FINRA ordered Phoenix, Arizona-based SagePoint Financial to pay $86,000 in fines and restitution after failing to supervise its brokers, resulting in improper margin use, including an elderly investor's unsuitable use of margin that directly violated firm policies.
According to the investigation, SagePoint's failure to detect red flags of unsuitable use of margin caused customers to pay more than $50,000 in excessive and unnecessary fees, commissions, and interest.
For example, brokers improperly facilitated a margin loan for a 79-year-old client whose risk tolerance preference, investment objectives, and annual income should have disqualified this customer from use of margin. Instead, the elderly investor saw their margin balance increase to nearly $150,000, in excess of the account's equity, and accompanied by various fees and other payments the customer otherwise would not have incurred.
SagePoint representatives also allowed another customer to leverage up to 46% of her portfolio, also in contravention of firm rules, and similarly resulting in high fees, commissions, and margin interest payments that otherwise would not have been incurred.
Despite SagePoint's surveillance department identifying the unusually high margin use and the firm's own policies regarding margin, the firm closed its investigation after the representative explained via e-mail that the customer was purportedly aware of the implications of margin use. Nonetheless, FINRA saw fit to award this customer, as well as the aforementioned elderly client, restitution for the firm's margin misconduct.
If you invested with a SagePoint Financial broker or investment adviser who unsuitably recommended you participate in margin investments or take out a loan on margin, thus exposing your to high fees, commissions, interest payments, or other unnecessary charges that have proven harmful to your financial interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.