Jeffrey A. Hill, of Bemidji, Minnesota, a stockbroker formerly associated with Dougherty Company LLC, was fined $5,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he utilized unauthorized discretion in customer accounts, and made unsuitable investment recommendations to customers. Letter of Acceptance, Waiver and Consent, No. 2015047008703 (Nov. 28, 2016).
According to the AWC, customer 1 and customer 2 had Doughery and Company accounts which were serviced by Hill from 2010 to 2014, in which hundred trades had been effected by Hill for such customers. Apparently, fifty percent of the trades had been effected by Hill prior to gaining approval from the customers. The AWC also stated that Hill was not provided with authorization from the customers to exercise discretion in the customers’ investment accounts.
The AWC further stated that Hill was not provided with any authorization by Doughery and Company to trade in customer accounts on a discretionary basis. As such, FINRA found that Hill’s unauthorized trading was violative of FINRA Rules 2010 and 2510(b).
The AWC further revealed that from June of 2010 to June of 2014, the affected customers received recommendations by Hill to sell bond investments a short time after the customers purchased such bonds, or after Hill initiated them to purchase such. Apparently, six of the twenty-five occasions involved Hill making a recommendation regarding a municipal bond, while the remaining nineteen occasions concerned investments in corporate bonds.
FINRA found that there were no factors, such as the bond issuers’ financial status, interest accrual or overall prices of bonds, which called for trading to be conducted on such a short-term basis. Specifically, the AWC revealed that Hill failed to have an adequate basis to conclude that any customer would have been suited for Hill’s short term trading strategy, especially when considering the extensive commissions associated with transacting in that manner.
FINRA further found that Hill effected quantitatively unsuitable trades, in which the amount of activity, coupled with the earnings that Hill generated as a result of such trading, failed to be consistent with the needs, objectives, and financial status which the affected customers communicated to Hill.
Moreover, between January of 2010 and June of 2014, recommendations were made by Hill for customer 2 to utilize a margin account for purposes of buying securities. Yet, FINRA found that such margin use recommendation, coupled with the actual margin use by customer 2 resulting from Hill’s recommendation, failed to be consistent with the objectives for investing which customer 2 communicated to Hill.
FINRA also found such margin use to be flawed when considering customer 2’s needs for income and the alternative assets available to customer 2. As such, FINRA found that Hill made qualitatively unsuitable recommendations to customer 2. FINRA ultimately found that Hill’s overall conduct of making unsuitable recommendations was violative of MSRB Rule G-19, G-17, FINRA Rules 2111, 2010, and NASD Rule 2310.
FINRA Public Disclosure reveals that Hill has been subject to seven customer arbitrations concerning allegations of misconduct. Particularly, on October 10, 2000, a customer initiated investment related arbitration claim involving Hill’s conduct was settled for $200,000.00 in damages based upon allegations that Hill made omissions and misrepresentations concerning municipal bonds.
On January 12, 2001, a customer initiated investment related arbitration action involving Hill’s conduct was resolved for $5,002.08 in damages based upon allegations that Hill made unsuitable investment recommendations to the customer concerning bond investments. On February 16, 2001, a customer was awarded $4,968.00 in damages per an investment related arbitration claim involving Hill’s actions based upon allegations that Hill effected trades in the customer’s account without authorization.
On August 20, 2015, a customer initiated investment related arbitration claim pertaining to Hill’s conduct was settled for $1,000,000.00 in damages based upon allegations that Hill breached his fiduciary duty to the customer, effected unsuitable and unauthorized trades, and churned the customer’s investment account.
Hill’s registration with Dougherty & Company LLC was terminated in June of 2014. Since June of 2014, Hill has been registered as a stockbroker with Wells Fargo Advisors.
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