FINRA’s Department of Enforcement investigated Crabtree and discovered he recommended three unsuitable investments to a customer. According to FINRA, the investor’s risk tolerance was moderate and she sought short-term growth. The customer was also retired from the practice of medicine due to a degenerative eye condition.
Nevertheless, Crabtree recommended three risky and speculative investments to the customer, including GMX Resources Preferred Stock, and two closed-end funds (Eaton Vance Tax-Managed Global Diversified Equity Income Fund and Eaton Vance Tax Managed Buy-Write Fund), that all exceeded the investor’s risk tolerance. To make matters worse, Crabtree also provided the customer with a graph and a chart that purported to demonstrate how her account would grow at either a 9% or 12% return without any relevant risk disclosures.
Moreover, FINRA alleged Crabtree exercised discretion in three customer accounts by effecting approximately 1400 trades without obtaining prior written authorization from the customers. Indeed, Crabtree also failed to designate the accounts as discretionary nor did he obtain approval from WFG Investments prior to executing these transactions.
Based upon the foregoing misconduct, FINRA alleges Crabtree violated several financial industry rules and regulations, including NASD Conduct Rules 2210(d)(1), 2310, and 2510(b), as well as 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 with Crabtree through WFG Investments, 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.