The Financial Industry Regulatory Authority (FINRA) fined and suspended registered principal Thomas Michael Buehler of Alpharetta, Georgia for failing to take reasonable steps to supervise one of his brokers, an oversight that FINRA alleges led to 105 unsuitable mutual fund switches and resulting in losses of approximately $600,000.
According to FINRA, the lack of supervision occurred from 2007 through 2009 when Buehler was serving as Area Vice President for J.P. Turner & Company, LLC. During this time, Buehler was responsible for 25 subordinates, including one assigned to a Nebraska office, though the individual worked from his New Jersey home.
In 2008, this subordinate allegedly recommended only "Class A" mutual fund shares, encouraging customers to engage in unsuitable mutual fund switches. Furthermore, by failing to disclose the concept of "Free Exchanges," which allow mutual fund exchanges within the same fund family without paying an additional sales load, the subordinate deliberately set his customers up to incur significant fee liability, as evidenced by the broker falsely identifying the switches as "unsolicited."
While customers lost nearly $600,000, the subordinate broker received gross commissions from the switches of approximately $240,000.
According to FINRA, Buehler should have identified this fraudulent activity: By taking reasonable steps to supervise his rogue broker, Buehler would have seen the significant spike in switch transactions, the broker's pattern of identifying all mutual fund trades as "unsolicited," the broker's recommendation of "Class A" shares and further irregularities with Mutual Fund Disclosures submitted to Buehler for approval.
The findings stated that Buehler never questioned his subordinate about these habits and trends, failed to investigate or contact customers to inquire about the odd activity and failed to place the representative on heightened supervision.
Firms have a mandatory duty under FINRA Rule, as well state and federal securities laws to supervise their brokers and representatives. If you have invested with a broker or firm and believe that a poor level or lack of supervision has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.