FINRA, the Financial Industry Regulatory Authority, has taken action against Concorde Investment Services LLC. The firm faces a fine of over $130,000 for selling unsuitable GPB Capital investments.
This penalty stems from Concorde’s actions between November 2015 and April 2018. The company failed to properly oversee recommendations for GPB Capital limited partnership interests.
These sales were made to six retail customers with conservative or moderate risk tolerances.
The fine includes a censure, a $110,000 penalty, and $20,382.39 in partial payback to affected customers. Five of the six customers were seniors who put more than 30% of their net worth into risky investments.
This went against Concorde’s own rules for suitable investments. The firm didn’t respond well to signs that its representatives were making bad recommendations. They also failed to look into red flags about these sales.
This case highlights broader issues with GPB Capital investments. In February 2021, the SEC charged three GPB Capital executives with running a “Ponzi-like scheme.” This news came after the period of misconduct at Concorde.
The violations involved breaking FINRA rules on supervision and suitable recommendations.
The impact of this fine reaches beyond Concorde. Other advisers and broker-dealers have faced similar penalties for GPB sales. This case shows the importance of following rules and protecting investors.
The story doesn’t end here.
Key Takeaways
Table of Contents
- FINRA fined Concorde $110,000 and ordered $20,382.39 in partial restitution for unsuitable GPB Capital sales from November 2015 to April 2018.
- Concorde broke FINRA Rules 3110 and 2111 by failing to supervise recommendations and making unsuitable sales to conservative or moderate risk customers.
- Five out of six affected customers were seniors who invested over 30% of their net worth in risky GPB Capital products.
- The SEC charged three GPB Capital executives with running a “Ponzi-like scheme” in February 2021.
- Concorde partnered with LINK, a due diligence analytics platform, to improve investment oversight and compliance practices.
Background of the Case
FINRA slapped Concorde with a hefty fine. The regulatory body found fault with the firm’s sales of GPB Capital limited partnerships.
FINRA fines Concorde over $130,000 for unsuitable GPB Capital sales
Concorde Investment Services LLC faced a hefty fine from FINRA for unsuitable GPB Capital sales. The regulatory body slapped Concorde with a $110,000 penalty and ordered $20,382.39 in partial restitution, plus interest.
These violations occurred between November 2015 and April 2018. Concorde, a Michigan-based firm, operates as a registered investment adviser, broker-dealer, and insurance company.
The Ann Arbor-headquartered firm has 53 branch offices and about 145 registered representatives. FINRA’s action stems from Concorde’s failure to supervise recommendations for GPB Capital limited partnership interests.
The firm made unsuitable sales to customers with conservative or moderate risk tolerances. While Concorde accepted the censure and fine, they neither admitted nor denied the claims.
Three of six affected customers will receive partial restitution, while the other three had prior settlements.
Violations and Failures by Concorde
Concorde failed to watch over risky sales to customers. Want to know more? Keep reading.
Failure to supervise recommendations for purchasing GPB Capital limited partnership interests
Concorde dropped the ball on watching over GPB Capital sales. From late 2015 to early 2018, the firm failed to keep an eye on reps pushing these risky investments. They ignored red flags that showed advisors were making bad calls for clients.
Even after looking at paperwork, Concorde didn’t dig deeper to check if the advice fit each person’s needs.
The firm broke FINRA Rule 3110 about keeping tabs on things. They let reps suggest putting up to 30% of a client’s money into alternative investments. This led to some folks with careful or middle-of-the-road risk views getting too much GPB Capital in their mix.
As someone who’s seen this firsthand, I can say it’s crucial for firms to stay on top of what their advisors are selling.
Recommendations made to customers with conservative or moderate risk tolerances
Moving from supervision failures, we now focus on the actual recommendations made by Concorde. The firm’s representatives suggested risky GPB Capital investments to clients with cautious money habits.
All six affected customers had conservative or moderate risk tolerances. These suggestions went against the clients’ stated financial goals and comfort levels.
Concorde’s actions raised red flags about suitability. Five out of six customers were seniors who put over 30% of their net worth into alternative investments. This high concentration in a single, risky product was not appropriate for their profiles.
The Securities and Exchange Commission later charged GPB Capital executives with running a “Ponzi-like scheme.” This shows how unsuitable these recommendations were for risk-averse clients.
Concentrated investment positions inappropriate for customer profiles
Concorde’s sales of GPB Capital limited partnerships raised red flags. Five out of six customers, all seniors, put over 30% of their net worth into these risky investments. This went against Concorde’s own rules for suitable recommendations.
