According to Investment News, the Financial Industry Regulatory Authority (FINRA) has fined VSR Financial Services Inc. $550,000, in addition to a 45-day suspension of their chairman, Don Berry, for over concentrating client portfolios in alternative investments.
On May 15th, 2013 VSR entered into a Letter of Acceptance, Waiver, and Consent which alleges that Mr. Berry “failed to adequately implement the firm’s supervisory system pertaining to its supervision of concentrated positions in alternative investments through the use of a ‘discount program,’” which “artificially reduced the amount a customer had invested in a particular investment for purposes of calculation concentration.”
According to the Letter, “when calculating concentration at certain risk levels, VSR reduced the risk ratings on many investments, making the ratings inconsistent with the risks stated in the offering documents related to the investments.”
Alternative investments are security products other than stocks, bonds, and cash. Types of alternative investments include hedge funds, non-traded REITs, TICs, private placements, commodities and financial derivatives. Most alternative investments are intended for accredited high-net worth individuals because they are not subjected to the same public scrutiny and regulatory oversight as traditional investments. Furthermore, alternative investments are often more complex and lack liquidity.
Brokerage firms have a responsibility to make suitable investment recommendations that are inline with the clients risk tolerance. In addition, brokers are required to perform adequate due diligence prior to making investment recommendations to determine if an investment is appropriate given the clients age, liquidity needs, investment experience and financial objectives.
Broker-dealers that have not done their fiduciary duty or performed adequate due diligence when selling investments may be held liable for investment losses through FINRA arbitration.
The White Law Group has filed several FINRA arbitration cases involving VSR’s sales of alternative investments. Those cases have included alternative investments in Reef Oil and Gas, Mewbourne, Waveland, Bradford Energy, Vestara Medical, DBSI, Passco, and Behringer Harvard, among other alternative investments.
If you purchased alternative investments through VSR Financial Services Inc. and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312-238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago Illinois and Boca Raton, Florida.
For more information on The White Law Group and the firm’s securities fraud practice visit http://www.whitesecuritieslaw.