FINRA’s Department of Enforcement investigated Marcom and discovered she recommended a series of unsuitable junk bond investments to her client. According to FINRA, the client’s risk tolerance was conservative/growth and that its investment objectives were income and capital conservation. In 2009, when Marcom began recommending the allocation of junk bond investments to the church, its then current portfolio consisted of CDs and cash.
Nevertheless, Marcom recommended that the church begin investing in non-investment grade bonds to generate a larger return in the church’s NEXT Financial account. By April 2011, the church’s NEXT Financial account was comprised almost entirely (99%) in junk bonds. By September 30, 201, $706,022, or approximately 45% of the church’s liquid assets, was invested in non-investment grade bonds in the NEXT Financial account. Ultimately, the church sustained approximately $135,000 in realized losses as a result of its unsuitable holdings in non-investment grade bonds.
Based upon the foregoing misconduct, FINRA alleges Marcom violated several financial industry rules and regulations, including NASD Conduct Rule 2310 and FINRA Rules 2010 and 2111. Specifically with respect to NASD Conduct Rule 2310, financial advisors are required to recommend suitable investments and investment strategies to their clients (known as the suitability rule). Typically, a claim for unsuitable investments is brought as a form of a negligence claim with the theory: the financial advisor had a duty to recommend suitable investments; the financial advisor breached the duty with unsuitable investments; and the financial advisors unsuitable investments caused the investor damages.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment damages investing in junk bonds with Marcom through NEXT Financial, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.