Unsuitable Alternative Investments Lead to Suspension for William C. Burks II

According to the Financial Industry Regulatory Authority (FINRA), William C. Burks II (CRD No. 2944992) engaged in misconduct by recommending that three customers invest an excessively high concentration of their portfolios in illiquid alternative investments between February 2017 and April 2020. FINRA alleged that Burks advised the customers to invest between 51% and 91% of their actual net worth in non-traded real estate investment trusts (REITs), business development companies (BDCs), and interval funds—investments that exposed them to significant liquidity risks and potential losses. FINRA found that these recommendations were unsuitable based on the customers’ investment profiles and violated FINRA Rules 2111 and 2010. Burks consented to a four-month suspension and a $10,000 fine for these violations.

Burks first registered with FINRA in September 1997 and, since August 2000, has been associated with Centaurus Financial, Inc. (CRD No. 30833) as an Investment Company and Variable Contracts Products Representative. He later became registered as an Investment Company Products/Variable Contracts Principal and as a General Securities Representative. He continues to be affiliated with Centaurus Financial, Inc.

Under FINRA Rule 2111, brokers must ensure that any recommendation made to a client is suitable based on the customer’s investment profile, which includes their financial situation, risk tolerance, and investment objectives. Concentrating a large portion of a client’s assets in illiquid or high-risk securities may render an investment strategy unsuitable. FINRA Rule 2010 further requires all registered representatives to uphold high standards of commercial honor and just and equitable principles of trade. For example, it would be inappropriate to recommend that a retired investor seeking income stability place most of their assets into long-term, non-traded REITs or similar illiquid products.

FINRA found that Burks’ customers had low or moderate risk tolerances and, in two cases, investment objectives focused on preserving capital and generating income. Nevertheless, Burks recommended large investments in alternative products that were not only illiquid but also inconsistent with the firm’s own concentration guidelines. FINRA noted that these unsuitable recommendations subjected the investors to “a substantial risk of loss,” and that two of the affected customers later reached settlements in arbitration with the firm. Based on these findings, FINRA determined that Burks violated the suitability rule and failed to observe the ethical standards required under Rule 2010.

Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.

The content on this site reflects personal opinions and does not constitute statements of fact. No findings have been made against the firms or individuals mentioned. This blog is intended solely for educational purposes, drawing on publicly available information to provide general insights and a basic understanding of the law. It is not a substitute for legal advice.