Mary C. Beslagic, a broker at Edward Jones, faced penalties from FINRA for not following Reg BI rules. In March 2022, she suggested putting $220,000 from a home equity loan into long-term mutual funds.
This advice did not fit the client’s plan to use the money soon for buying and fixing up a house. Not long after buying them, the funds lost value, leading to a sale at a loss and taking out an extra $25,000 margin loan.
FINRA fined Beslagic $5,000 and suspended her for two months because of this issue. Her actions went against SEC’s Regulation Best Interest and FINRA’s Rule 2010. After these events, Edward Jones ended her employment in August 2023.
They also settled with the affected customer for $24,000 in July 2023 after an initial demand of $127,000 for damages caused by this investment decision.
Summary of the Violation
Table of Contents
Mary Beslagic, a former Edward Jones broker, faced a Reg BI violation for advising an investment of $220,000 from a home equity loan into long-term mutual funds. This recommendation overlooked the customer’s immediate need to use the funds for short-term housing expenses.
Improper recommendation to invest $220,000 from a home equity loan into long-term mutual funds
In March 2022, financial advisor Mary C. Beslagic guided a married couple to invest $220,000 into long-term mutual funds. This advice disregarded the couple’s immediate housing needs.
They had taken out a home equity loan, intending to use it for short-term purposes. Beslagic’s suggestion aimed at growing their wealth through long-term investment in mutual funds instead.
Investing in your future requires understanding the present needs.
Shortly after following her recommendation, the value of these mutual funds dropped significantly. This decline put the couple at risk financially because they needed accessible funds for their housing situation and now faced a loss on their investment.
Customer’s intended use of funds for short-term housing needs
Customers sought funds for short-term housing needs. They planned to buy a house for a family member and renovate their own home. Aware of these plans, Mary Beslagic still advised investing in long-term mutual funds.
These actions did not align with the customer’s immediate housing goals or renovation funding needs.
Value of mutual funds declined shortly after acquisition
After applying $220,000 from a home equity loan to long-term mutual funds, the funds’ value experienced a decrease. This development necessitated the customers to partially liquidate their investment at a lower price, resulting in financial stress.
Their financial pressure was further intensified as they resorted to a $25,000 margin loan to accommodate unexpected expenses. This unfortunate sale deepened their financial problems by reducing their initial investment and burdening them with extra debt from the margin loan.
Violation of Regulations
Mary Beslagic violated Regulation Best Interest (Reg BI) and FINRA’s Rule 2010, failing to consider the customer’s investment profiles and liquidity needs. This resulted in improper recommendation to invest $220,000 from a home equity loan into long-term mutual funds, against the customer’s intended use of funds for short-term housing needs, leading to a decline in the value of mutual funds shortly after acquisition.
Breach of Regulation Best Interest (Reg BI) and FINRA’s Rule 2010
Mary Beslagic violated the Securities and Exchange Commission’s Regulation Best Interest (Reg BI) by neglecting to consider a client’s investment profiles, including time horizon and liquidity needs.
This violation occurred as Beslagic made an improper recommendation for a client to invest $220,000 from a home equity loan into long-term mutual funds, despite the customer’s intended use of the funds for short-term housing needs.
Furthermore, her actions breached FINRA Rule 2010 which requires high standards of commercial honor in the financial industry.
Failure to consider customer’s investment profiles and liquidity needs
When failing to consider the customer’s investment profiles and liquidity needs, Beslagic neglected vital aspects of the clients’ financial situation. The customers had intended to use the funds for near-term housing expenses, emphasizing a critical requirement for liquidity.
The unsuitable recommendation directly resulted in subsequent financial loss for the customers, highlighting the importance of carefully assessing investment suitability based on individual time horizons and liquidity needs.
Beslagic overlooked crucial elements such as the customers’ intended use of funds and their immediate housing expenses. This disregard led to a breach of regulations and regulatory notice by FINRA on “suitability concerns” regarding investing liquefied home equity, ultimately causing Edward Jones to settle a customer complaint for $24,000 due to these oversights.
Consequences and Settlement
Mary Beslagic experienced a $5,000 fine and a two-month suspension for the violation at Edward Jones. Moreover, Edward Jones resolved a customer complaint by paying $24,000.
$5,000 fine and two-month suspension for Beslagic
FINRA fined Beslagic $5,000 and imposed a two-month suspension. Edward Jones terminated her employment due to related allegations in August 2023.
Moving on to “Edward Jones settled a customer complaint for $24,000” let’s look at the details of the settlement.
Edward Jones settled a customer complaint for $24,000
Edward Jones resolved a customer complaint by agreeing to a $24,000 settlement in July 2023. This was in response to an initial claim seeking $127,000 in damages.
Conclusion
Mary Beslagic, a former Edward Jones broker, faced a hefty fine and suspension by FINRA for violating Reg BI. The improper recommendation to invest in long-term mutual funds from a home equity loan directly impacted the customers’ short-term housing needs.
This case highlights the critical importance of considering customer profiles and liquidity when providing investment advice. It serves as a stark reminder about the serious consequences of breaching financial industry regulations.
Ultimately, this situation underscores the necessity for brokers to always prioritize their clients’ best interests.
FAQs
1. What did FINRA find in the case of Mary Beslagic?
FINRA found that broker Mary Beslagic violated Regulation Best Interest (Reg BI) while working at Edward Jones. This regulation requires brokers to act in their clients’ best interests.
2. What are the consequences for violating Reg BI?
When a broker violates Reg BI, they may face fines and disciplinary actions from regulatory bodies like FINRA. In this case, Mary Beslagic received a fine due to her actions.
3. Why is Reg BI important for investors?
Reg BI is crucial because it aims to protect investors by ensuring that brokers provide recommendations based on what is best for their clients rather than just seeking profits.
4. How does this violation affect Edward Jones as a firm?
The violation by Mary Beslagic reflects on Edward Jones as well. It raises concerns about compliance and how the firm supervises its brokers to ensure they follow regulations like Reg BI.
