FINRA Suspends Broker for Unit Investment Trust Fraud
The Financial Industry Regulatory Authority (FINRA) has identified the third investment representative from Huntington National Bank since last December who aggressively recommended the sale of unit investment trusts to the bank’s brokerage customers.
In the latest scandal, FINRA alleged that Huntington stockbroker Richard Graham of Lafayette, Indiana, made unsuitable investment recommendations that customers buy unit investment trusts. As punishment, Graham received a two-month suspension along with $10,000 in fines. FINRA also ordered him to pay back over $3,500 worth of commissions.
Graham recommended that a couple — who were preparing for retirement and spoke English as a second language — invest $350,000, or 93 percent of their net worth, into risky unit investment trusts in late 2012. By the end of 2013, the couple suffered nearly 23 percent in value losses on the investment.
Broker in Clear Violation of Suitability Rules
It is important for all investors to remember that a portfolio of different securities alone is not enough for an investment to be considered “safe.” In this case, even though the unit investment trusts at issue were — were essentially baskets of different kinds of securities — they were also full of highly leveraged and risky investments, and therefore at risk of suffering value declines. Because of the couple’s conservative risk profile and the fact that they planned to retire within 10 years, they clearly required safer, more secure investments.
Ninety-three percent of this couple’s hard-earned retirement savings was dumped into risky unit investment trusts, causing them to be heavily leveraged into investments that included non-investment grade securities.
“Non-investment grade” refers to investments of low credit quality that have a high risk of defaulting. Non-investment grade bonds are generally referred to as “junk bonds.”
The broker, in this case, violated the most important principle of investing: Don’t put all your eggs in one basket.
In another case involving the same broker, FINRA found that Graham unsuitably sold a 98-year-old citizen $259,000 worth of overly risky unit investment trusts in 2013 — and the investment represented 42 percent of her net worth. Six months later, the woman lost over $29,000 on her investment. Again, FINRA determined that it was unsuitable to leverage this senior citizen’s retirement assets in this fashion.
Not the Only Huntington Broker to Be Suspended for Unit Investment Trust Fraud
This is not the only suspension FINRA has recently implemented against Huntington brokers for unit investment trust recommendations. Last May, FINRA ordered Huntington broker David Michael Miller to pay over $800,000 to claimants harmed by his unsuitable recommendations of unit investment trusts. Further, FINRA permanently revoked his industry licenses.
Additionally, last September, FINRA ordered Huntington rep Jeffrey Rittberger to pay $10,000 in fines and penalized him with a 45-day suspension for the unsuitable sales of municipal unit investment trusts.
Why would a broker violate the law by putting all of an elderly client’s eggs in one basket like this? Clearly, it’s because of the broker — and his or her firm — had something to gain.
Were You Hurt by Unit Investment Trust Fraud? It’s Time to Fight Back!
Unscrupulous investment advisors — like these Huntington brokers — recommend that their customers buy risky investments because these investments often pay the broker and his or her firm a higher commission.
However, when a consumer is harmed because he or she trusted the investment advisor’s unsuitable and/or negligent recommendations like this, the consumer can seek financial restitution and justice by filing an FINRA arbitration claim to try and get his or her money back.