Robert Lyons, of Augusta Georgia, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly executing unsuitable mutual fund switches in the accounts of three customers.
FINRA alleged that between January 2011 and December 2013, Robert Lyons recommended and effected fourteen unsuitable mutual fund switches in the accounts of three customers, resulting in unnecessary fees for his customers. 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. In the case of Mr. Lyons, FINRA found that the former Cambridge Investment Research representative caused unnecessary losses to his clients and additional commissions for himself as a result of the mutual fund “switches” he recommended. FINRA found that Mr. Lyons recommended his customers purchase Class A and Class T shares for the switches, which were only advantageous if the customers held them on a long-term basis, usually several years or more. In this case, the switches recommended and effected by Mr. Lyons were held for less than one year and all of the customers involved incurred added and unnecessary commission charges.
FINRA alleged that Mr. Lyons executed these mutual fund switches without having reasonable grounds for believing that such transactions were suitable for his customers in light of the customers’ investment objectives of growth and income. 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 FINRA allegations, Mr. Lyons agreed to the sanctions and was suspended from association with any FINRA member for a period of 15 days and ordered to pay a deferred fine of $5,000.
Supervision within a brokerage firm can take many different forms, and the failure to enforce policies and procedures, can create grounds for a claim for incurred losses. Among other areas, management should have appropriate supervisory processes in place for the regular review of investor accounts, quality checks to see that the right products are being recommended to investors, and audits to ensure continual compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures.
Have you suffered losses in your Cambridge Investment Research account? Did you suffer from a broker making unsuitable switches in your investment accounts? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
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 40 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 email@example.com for answers to any of your questions about this blog post and/or any related matter.