Donald Lane Preston of Worthington Ohio a stockbroker formerly registered with PFS Investments Inc. has been fined $10,000.00 and suspended for six months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon consenting to findings that Preston made unsuitable investment recommendations to customers and false statements to his employer. Letter of Acceptance Waiver and Consent No. 2016050474001 (June 11, 2018).
According to the AWC, between March of 2015 and February of 2016, three investments had been recommended by Preston to a customer, ML, without Preston possessing an adequate foundation to conclude that the investments he recommended were suitable for ML. Apparently, at the time Preston made the recommendations, he was cognizant of ML’s employment situation, financial needs and the requirement for cash to address his medical and living expenses.
The AWC stated that in January of 2015, an early distribution had been processed by Preston for $9,500.00 so that ML’s monthly expenses could be paid. Preston then reportedly advised ML to switch from ML’s existing variable annuity into a new variable annuity despite Preston’s knowledge that the new variable annuity would contain expenses that exceeded ML’s present annuity, and that the switch would cause a valuable joint death benefit feature to be foregone. Apparently, ML’s annuity exchange had been proposed by Preston on nine occasions from March of 2015 to April of 2015; the firm consistently rejected those proposals once ML’s financial situation and the terms of exchanging the annuity had been reviewed by compliance personnel.
The AWC stated that Preston subsequently recommended that ML execute a $100,000.00 withdrawal from the customer’s annuity and place the assets in an IRA mutual fund. At that time, Preston apparently recommended that ML place the assets into a longer term investment; yet, longer term investments failed to conform to the customer’s liquidity needs. Preston evidently earned commissions and assessed fees to ML that FINRA deemed unreasonable considering Preston made unsuitable investment recommendations to the customer.
Moreover, in December of 2015, ML was advised by Preston to place the remainder of ML’s IRA mutual fund into another annuity even though this would cause ML to incur undue expenses, fees and penalties. FINRA found that Preston’s recommendations of the annuity exchanges and mutual fund investment to be inappropriate; conduct violative of FINRA Rules 2010, 2111 and 2330(b).
The AWC further revealed that Preston falsified statements to his firm to procure approval for the variable annuity exchanges as well as the mutual fund investment. Apparently, Preston furnished seven variable annuity applications and six variable annuity exchange pre-approval forms, in addition to an application for a IRA mutual fund to be purchased. In those submission, Preston reportedly failed to correctly state how funds would be used in the purchase, the purpose behind the recommendations and ML’s present and future liquidity needs. FINRA found Preston’s conduct violative of FINRA Rules 2010.
FINRA Public Disclosure reveals that Preston was terminated from PFS Investments on June 13, 2016 based upon allegations that he neglected to abide by the suitability protocol used by the firm.
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