The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against former Dempsey Lord Smith financial advisor Andrew Jay Lowe (Lowe). The underlying basis of the complaint alleged Lowe recommended unsuitable short-term Class A mutual fund transactions in some of his clients’ accounts. Lowe settled the complaint with FINRA and accepted a nine (9) month suspension, $20,000 fine and required to pay restitution to his victims.
Lowe (FINRA CRD No. 4636118) has been a member of FINRA since 2003. From 2009 to 2017, Lowe worked for Sterne Agee Financial Services, Inc. and then Berthel, Fisher & Company Financial Services, Inc. Most recently, Lowe worked for Dempsey Lord Smith, LLC until he was terminated in November 2017. Lowe’s FINRA BrokerCheck report includes seven negative disclosures.
FINRA’s Department of Enforcement brought a complaint against Lowe for the following alleged misconduct. FINRA alleged between January 2012 and September 2014, Lowe recommended unsuitable Class A mutual funds investments to 27 customers. Class A mutual fund shares typically include substantial upfront sales charges, known as “front end loads.” Generally, Class A mutual fund investment investments are considered long-term investments because the customer has to hold the mutual fund for a long period to overcome the front end fee(s). Thus, short-term Class A mutual fund recommendations may be considered unsuitable.
Specifically, Lowe executed 186 total or partial liquidations of Class A mutual fund shares, over half of which were held for less than 12 months. FINRA found the transactions unsuitable due to the relatively short holding periods, and also because Lowe knew from the outset that these customers had short-term income needs and would need to make complete or partial liquidations of their investments within a year to meet those needs.
Based upon the foregoing misconduct, FINRA alleges Lowe violated FINRA Rules 2111 and 2010. FINRA Rule 2111, for example, requires financial advisors to recommend suitable investments and investment strategies to their clients (known as the suitability rule) based upon the client’s unique financial situation, including investment objectives and risk tolerance. A financial advisor also must have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer.
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.