David Raymond Colflesh of Tarko Missouri a stockbroker formerly employed by NYLife Securities LLC has been suspended for eighteen months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that he made unsuitable mutual fund investment recommendations to customers. Letter of Acceptance Waiver and Consent No. 2016050685101 (Oct. 26, 2018).
According to the AWC, in July of 2014, three mutual funds had been offered by NYLife Securities that were concentrated in the production, exploration, transportation, storage, and use of natural resources and energy. Apparently, Colflesh became informed of the tax benefits and yields produced by these products; however, he neglected to learn about the magnitude of the risks that these products posed for investors. Namely, the AWC stated that the funds were subject of additional risks due to the lack of diversification, and the investments were anticipated to be volatile because of the impact of prices of natural gas and oil. It states that Colflesh conducted no additional review of those products before he made recommendations.
Evidently, shortly after the funds were introduced by NYLife Securities, customers were advised by Colflesh to make purchases of the investments, where Colflesh placed emphasis on the investments’ yields. Apparently, ninety of the firm’s customers had been advised by Colflesh to purchase the speculative investments, resulting in customers making two hundred fifty purchases totaling $4,500,000.00. Colflesh reportedly accumulated $34,546.98 in commissions.
The AWC stated that at least forty-eight of the customers who were advised to purchase those investments had conservative or moderate tolerances for risk. Evidently, six customers placed more than a third of their liquid net worth in the speculative investments; two invested at least eighty percent. Colflesh was seemingly cognizant of the recommendations he made having surpassed the limits imposed by the firm regarding concentration of assets in speculative investments by conservative or moderate risk investors.
The AWC stated that between 2014 and 2016, the speculative funds sustained forty-nine to eighty percent losses. Consequently, complaints had been lodged against the firm from twenty-four customers.
The AWC stated that Colflesh made recommendations for customers to purchase the three speculative funds despite him lacking an adequate foundation to conclude that the investments were appropriate for several of the firm’s customers, and without Colflesh becoming reasonably informed about the complexity and risks posed by the funds. FINRA also stated that the funds had been recommended by Colflesh to at least forty-eight customers despite those investments not having been suitable for customers given customers’ tolerances for risk and objectives for investing. FINRA found Colflesh’s conduct violative of FINRA Rule 2010 and 2111.
FINRA Public Disclosure confirms that Colflesh has been identified in eighteen customer initiated investment related disputes containing accusations of Colflesh’s violative conduct during the time that he was associated with NYLife Securities. For example, on June 23, 2016, a customer initiated investment related complaint involving Colflesh’s activities was resolved for $127,753.67 in damages founded on allegations that omissions had been made by Colflesh in regards to the risks of mutual funds purchased in the customer’s account.
On June 27, 2016, another customer initiated investment related complaint concerning Colflesh’s conduct was settled for $115,013.00 in damages based upon accusations of omissions. Further, on July 21, 2016, a customer initiated investment related complaint regarding Colflesh’s activities was resolved for $172,084.00 in damages supported by allegations that Colflesh failed to tell the customer about the risks of mutual fund transactions at the time that they were placed in the customer’s account.
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