Bad news comes in threes for
All three cases have concerned the suitability of investments that went awry during the market collapse of 2008 and 2009. One of the more high profile cases was a
At issue in the most recent case brought by
“The problem is that even if you’re in 30 or 35 stocks, when the market gets hit, your portfolio is going to get hit,” Lax said. “And if you’re invested in dividend stocks and dividend stocks start to dry out then you’re going to have a problem. You’re not diversifying your client’s portfolio.”
A call to
“I carefully selected portfolios for the clients that I reasonably believed would meet their stated need for income and matched their tolerance risk,” he wrote in the summary of a 2011 decision.
In the Mirabelli case, Scott said that the clients had acted against his advice.
“The clients were invested in an income portfolio, per their request, which was suitable for their stated risk tolerances,” his response states. “The clients sold their portfolio at the lowest point in the market against the specific advice of
In its summary of the Couturier cases, FINRA claimed that the products being sold were misrepresented and the Personal Investment Advisory Questionnaire was misused in building out the portfolio. The panel took the decision a step further to say that the firm had violated its own rules with regards to client suitability and detailed all three concerns “so Respondents can modify their conduct accordingly.”
“This wrongdoing was caused by Respondent Merrill Lynch, Pierce, Fenner & Smith Incorporated’s inadequate supervision before the fact and aggravated by its failure to take corrective action after it received notice of the communications,” the panel said in its resolution.
According to Lax, the level of detail and suggestions that the panel included in the finding was “unusual,” and set a precedent for firms to take responsibility for and examine their own practices. “I think it shows no one is above the fray,” he said. “It doesn’t really matter if it was the worst market ever purportedly and clients lost money. The issue is their conduct.”
A spokesman for
“He’s still with the firm, and he’s had a long and distinguished career as a [financial advisor],” Halldin said.
“We disagree with the panel's decision given the facts presented in this case,” Halldin said reiterating his comments to
“We are reviewing the decision,” he said.
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