Financial Planning (December 6, 2022) - Four of Advisor Group's brokerages settled FINRA charges that the firms negligently sold clients $16 million worth of alternative investments without informing them of the risks.
FSC Securities, Royal Alliance Associates, SagePoint Financial and Woodbury Financial Services agreed to pay $1.27 million in fines and restitution to nearly 200 clients who purchased stakes in limited partnerships called GPB Automotive Portfolio. The brokerages sold the investments even after the products' issuer notified them of delays in filing its required audited financial statements to the Securities and Exchange Commission, according to the Nov. 21 settlement. The payout adds up to 92% of the sales commissions generated by the Advisor Group brokerages in the two months after the issuer, GPB Capital, alerted the firms in April 2018 to the late filings, FINRA said. GPB and its founder are facing fraud cases filed by the SEC as well as state and federal prosecutors last year.
The four firms must pay "most or substantially all of the commissions they earned on the sales they made after they should have stopped making sales," said Hugh Berkson, a securities lawyer with McCarthy Lebit Crystal Liffman who is the president of the Public Investors Advocate Bar Association. Berkson hasn't represented any clients who have filed hundreds of FINRA arbitration claims against brokerages that helped sell $1.77 billion worth of GPB products tied to car dealerships, information technology firms, storage companies and waste management. FINRA's letter of acceptance, waiver and consent with the Advisor Group firms ordered restitution to the clients without prohibiting future claims, Berkson noted.