Representative pays fees for improper sales of “Steepeners” – Finance and Banking

United States: Representative pays fees for improper sales of “Steepeners”

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A registered representative paid the costs for violating the suitability rules.

FINRA alleged that the representative advised clients to buy “steepeners” – financial instruments that typically pay interest above the market at the start of the term and end up moving to a lower floating interest rate. at the forward rate. FINRA previously cautioned against recommending steepings on the grounds that they are “too difficult to understand” for clients, have the potential for extended periods of time with little or no interest, and generally have no market. secondary liquid.

FINRA found that the representative recommended that the client buy the pentifiers without fully understanding the risks, including the possibility that no interest will be paid if the yield curve flattens. FINRA found that the representative violated FINRA Rule 2111 (“suitability”), which requires a “reasonable basis to believe that a recommended transaction or investment strategy involving one or more securities is suitable for the client, on the basis of the information obtained through the due diligence of the
[adviser] or associated person “and, therefore, the FINRA 2010 rule (” Commercial Honor Standards and Principles of Commerce “).

Although the individual is no longer affiliated with a member firm registered with FINRA, he is still held accountable under FINRA rules. As a result of these execution measures, the individual was (i) suspended from his right to associate with a FINRA member in any capacity for four months and (ii) ordered to pay a fine. of $ 5,000. The effective date of these sanctions has not yet been determined by FINRA.

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