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FINRA Suspends LPL Financial Broker for Unsuitable Mutual Fund Trading

Steve Dale Heath, of Newport News, Virginia, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly executing unsuitable mutual fund trades, including switches, in the account of an elderly customer with conservative investment goals, causing the customer to suffer losses of approximately $7,207.

FINRA alleged that Steve Heath recommended and effected short-term mutual fund trades in the account of an elderly customer.  Mutual funds are intended as longer-term investments. However, Mr. Heath allegedly recommended selling after only 249 days on average.  Further, some of the trades involved mutual fund switches, which were allegedly unsuitable for his customer in light of the customer’s conservative investment objectives. Mutual fund “switching” is simply the process of transferring an investment from one mutual fund to another, sometimes for good reasons and other times to defraud clients. Some brokers attempt to effect numerous switches in client accounts in order to generate commissions. 

FINRA found that this pattern of unsuitable mutual fund switches violated NASD Rule 2310 and FINRA Rules 2010 and 2011. Without admitting or denying the allegations, Mr. Heath agreed to FINRA’s findings and was suspended from association with any FINRA member for a period of two months, fined $5,000 and ordered to pay restitution to the elderly customer in the amount of $7,207, plus interest.

Stockbrokers have been known to engage in many practices that may be in violation of industry and firm rules, practices, and procedures.  In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms to establish and implement a supervisory system.  The implementation of these industry rules require supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures.  If broker-dealers and/or their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages which flow from the broker’s misconduct. Therefore, investors who have suffered losses stemming from unsuitable recommendations and/or mutual fund switches by their broker can bring forth claims to recover damages against broker-dealers, like LPL Financial, which should consistently oversee its brokers’ activities in order to prevent the above-described misconduct.

Have you suffered losses in your LPL Financial account?  Did you suffer from a broker making unsuitable mutual fund trades or switches in your investment accounts?  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 LPL Financial stockbrokers who may have engaged in broker 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.