The firm ignored warnings about whether these investments fit their customers’ needs. From November 2015 to April 2018, Concorde failed to properly watch over these sales.
The Financial Industry Regulatory Authority (FINRA) found these concentrated positions didn’t match customer profiles. Seniors with conservative or moderate risk tolerances shouldn’t have such large stakes in alternative investments.
This mistake led to FINRA fining Concorde and ordering them to pay back some money to affected customers. The case shows how important it is for broker-dealers to follow suitability guidelines and protect their clients.
Violations of Rule 3110 and Rule 2111
These concentrated positions led to serious rule violations. Concorde broke FINRA Rule 3110 on supervisory systems and Rule 2111 on recommendation suitability. From November 2015 to April 2018, the firm failed to properly oversee GPB Capital sales.
They ignored red flags about unsuitable recommendations to clients. This put customers with conservative or moderate risk tolerances in high-risk investments.
I’ve seen firsthand how these violations can harm investors. Firms must follow strict rules to protect their clients. Concorde’s actions show a clear disregard for these important safeguards.
The SEC has charged GPB Capital executives with running a “Ponzi-like scheme.” This makes Concorde’s lack of oversight even more troubling for affected customers.
Consequences and Restitution
Concorde faced serious penalties for its actions. The firm agreed to pay a fine and give money back to affected customers.
Concorde accepts censure and fine, along with partial restitution to affected customers
FINRA hit Concorde with a $110,000 fine and censure. The firm must also pay $20,382.39, plus interest, to some affected customers. This action stems from unsuitable GPB Capital sales.
Three of six impacted customers will get partial payback. The other three won’t due to prior deals. Concorde didn’t admit or deny the claims in this case.
The U.S. Securities and Exchange Commission oversees such enforcement actions. FINRA, a self-regulatory body, handles day-to-day oversight of broker-dealers. These groups aim to protect investors and maintain fair markets.
Their work helps keep financial advisors and firms in check, safeguarding client interests.
SEC charges three executives from GPB Capital with running a “Ponzi-like scheme”
Concorde’s acceptance of censure and fine wasn’t the end of the story. In February 2021, the SEC took action against GPB Capital itself. The regulatory body charged three executives from GPB Capital and related entities with running a “Ponzi-like scheme.”.
David Gentile and Jeffry Schneider were among the accused executives. The SEC claimed they used investor funds for partial payments instead of income from portfolio companies. This practice misled investors about the true financial health of GPB Capital’s holdings.
The SEC’s complaint seeks to reclaim ill-gotten gains, interest, and penalties from those involved.
Industry Impact
GPB Capital sales have caused trouble for other firms too. Some former advisers and broker-dealers faced fines for similar issues.
Previous fines related to GPB sales for former advisers and broker-dealers
GPB Capital sales have led to fines for several financial firms in recent years. In the past year alone, many former advisers and broker-dealers faced penalties for unsuitable recommendations.
These fines highlight the growing scrutiny on alternative investments in the securities industry. The Financial Industry Regulatory Authority (FINRA) has cracked down on firms that failed to properly supervise GPB Capital sales.
Concorde’s recent fine of over $130,000 fits into this broader pattern of enforcement. The firm violated FINRA rules by recommending GPB investments to customers with conservative risk profiles.
Five out of six affected customers were seniors who invested more than 30% of their net worth in these risky products. This case shows how regulators are working to protect retail investors, especially older adults, from unsuitable investment advice.
Concorde’s partnership with the due diligence analytics platform LINK
Concorde has teamed up with LINK, a due diligence analytics platform. This move aims to boost Concorde’s ability to check investments more carefully. The partnership is a big step for Concorde, making news in the financial world.
It shows Concorde’s push to get better at following rules and watching over investments.
LINK’s tools will help Concorde look at investments more closely. This team-up is part of Concorde’s plan to improve how they follow laws and watch over money. By using LINK, Concorde hopes to spot problems with investments before they cause trouble.
This could help avoid issues like the ones that led to fines from FINRA.
Conclusion
FINRA’s action against Concorde serves as a wake-up call for the financial industry. Firms must prioritize customer protection and proper oversight of investment recommendations. This case highlights the need for rigorous suitability checks, especially for high-risk products like GPB Capital.
Investors should stay informed about their advisors’ recommendations and ask questions. The SEC’s charges against GPB Capital executives underscore the importance of due diligence.
Financial firms can learn from Concorde’s missteps to improve their compliance practices.
