On July 30, 2021, the U.S. Securities and Exchange Commission issued a cease-and-desist order against investment firm Herbert J. Sims & Co., Inc “HJS”. The SEC found that between January 2015 and April 2018 HJS made unsuitable investment recommendations to forty-five customers. Thirteen registered brokers at HJS’s Boca Raton, Florida branch recommended certain high-risk and highly sophisticated variable interest rate structured products “VRSPs” to forty-five customers. Brokers are required to determine whether an investment is in their client’s best financial interests. All of the VRSPs recommended and sold to the clients at issue had maturity periods of at least fifteen years. Notwithstanding this, the product was sold to elderly clients. VRSPs are “principal-at-risk” securities, meaning that investors can lose part of or their entire principal. The HJS brokers recommended these VRSPs to elderly clients with low risk tolerance and low annual income. In one example, an HJS broker “recommended the purchase of over $30,000 in VRSPs to a 69-year-old customer with a low risk tolerance, an investment objective of income, an annual income of less than $25,000, and a net worth of less than $185,000.”
The SEC ordered HJS to hire an independent consultant to review its policies and procedures that are designed to prevent and detect unsuitable recommendations. The SEC also fined HJS $250,000.
If you wish to discuss any securities related question, please contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL 33324. By phone: 954.693.7577 or 800.718.1422.