Concorde Investment Services, LLC and its Chief Compliance Officer, Kimberlee Elizabeth Levy, were recently censured and fined by the Financial Industry Regulatory Authority (FINRA) for failing to reasonably supervise a former representative who allowed her husband to conduct business transactions and trades with Concorde’s customers while he was serving a FINRA-imposed one-year suspension.
While aware that her husband was still under his suspension period, Concorde’s representative assisted her husband in communicating with several of the firm’s customers, who were not accredited investors, allowed him to make securities recommendations and placed trades on behalf of the customers while not being authorized to do so. At the time, most of Concorde’s customers were not aware of his suspension and believed that he was still acting as their licensed broker.
When Levy joined Concorde, she was approached by the firm’s chief operating officer and one other employee who notified her of the suspension and expressed concerns regarding the representative handling “her husband’s book of business.” To determine who specifically was serving in fact as the representative for Concorde’s customers at the branch office at issue, Levy was advised by a third-party consultant to conduct a “surprise inspection” of the representative’s branch office.
Despite their knowledge of his suspension, both Levy and the firm made the decision to not place the husband on heightened supervision. In addition, the firm failed to reasonably supervise the suitability of his securities suggestions but instead approved his recommendations for customers to invest in a private placement, despite many red flags.
The FINRA findings stated that:
- From April 2013 to March 2014, Concorde Investment Services, LLC and Levy Failed to Reasonably Supervise its representative, who permitted her husband to conduct a securities business with firm customers while he was suspended by FINRA.
- Concorde Investment Services, LLC and Levy failed to reasonably supervise the representative’s husband and, as a result, did not identify that he recommended unsuitable trades in several customers’ accounts, among other things.
- Levy failed to take reasonable steps to determine whether he was acting in a registered capacity while using his business email address during his suspension.
Consequently, two customers suffered around $25,000 in investment losses, and five customer accounts suffered about $148,000 in total loss due to “unsuitable concentrations of fixed-to-floating rate securities.” The firm has reached settlements with six of the impacted customers.
Due to its violations of NASD Rule 3010, and FINRA Rules 3110 and 2010, Concorde Investment Services, LLC was fined $300,000, censured, and ordered to pay $76,344.20 in restitution. Levy is also fined $10,000 and is serving a four-month suspension from association with “any FINRA member in any principal capacity” for four months and is required to complete 40 hours of “continuing education on supervisory responsibilities.”