The Financial Industry Regulatory Authority
has censured and fined NYLife Securities $250,000 for its failure to supervise sales of higher-risk mutual funds. The firm also will have to pay restitution of more than $76,600 to the 28 customers affected, as well as offer rescission to the customers, who suffered unrealized losses of about $250,000.
Finra said that from September 2014 to December 2016, NYLife Securities failed to enforce its written procedures for supervising the suitability of sales of higher-risk mutual funds that were subject to
significant volatility.
According to those procedures, when such sales resulted in customer portfolios that were overconcentrated in higher-risk securities, NYLife Securities reps were required to work with customers to reallocate the portfolios or determine how to change their risk tolerances and investment objectives to correspond with their assumption of additional risk.
[Recommended video: Ed Slott: Here's why January is the new December for charitable contributions]
But the reps adjusted customers' risk tolerances and investment objectives to accommodate sales of the funds without first seeking the customers' input, Finra said in a letter of acceptance, waiver and consent.
"Those unilateral adjustments permitted numerous customers to overconcentrate their portfolios in higher-risk mutual funds, leading to losses totaling $1.4 million," Finra said, noting that before its investigation, NYLife Securities had responded to complaints by 21 of the customers and voluntarily paid restitution totaling $1.1 million.
[More: Mutual fund conflicts pose issues for brokers under Reg BI]
