Donald P. Southwick, of Troy, Michigan, a stockbroker formerly registered with CSSC Brokerage Services, Inc., has been suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that he made unsuitable investment recommendations to customers. Letter of Acceptance, Waiver and Consent, No. 2016049789601 (Sept. 29, 2017).
According to the AWC, between November of 2012 and March of 2015, seven of the firm’s customers received recommendations from Southwick to invest in Consulting Services Support Corporation Convertible Debenture Bond through a private offering conducted by the parent company of the firm, CSSC, Inc., which paid eight percent interest biannually over a five-year period. Evidently, three of the firm’s customers received recommendations from Southwick to make investments in a bridge Loan – another private offering by CSSC, Inc., paying eight percent interest over a twelve-month term.
Apparently, no due diligence was conducted by Southwick about the investments before he made the recommendations to the firm’s customers. Southwick reportedly lacked comprehension of the features, benefits and risks pertaining to the offering, including liquidity of the investments, and did not understand CSSC, Inc.’s financial circumstances. The AWC stated that Southwick rested on the parent company’s representations about its finances without taking additional steps to verify the accuracy of information.
The AWC reported that customers who invested in the bond offering were ultimately deprived of any interest on their investments following May of 2015, and CSSC, Inc. defaulted on the bridge loan repayment of interest and principal in 2015. FINRA found that Southwick lacked an adequate foundation to conclude that his recommended private placements were suitable for customers; his failure to have a reasonable basis to determine suitability was conduct FINRA found to be violative of FINRA Rules 2010 and 2111.
Moreover, the AWC stated that Southwick made recommendations for two of the firm’s customers to invest their liquid assets in illiquid products. Particularly, a sixty-three-year-old customer, PK, who was nearing retirement at the time, had been reportedly persuaded by Southwick to utilize thirty-six percent of PK’s liquid net worth for the bond offering investment. FINRA found that Southwick’s investment recommendations for the speculative bond offering was inconsistent with PK’s conservative-to-moderate tolerance for risk.
The AWC also stated that an eighty-eighty-year-old investor, JM, was advised by Southwick to invest in the bridge loan and bond offering utilizing fifty-seven percent of her net worth. Southwick’s concentration of the customer’s assets in the bridge loan and bond offering was evidently inappropriate based on JM’s objectives for investing. FINRA found that Southwick failed to perform a suitability analysis specific to the customer and made unsuitable investment recommendations in that regard; conduct violative of FINRA Rules 2010 and 2111.
FINRA Public Disclosure reveals that Southwick has been identified in two customer initiated investment related disputes containing allegations of his misconduct while associated with Morgan Stanley & Co. Incorporated and Consulting Services Support Corporation. Particularly, on May 10, 2009, a customer initiated investment related written complaint involving Southwick’s activities was settled for $195,000.00 in damages based upon accusations that unauthorized corporate debt transactions were placed in the customer’s investment account. The customer’s investments were apparently concentrated more than twenty-five percent in one industry by the firm, violating the terms and instructions that the customer set forth.
Moreover, a customer filed an investment related written complaint regarding Southwick’s activities, where the customer sought $300,000.00 in damages supported by allegations including misrepresentation, breach of fiduciary duty, and unsuitable private placement investments. FINRA Arbitration No. 16-03050 (Dec. 27, 2016).
Southwick’s registration with CSSC Brokerage Services, Inc. was terminated as of October 22, 2015.
Guiliano Law Group
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
For more information concerning common claims against stockbrokers and investment professionals, please visit us at securitiesarbitrations.com
To learn more about FINRA Securities Arbitration, and the legal process, please visit us at securitiesarbitrations.com
