Securities Arbitration Investment Fraud Lawyers » FINRA Securities Arbitration » U.S. Bancorp Broker Suspended for Misrepresentations

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David Levorchick of Sidney, Ohio, a registered representative with U.S. Bancorp, Inc., was fined $7,500 and suspended for thirty days from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he negligently misrepresented to a customer that the liquidation of a variable annuity would not result in significant tax liability. Letter of Acceptance, Waiver and Consent, No. 2013039198501 (Apr. 29, 2015).
According to the AWC, as part of a financial plan for a customer of the firm, Levorchick had recommended the customer liquidate a Prudential variable annuity and invest the proceeds in certain unit investment trusts. The AWC stated that Levorchick informed his customer that liquidating the annuity would not result in tax liability. However, the liquidation of the variable annuity did result in tax liability of roughly $20,000.
FINRA found that Levorchick should have known that the liquidation of the variable annuity at Prudential would result in a considerable tax liability for the customer. The AWC stated that prior to the liquidation, Levorchick actually participated in a telephone conference call with a Prudential representative, where the Prudential representative informed Levorchick of the customer’s cost basis in the variable annuity along with the surrender value. The Prudential representative reportedly informed Levorchick that the customer’s liquidation of the annuity would result in a taxable capital gain.
FINRA found that as a result of Levorchick’s negligent misrepresentation to his customer concerning the tax liability, Levorchick violated FINRA Rule 2010. Further, FINRA found that Levorchick’s recommendation to liquidate the Prudential variable annuity was also unsuitable in violation of FINRA Rules 2111 and 2010.
FINRA Rule 2111 requires that associated persons have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer. FINRA will generally find this rule to be violated, as is the case with Greenfield, when the individual does not have a basis to believe that the recommendation is suitable for at least some investors, that the recommendation is suitable for a particular customer considering the customer’s investment objectives and financial profile, and (for the accounts where the individual is exercising discretion) that a series of recommended transactions are not excessive and unsuitable even if each transaction alone would be deemed suitable.
Further, Rule 2330(b)(1) indicates that a registered representative like Levorchick must have a reasonable basis to believe that a recommended variable annuity exchange is suitable for the customer to whom the recommendation is made. According to FINRA, this requirement includes an adequate assessment of the impact of surrender charges, loss of existing benefits, and benefits of product enhancements and improvements.
Public disclosure records via FINRA’s BrokerCheck reveal that Levorchick has been subject to four disclosure incidents. In August 23, 2013, Levorchick settled a customer complaint for $37,500.00 after a customer alleged that Levorchick sold the customer’s stock without first gaining consent from the customer. On March 4, 2014, Levorchick settled a customer dispute for $35,000.00 after the customer’s attorney alleged several unsuitable transactions and incidents of misrepresentation. Finally, on August 12, 2015, Levorchick settled a customer dispute for $8,574.81 after a customer alleged that the registered representative misrepresented the fees and returns associated with structured certificates of deposits.

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