Mercer Hicks III (also known as Toby Hicks III) of Charlotte North Carolina a stockbroker formerly registered with Capital Investment Group and Southeast Investments NC Inc. has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity according to a FINRA Extended Hearing Panel Decision containing findings that Hicks made unsuitable recommendations to customers. Department of Enforcement v. Mercer Hicks III Disciplinary Proceeding No. 2017052867301 (May 19, 2021).
According to the Decision, five customers of Hicks were inappropriately sold real estate investment trusts and business development companies. The customers did not contain high risk tolerances but were placed into investments that carried risk of total principal loss.
The Order stated that Hicks failed to consider the risks outlined in the prospectuses. He did not review the prospectuses of those products before selling them. FINRA found that he excessively concentrated the customers’ accounts in these investments too.
As an example, Hicks told a customer to purchase Business Development Company of America (BDCA) which was a high-risk and long-term investment. When questioned by FINRA regarding selling this product, the stockbroker indicated that he probably did not read the first page of the prospectuses which outlined the risks. Hicks failed to explain those risks to the customer. He also did not know that the customer was unable to liquidate her shares in the investments. He learned about the illiquidity of the investments when the customer sought a redemption.
The stockbroker recommended that a second customer invest in BDCA and Realty Finance Trust Inc. FINRA indicated that Hicks gave bad advice based on the customer’s annual income, liquid assets, risk tolerance, investment objectives and age. The stockbroker neglected to do anything more than glance at the prospectus. He also failed to tell the customer about the risks relating to Realty Finance Trust Inc.
The third instance involved Hicks giving a customer poor advice about ARC Realty Capital New York City REIT Inc. and ARC Retail Centers of America Inc. The stockbroker admitted that advising the customer to invest in risky and illiquid securities was a mistake. A fourth customer who had a conservative risk tolerance was inappropriately steered by Hicks towards investing in ARC NYC, ARC Retail and ARC Realty Capital Healthcare II Inc. The stockbroker failed to review the risks of those investments before making recommendations.
A fifth customer received eight bad recommendations from Hicks. The customer was told to invest in non-traded REITs. Hicks failed to tell them about the risks or that they were overconcentrating their assets in those products. FINRA found that Hicks violated FINRA Rules 2010 and 2111 by giving bad advice to customers given their suitability profiles.
The regulator also found that Hicks neglected to have an adequate basis to believe that recommendations of BDCA and non-traded REITs were suitable since Hicks failed to perform due diligence on those products. Hicks did not understand what customers were investing in before he made recommendations. The stockbroker violated FINRA Rules 2010 and 2111 for this reason.
Mr. Hicks appears to have never been the subject of a written complaint or arbitration by his customers for sales practice or other violations, requesting damages, based upon his conduct, in excess of $5,000 within the last two years, or which was ever settled, in exceess of $15,000.
