Alexander Capital General Securities Representative Suspended for Allegedly Making Unsuitable Recommendations to CustomersFriday, March 13, 2020
On February 28, 2020, the Financial Industry Regulatory Authority (FINRA) Department of Enforcement accepted a Letter of Acceptance, Waiver and Consent (AWC) submitted by former general securities representative Jody Thompson to resolve allegations of making unsuitable recommendations to customers.
Since registering as a general securities representative in 1994, Thompson has been associated with three FINRA member firms: Painewebber Incorporated in Weehawken, New Jersey from May 1994 to September 2000; Merrill Lynch, Pierce, Fenner & Smith Incorporated in New York, New York from August 2000 to July 2015; and most recently at Alexander Capital, L.P. in New York, New York from July 2015 to February 2019. His most recent disclosures on his FINRA BrokerCheck report include two judgements/liens including one over $372,000 tax lien and a civil judgement totaling $18,000.
FINRA alleges in the AWC that between August 2015 and April 2017, Thompson recommended investments in a fund that pools individual investors’ money into Special Purpose Vehicles to make other investments on behalf of the fund. Thompson recommended at least two fund series involving convertible notes issued by private technology companies. FINRA claims that Thompson did not conduct proper due diligence. Thompson did not understand the associated risks and costs of these investments nor did he understand if and how interest payments for the Fund investments would be made to investors. FINRA also asserts that Thompson did not understand the fee structure, and without this knowledge, he was unable to evaluate or explain the true cost of the investment to a customer.
According to the AWC, Thompson recommended one customer make a $1 million investment in two fund series. As of the date of the AWC approval, the customer had yet to understand the gains or losses on the fund investments because there was no liquid market.
During this time period, Thompson also made recommendations of promissory notes in ABC Company and in Regulation D offerings, involving convertible debt, common and preferred units. These offerings were private placements of a wireless audio technology company with a limited financial and operating history. Although the offering documents warned of significant risks, Thompson recommended that a customer make a $1.15 million investment. During FINRA’s investigation, the customer had not realized any profits or losses because the securities were subject to a lockup.
According to FINRA, without understanding the offerings he was recommending to customers, Thompson could not have had a reasonable basis to believe these transactions were suitable, thus violating FINRA Rules 2111 and 2010. Without admitting or denying the allegations made against him, Thompson consented to a five-month suspension from associating with any FINRA member firm in any capacity.
FINRA also asserts that from August 2015 to March 2017, Thompson exercised discretion by placing at least 40 trades in five accounts held by a single customer without written authorization in several accounts held by one customer. Thus, Thompson violated NASD Rule 2510 and FINRA Rule 2010.
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