Concorde Investment Services in Livonia Proposes to Settle FINRA Allegations of Failure to Supervise a Registered Representative
A Livonia, Michigan, Financial Industry Regulatory Authority (FINRA) member, Concorde Investment Services, LLC, submitted a Letter of Acceptance, Waiver and Consent (AWC) on June 26, 2020, for the purpose of proposing a settlement of alleged FINRA Rule violations involving the failure to reasonably supervise two former registered representatives of the Concorde Investment Services which resulted in one of the registered representatives recommending unsuitable trades in several customers’ accounts, among other things. With this AWC, Concorde Investment Services did not admit or deny FINRA’s findings.
FINRA alleged that from April 2013 through March 2014, Concorde and Kimberlee Elizabeth Levy, the firm’s Chief Compliance Officer and a General Securities Principal, did not reasonably supervise a registered representative of the firm, named in the AWC document as JT. FINRA further alleges that JT allowed her then-husband, named in the document as RC, to conduct business with Concorde customers. However, during that period, RC had been suspended by FINRA. When RC’s suspension was over in March 2014, Concorde hired RC, failing to reasonably supervise him, which resulted in Levy not identifying that he recommended unsuitable trades in several customers’ accounts, among other things.
RC’s suspension was initiated because, when working for another FINRA member firm, RC recommended unsuitable transactions involving complex products. He also sent his customers misleading and unapproved account summaries and failed to disclose customer complaints in a timely manner on his Uniform Application for Securities Industry Registration. JT was hired by Concorde Securities just before her then-husband, RC, began serving his FINRA suspension. She brought no customers of her own to the company. RC, who participated in JT’s employment negotiations, “explicitly told Concorde that he wanted JT to take over the business and service his customers while he was suspended.”1 Despite knowing this, doubts expressed by the firm’s CEO about JT’s competency to handle RC’s book of business, and recommendations by a third-party consultant, Levy did not schedule a timely branch inspection. That inspection was actually conducted more than ten months later and six months after the consultant had recommended a surprise inspection. During that inspection no one contacted customers, or inspected email communications or customer contact notes to determine if JT or her husband RC was actually servicing customers’ accounts. If they had reviewed the email records they would have found over 1,700 emails that RC sent to clients through a Concorde email address. A check made out to RC and Concorde in August 2013, and rejected by Concorde’s clearing firm because RC didn’t work for the company at the time, should have prompted Levy to initiate an investigation of who was servicing these accounts, but it did not.
When Concorde hired RC after his suspension, knowing he had been suspended, they still did not adequately supervise him. Concorde’s own written supervisory procedures indicated that heightened supervision was required for employees with disciplinary backgrounds and that supervision should be done on a daily basis. It wasn’t. This lack of supervision enabled RC to advise unsuitable securities recommendations resulting in a 22-year old student and an 85-year-old widow suffering losses of $25,000 each based on his recommendation to purchase private placements, a high-risk investment for investors with a minimum $1M net worth, which neither of these investors had. In another instance, RC recommended fixed-to-floating securities that resulted in five customers suffering total losses of about $148,000. Concorde and Levy terminated RC and JT in July 2016.
FINRA has accepted the AWC which had the following stipulations: Concorde will accept a censure; pay a fine of $300,000; and pay one of the customers that was harmed $76,344.20 plus interest. Concorde has reached settlements previously with the other affected customers. Levy will be suspended for four-months, starting 8/17/2020, from association with any FINRA member in any principal capacity; pay a fine of $10,000; and undertake 40 hours of continuing education concerning supervisory responsibilities.
If you believe you have been a victim of securities or investment fraud or have questions about your broker’s management of your account, please contact our Michigan Securities Law Firm today. Our experienced securities lawyers can handle a wide variety of legal matters including securities litigation, broker misconduct, FINRA matters, and more.
1 Financial Industry Regulatory Authority Letter of Acceptance, Waiver and Consent No. 2018060577602