A recent Letter of Acceptance, Waiver and Consent (“AWC”) illustrates why reps don’t want to make guarantees against customer losses, even “guarantees” that loosely are defined.
In 1999, the rep entered the securities industry. From January 2004 through October 2012 the rep was
registered with EKN Financial Services, Inc. (“EKN”). The AWC alleges that between September 2010 until October 2010 the rep offered to customers a signed statement on firm letterhead, which essentially guaranteed (but did not explicitly guarantee) the immediate return of the original amount of the investment and represented that the investment would be maintained in cash, securities, or hard assets.
Notably, this was not your typical guarantee, but, arguably instead, a misrepresentation / omission that FINRA construed as being a "guarantee." FINRA thus found that the rep violated Rule 2010 and 2150(b), which prohibit stockbrokers from guaranteeing customers against losses and from sharing the profits in customers’ accounts. As a result, FINRA imposed upon the rep a $5,000 fine due upon re-association with a member firm and a 10 business-day suspension from association with any FINRA member firm in any capacity.