Richard Graham, of Lafayette, Indiana, a stockbroker registered with The Huntington Investment Company, was fined $10,000.00 and suspended from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he made unsuitable investment recommendations to customers. Letter of Acceptance, Waiver and Consent, No. 2015046281401 (Sept. 29, 2016).
According to the AWC, in 2012, Graham made recommendations to customers A and B regarding the purchase of unit investment trusts. The AWC stated that the customers had a conservative risk tolerance, and had a short term investment horizon. Graham reportedly knew that the customers, who had an estimated $212,000.00 in a fixed annuity, planned to surrender it and invest both the fixed annuity proceeds as well as their remaining net worth of $161,000.00 into the unit investment trust investments.
The AWC stated that the customers acted upon Graham’s recommendations, and in November and December of 2012, invested an estimated $350,000.00 (ninety-four percent of the customers’ net worth) in the Van Kampen Unit Investment Trust 1263 Closed End Strategy Master Municipal Income Portfolio Series 30. Consequently, the customers reportedly lost an estimated $79,297.70.
FINRA claimed that the recommendations made by Graham had resulted in customers having over-concentrated positions in one asset class, and in one fund. FINRA claimed that such customers, as a result, had their net worth exposed to municipal bond market fluctuation, which was not in line with the customers’ risk tolerance. FINRA further stated that the products, which were leveraged and contained sub-investment grade debt, could cause significant principal losses in short investing periods. As such, FINRA claimed that Graham’s investment recommendations were unsuitable for customers A and B.
The AWC additionally reported that Graham made recommendations of unit investment trusts to ninety-eight-year-old customer C. Particularly, customer C stated that her goal was to invest in the short term within income producing securities, and indicated that she wanted to invest on a moderate to conservative risk level.
According to the AWC, customer C acted pursuant to Graham’s recommendations, and invested an estimated forty-two percent of her net worth in an Invesco Unit Trust Series 1313 Closed End Strategy Master Income Portfolio 34. Apparently, by the time that the customer sold her unit investment trusts, she incurred losses of $29,493.00. FINRA found that Graham’s recommendations for the customer to invest in such unit investment trust products was unsuitable.
FINRA ultimately stated that Graham lacked any adequate basis in concluding that the aforementioned unit investment trust investments were suitable for the affected customers when considering the financial status and risk tolerance of the customers. As such, FINRA found that Graham’s conduct was violative of FINRA Rules 2010 and 2111.
According to FINRA’s BrokerCheck, Graham has been subject to seven disclosure incidents, all of which are customer disputes, prior to FINRA’s disciplinary action against him. Specifically, on August 21, 2013, Graham settled a customer dispute for $34,457.83 after the customer alleged that she incurred substantial losses. On September 5, 2013, Graham settled a customer dispute for $19,101.78 after the customer alleged to have incurred investment losses pursuant to Graham’s unsuitable recommendations.
On October 1, 2013, Graham settled another customer dispute for $20,029.83 after a customer claimed not to have been properly informed by Graham regarding investments prior to the customer investing. On October 14, 2013, Graham settled a customer dispute for $29,493.56 after the customer alleged that investment recommendations made by Graham were poor and led the customer to bear investment losses.
On October 22, 2013, Graham settled a customer dispute for $20,760.67 after the customer alleged that Graham made misrepresentations to the customer concerning investments. On November 18, 2013, Graham settled a customer dispute for $13,290.22 after the customer alleged that he was not advised as to the risk involved in investments purchased. On December 10, 2013, Graham settled a customer dispute for $79,297.70 after a customer alleged that Graham made misrepresentations concerning the safety of the customer’s principal investment.
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