The securities industry watchdog, the Financial Regulatory Industry Authority (“FINRA”) barred, NPB Financial Group’s, Ex-Broker Cynthia Diane Cowden, for Unsuitable Investment Recommendations to a retired couple and an individual senior investor. The recommended investments at issue were illiquid non-traded REITs and non-traded closed end funds. According to FINRA, the barred broker’s recommendations resulted in unsuitable, securities concentration in illiquid securities that exceeded concentration limits established by the California State Regulations designed to protect investors.
FINRA required that Cynthia Diane Cowden’s investment advice should have had reasonable basis for her recommendations, based on the investor’s “age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, and risk tolerance.” NPB Financial Group failed to supervise the conduct of Cowden’s handling of her client’s accounts which resulted in severe sanctions against Cowden who was barred further association with the securities industry. According to FINRA, “the three senior customers who were the subject of Cowden’s unsuitable recommendations during the Relevant Period included one married couple and one other customer, all of whom were California residents with little investment experience”.
The retired couple had a household net worth of roughly $1.0 million, and liquid net worth of $300,000. The household annual income was $23,000 and they had a moderate risk tolerance. The stated investment objective current income with a need for liquidity. During the Relevant Period, Cowden recommended two investments which totaled $231,200, of NorthStar Real Estate Income Trust, an illiquid, high risk, non-traded REIT. The investments were not only unsuitable based on the couples’ moderate risk tolerances, but it represented an over-concentration which consumed nearly their entire liquid net worth.
The individual investor, who still worked to meet their financial needs, had a net worth of approximately $400,000 of which $300,000 was liquid. Their annual income was $60,000, with a stated “low to moderate risk tolerance”. Investment liquidity was also important. According to FINRA, “Cowden recommended that the customer purchase $250,000 of Priority Income Fund, Inc. (Priority), a speculative, high risk, illiquid, closed-ended mutual fund”. Furthermore, Priority Income Fund, Inc. offered through managing Broker Dealer Preferred Capital Securities, was not suitable given the customer’s investment objective, circumstances, and financial needs. The investment of $250,000 represented an unsuitable concentration of over 50% of the investor’s net worth.
KlaymanToskes is a leading securities law firm dedicated to the protection of investor rights. Our Investment Litigation Blog entry is designed to alert investors of broker misconduct and the failure of brokerage firms to adequately supervise the handling of investor accounts. The purpose of this release is Blog Post is to investigate whether recommendations made by brokerage firms were suitable for non-traded illiquid REITs and Closed-End Funds. For investors with investment losses that exceed $250,000 from accounts at full-service brokerage firms, and have information relating to the manner in which the firm handled their accounts are encouraged to contact Lawrence L. Klayman, Esq., at (561) 542-5131, and download our Special Investor Report.
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