Robert Stein, a registered representative with the Boston, MA branch of Capitol Securities Management, Inc. (Capitol Securities), submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that he made unsuitable reverse convertible note (RCN) recommendations and purchases in the accounts of eight customers.
FINRA found that Robert Gerald Stein, of Sudbury, MA, recommended and effected 24 purchases of RCNs in 8 customer accounts. The customers were primarily over 60 years old and had conservative investment objectives. According to FINRA, Mr. Stein’s recommendations and purchases totaled approximately $4 million in the 8 customers’ accounts. Moreover, all of the accounts were heavily concentrated in RCNs, constituting a substantial portion of their net worth.
Reverse convertible notes are complex investment products that expose investors not only to risks associated with bonds and fixed income products, but to the added risks of the underlying linked equity, which exposes investors to the potential for loss of all or part of their investment principal. Mr. Stein’s recommendations were unsuitable for his customers in light of their investment goals, ages, and net worth. Consequently, he was fined $5,000 and suspended from association with any FINRA member in any capacity for three months. The suspension is in effect from March 21, 2016 through June 20, 2016.
Brokerage firms and their registered representatives have the responsibility, under FINRA Rule 2111, the “Suitability Rule,” to make suitable recommendations to investors. This rule lays out the three main suitability obligations requiring brokers to (i) perform due diligence to understand the risks of an investment or investment strategy, and determine whether it is suitable for anyone, (ii) have a reasonable basis for believing the investment or investment strategy is suitable for the particular customer based on that customer’s investment profile; and (iii) have a reasonable basis for believing that a series of securities transactions are not excessive (if the broker has control over the account).
Have you suffered losses in an unsuitable reverse convertible note investment? Have you suffered losses in your Capitol Securities Management or any other brokerage account due to unsuitable recommendations or the overconcentration of your investments by your broker? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Capitol Securities Management stockbrokers and other financial professionals who may have engaged in misconduct and caused investors losses.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Robert Wayne Pearce
Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $125 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.
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