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February 18, 2010 Thursday
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FINRA fines H&R Block Financial Advisors $200,000
Zaeem Shoaib
FINRA also fined and suspended Andrew MacGill, a broker at H&R Block Financial Advisors, for making unsuitable sales of reverse convertible notes to a retired couple.
The Financial Industry Regulatory Authority said Feb. 16 that it levied a fine of $200,000 against H&R Block Financial Advisors Inc., now known as Ameriprise Advisor Services Inc., a unit of Ameriprise Financial Inc., for failing to establish adequate supervisory systems and procedures for supervising sales of reverse convertible notes to retail customers. In addition, FINRA fined and suspended Andrew MacGill, a broker at H&R Block, for making unsuitable sales of reverse convertible notes to a retired couple.H&R Block was ordered to pay $75,000 in restitution to the couple for losses they incurred.In the enforcement action, FINRA found that H&R Block engaged in sales of reverse convertible notes without having a system or procedures in place to effectively monitor customer accounts for potential overconcentrations in the notes during the period from January 2004 through December 2007. Consequently, the company failed to detect and respond to indications of potential overconcentration in the notes in several customer accounts.According to the regulator, H&R Block utilized an automated surveillance system to help its suitability review of securities transactions and to monitor customer accounts for potentially unsuitable positions and activity.The system was not configured or designed to monitor reverse convertible notes transactions or positions in customer accounts, and the company did not establish an effective alternative means to do so. As a result, H&R Block failed to detect and respond to indications of potentially unsuitable reverse convertible notes concentration levels in numerous customer accounts. It also failed to provide sufficient guidance to its supervising managers on how to assess suitability in connection with their brokers’ recommendation of reverse convertible notes.The regulator found that the retired couple receiving restitution had invested nearly 40% of their total liquid net worth in nine reverse convertible notes on MacGill’s recommendation, exposing them to a risk of loss that was inconsistent with their investment objectives and risk tolerance and ultimately resulted in substantial loss.FINRA suspended MacGill from associating with any of its regulated firms in any capacity for 15 days, fined him $10,000 and ordered him to disgorge $2,023 in commissions earned from his sales of reverse convertible notes to the retired couple.H&R Block and MacGill neither admitted nor denied the charges, but consented to the entry of FINRA’s findings in concluding the settlement.
February 24, 2010
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