FINRA’s Department of Enforcement investigated Gundersen and discovered he recommended that a married couple invest approximately $1.26 million, or 80% of their net worth, in an intermediate municipal bond mutual fund. Specifically, in April 2013, Gundersen recommended they purchase Class A shares of two mutual funds, the Invesco Floating Rate Fund (“AFRAX”) and the Invesco Intermediate Term Municipal Income Fund (“VKLMX”). According to FINRA, Gundersen recommended the couple invested nearly $1.26 million in VKLMX, which represented approximately 80% of their estimated net worth.
Based upon the foregoing misconduct, FINRA alleged Gundersen violated several financial rules and regulations, including but not limited to FINRA Rules 2010 and 2111. FINRA Rule 2111 provides that when recommending the purchase, sale, or exchange of any security to a customer, a registered representative “must have a reasonable basis to believe that a recommended transaction... is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile…”
Here, Gundersen recommended the couple invested nearly $1.26 million in VKLMX, which represented approximately 80% of their estimated net worth. According to FINRA, the recommendation was unsuitable and violated FINRA Rules 2010 and 2111 because the investment represented an excessive concentration of the customers’ net worth.
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