Victor Alan Lessinger, a former stockbroker associated with Colorado Financial Services Corporation based in Boca Raton, Florida, was sanctioned by Financial Industry Regulatory Authority (FINRA) for willfully violating Exchange Act Rule 15l-1(a)(1) by recommending high-risk closed-end funds to a retail customer whose investment profile indicated moderate risk tolerance and an income-oriented objective. Letter of Acceptance, Waiver, and Consent No. 2023077597701 (October 28, 2024).
According to the AWC, In November 2017, Customer A, who was 82 years old at the time, opened an account with Colorado Financial Service Corporation. On her new account form, she reported that she had limited investment experience, an annual income of less than $25,000, and a net worth between $50,000 and $99,999. She also stated that her risk tolerance was moderate and that her investment objective was income.
In June 2022, Lessinger recommended that Customer A purchase $28,692.21 in Fund A, a closed-end fund that primarily invested in collateralized loan obligation vehicles, which are highly leveraged and consist of below investment-grade loans. The fund’s prospectus stated that investing in it carried significant risks, including the possibility of a total loss of investment. This purchase resulted in at least 28 percent of Customer A’s net worth being concentrated in this single high-risk security.
In July and September 2022, Lessinger recommended that Customer A sell Fund A and purchase $23,632.30 in Fund B, another closed-end fund. Fund B’s prospectus disclosed that it invested in securities of below investment-grade quality, which were regarded as having speculative characteristics. The fund was subject to a greater risk of loss due to default or declining credit quality. This purchase resulted in at least 23 percent of Customer A’s net worth being concentrated in Fund B.
In October 2022 and February 2023, Lessinger again recommended that Customer A sell her holdings and purchase $37,053.21 in Fund C, another closed-end fund. Fund C primarily invested in unrated or below investment-grade collateralized loan obligation vehicles that were considered speculative. The fund’s prospectus warned that investing in it carried a high degree of risk, including the possibility of substantial loss of investment. This investment recommendation resulted in at least 37 percent of Customer A’s net worth being concentrated in Fund C.
Customer A’s financial profile, including her advanced age, limited investment experience, modest income, and moderate risk tolerance, did not support an investment strategy that concentrated significant portions of her net worth in speculative funds. These recommendations were unsuitable for her and exposed her to losses.
Lessinger violated Exchange Act Rule 15l-1(a)(1), known as Regulation Best Interest (Reg BI), which requires brokers to act in the best interest of a customer when making investment recommendations. He also violated FINRA Rule 2010.
As a result of this violation, Lessinger consented to sanctions including a $5,000 fine, restitution of $5,029.85, and a three-month suspension from associating with any FINRA member in all capacities from November 4, 2024, to February 3, 2025.
Lessinger was registered with Colorado Financial Service Corporation from 2012 to 2023.
