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NEXT Financial Broker Fined by FINRA for Unsuitable Bond Recommendations

Betsy Bratton Marcom, a former Registered Representative with the Georgetown, Texas branch of NEXT Financial Group, Inc. (NEXT Financial), submitted a letter of Acceptance, Waiver, and Consent in which she consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that she made unsuitable investment recommendations to her customer which resulted in approximately $135,000 in realized losses.

FINRA’s findings state that Betsy Marcom, of Georgetown, Texas, recommended that her client, a non-profit parish church, invest almost its entire portfolio in non-investment grade corporate bonds. Her recommendation was inconsistent with her client’s investment objectives and risk tolerance. According to FINRA, Betsy Marcom was a member of her client’s Finance Council and recommended that the council begin investing in non-investment grade bonds in order to generate a larger return in their account. Relying on the expertise of Ms. Marcom, the church’s account became increasingly concentrated in the bonds, reaching as much as 99% of the account’s assets. As a result of Ms. Marcom’s unsuitable recommendations, her client had invested over $700,000, approximately 45% of its liquid assets, in non-investment grade bonds in the NEXT Financial account, with realized losses of approximately $135,000.

Further, FINRA found that on at least four occasions, Ms. Marcom recommended that her client sell the bonds within three months of maturity, resulting in the client receiving nearly $3,661 less that it would have it had held the bonds to maturity. Due to the aforementioned misconduct, Betsy Marcom was assessed a deferred fine of $15,000 and suspended from association with any FINRA member for four months.

Brokerage firms and their registered representatives have the responsibility under FINRA Rule 2111, the “Suitability Rule,” to make suitable recommendations to investors. This rule lays out the three main suitability obligations requiring brokers to (i) perform due diligence to understand the risks of an investment or investment strategy, and determine whether it is suitable for anyone, (ii) have a reasonable basis for believing the investment or investment strategy is suitable for the particular customer based on that customer’s investment profile; and (iii) have a reasonable basis for believing that a series of securities transactions are not excessive (if the broker has control over the account).

Have you suffered losses in an unsuitable or excessively concentrated bond investment? Have you suffered losses in your NEXT Financial or any other brokerage account due to unsuitable recommendations or the overconcentration of your investments by your broker? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against NEXT Financial stockbrokers who may have engaged in misconduct and caused investors losses.

The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.