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David Michael Miller, of Columbus, Ohio, a stockbroker with Huntingdon Investment Company, was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity per an Office of Hearing Officers Default Decision containing findings that Miller engaged in unsuitable recommendations and negligent misrepresentations concerning customer accounts. Department of Enforcement v. Miller, No. 2013036874901 (Apr. 28, 2016).
According to the Decision, Miller had engaged in the unsuitable recommendations of one hundred and forty unit investment trusts in one hundred and twenty-nine of his firm’s customer accounts. The unsuitable recommendations apparently resulted in purchases in excess of $5,300,000.00 in the aggregate.
The Decision stated Miller’s education concerning the unit investment trusts only consisted of his attendance in a short sales meeting; speaking with his supervisor, and discussing the products with the wholesalers. The Decision further stated that Miller failed to take the proper steps to ascertain information pertaining to the risks and features of the products prior to making recommendations to the affected customers.
Apparently, Miller never even read the unit investment trust prospectus prior to recommending the products, and failed to comprehend the products’ valuation upon maturity, as well as other aspects such as leverage, volatility, and risks. FINRA alleged in the Decision that Miller ultimately failed to conduct the requisite due diligence in order to have an adequate basis to believe recommendations he made the affected customers were actually suitable. As such, FINRA alleged Miller violated FINRA Rules 2010 and 2111.
The Decision further alleged that Miller made negligent misrepresentations to customers, and failed to disclose to customers’ material information concerning the purchases of the unit investment trusts. Apparently, Miller informed his customers that they would receive a return of principal upon maturity so long as the relevant municipalities (in the UITs) did not default on obligations and interest rates on bonds did not increase. Miller allegedly told the clients that losses from the net asset value fluctuation on the UITs would not be greater than the interest payments that customers would be receiving over the term of the investment.
FINRA found that Miller made inaccurate statements, in that the net asset value of the UITs could actually drop in circumstances that did not bear any relation to municipal default or changes in bond interest rates. Apparently, the UITs could drastically decrease in value; and the losses could be greater than interest payments that the customers would receive. Miller, according to the Decision, omitted other aspects of the UITs regarding the risks associated with such investments. FINRA found that Miller’s negligent misrepresentations were violative of FINRA Rule 2010.
The Decision further stated that Miller’s misconduct pertaining to unsuitable recommendations, which FINRA claimed was negligent at a minimum, led customers to bear losses totaling $1,019,656.83. FINRA also found that Miller’s omissions and misrepresentations led eight customers to suffer losses totaling $171,464.00 FINRA not only barred Miller as a result, but ordered him to pay restitution to affected customers in the amount of $799,161.07.
Public disclosure records reveal that Miller has been subject to eight disclosure records. On April 3, 2013, Miller settled a customer dispute for $11,061.70 amid allegations of poor performance, misrepresentation, and suitability. On June 13, 2013, Miller settled a customer dispute for $17,670.13 amid allegations of misrepresentations.
On August 15, 2013, Miller settled a customer dispute for $29,860.03 after a client alleged that Miller guaranteed the customer a specific return on the customer’s investment. On August 15, 2013, the Huntington Investment Company permitted Miller to resign amid allegations that Miller violated industry standards of conduct.
On August 22, 2013, Miller settled a customer dispute for $14,910.01 after a client alleged misrepresentations. On September 4, 2013, Miller settled another customer dispute for $44,568.56 amid the customer’s allegations that Miller lied to the customer about the customer’s investment having no principal risk.
On September 13, 2013, Miller settled yet another customer dispute for $28,213.05 after a client alleged that she was misinformed about an investment’s risk of loss. Miller settled another customer dispute for $13,910.79 on November 5, 2013, amid allegations of misrepresentation.
On May 29, 2014, Miller settled a customer dispute for $42,852.30 amid allegations of misrepresentations regarding the customer’s investment risk. Finally, on July 1 ,2014, Miller settled a customer dispute for $27,232.45 after the customer alleged Miller to have recommended risky investments when the customer stated her wish to be in safe and low risk investments.
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