Initiated By
FINRA
Allegations
NASD RULES 2110, 2310(A): ISSEL ENGAGED IN A PATTERN OF UNSUITABLE MUTUAL FUND RECOMMENDATIONS IN THE ACCOUNTS OF SEVERAL CUSTOMERS OF HIS MEMBER FIRM. IN THE BEGINNING, AFTER REVIEWING THE VARIOUS SHARE CLASS OPTIONS OFFERED BY AN ENTITY, ISSEL CONCLUDED THAT THE ENTITY'S CLASS-T SHARES PROVIDED HIS CUSTOMERS THE BEST BALANCE OF UPFRONT SALES CHARGES AND ONGOING ANNUAL FEES. THEREFORE, ISSEL RECOMMENDED THAT EACH OF THE CUSTOMERS SWITCH SHARE CLASSES, FROM CLASS-T SHARES TO CLASS-C SHARES, FOR THEIR EXISTING MUTUAL INVESTMENTS WITHIN THE SAME MUTUAL FUND FAMILY. LATER, ISSEL BEGAN RECOMMENDING TO NEW MUTUAL FUND CUSTOMERS THAT THEY INVEST IN ENTITY'S CLASS-C SHARES. THE EXISTING CUSTOMERS TO WHOM ISSEL MADE THESE RECOMMENDATIONS HAD NOT EXPERIENCED ANY CHANGE IN THEIR FINANCIAL SITUATION OR INVESTMENT OBJECTIVES. RATHER, ISSEL MADE THE RECOMMENDATIONS BECAUSE HE WANTED HIS CUSTOMERS INVESTING IN THE ENTITY'S MUTUAL FUND TO BE INVESTED IN THE SAME SHARES CLASS, THE CLASS-C, WHICH HE BELIEVED WOULD RESULT IN EASIER RECORD-KEEPING AND MORE EFFICIENT EXCHANGES WITHIN THE VARIOUS MUTUAL FUNDS. ISSEL'S RATIONALE FOR RECOMMENDING THE CLASS-C SHARES TO HIS NEW CUSTOMERS WAS THAT ELIMINATING THE UPFRONT SALES CHARGE WOULD GENERATE A HIGHER RETURN FOR THE NEW CUSTOMER IN THE SHORT TERM AND, THEREFORE, INCREASE THE LIKELIHOOD OF THE NEW CUSTOMER REMAINING WITH ISSEL FOR THE LONG TERM. IN EACH CASE, THE TRANSACTIONS WHEREBY THESE CUSTOMERS SWITCHED SHARE CLASS GENERATED ADDITIONAL COMPENSATION FOR ISSEL, BUT PROVIDED NO ECONOMIC BENEFIT TO THE CUSTOMERS.
Resolution
Acceptance, Waiver & Consent(AWC)
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$15,000.00
Sanctions
Suspension
Registration Capacities Affected
ANY CAPACITY
Duration
10 BUSINESS DAYS
Start Date
2/19/2013
End Date
3/4/2013
Regulator Statement
WITHOUT ADMITTING OR DENYING THE FINDINGS, ISSEL CONSENTED TO THE DESCRIBED SANCTIONS AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS FINED $15,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR 10 BUSINESS DAYS. THE SUSPENSION IS IN EFFECT FROM FEBRUARY 19, 2013, THROUGH MARCH 4, 2013. FINE PAID IN FULL ON 2/7/13.
Broker Comment
WITHOUT ADMITTING OR DENYING THE FINDINGS, ISSEL CONSENTED TO THE DESCRIBED SANCTIONS ND TO THE ENTRY OF FINDINGS; THEREFORE HE IS FINED $15,000 AND SUSPENDED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY FOR 10 BUSINESS DAYS. THE SUSPENSION IS IN EFFECT FROM FEBRUARY 19, 2013 THROUGH MARCH 4, 2013.