VSR Financial Services, Inc. agreed to a $550,000 fine from FINRA to settle allegations that it failed to adequately supervise its brokers relating to the sale of alternative investments.
VSR Chairman Don Beary also agreed to a $10,000 fine and is suspended for 45 days from associating with any FINRA member in any principal capacity relating to the charges.
According to the Letter of Acceptance, Waiver & Consent (“AWC”) that VSR and Beary entered into with FINRA, “From on or about July 28, 2005 through on or about August 19, 2010, VSR and its co-founder Donald Beary failed to adequately implement the Firm’s supervisory system pertaining to its supervision of concentrated positions in alternative investments through the use of a “discount program” that artificially reduced the amount a customer had invested in a particular investment for purposes of calculating the concentration. In addition, when calculating concentration at certain levels, VSR reduced the risk ratings on many investments making the ratings inconsistent with the risks stated in offering documents related to the investments.”
As the AWC notes, these actions increased VSR’s sales of non-conventional investments, which generated between 20-45% of the Firm’s revenues from 2006-2010.
VSR and Beary accepted and consented to the Order, without admitting or denying FINRA’s findings.
This is not the first time that VSR and Beary have been disciplined by FINRA and/or state regulators. A review of their respective FINRA BrokerCheck reports reveal the following actions:
- FINRA fined VSR $20,000 in March 2008 for failure to supervise registered representative and failure to detect and prevent the representative from making unsuitable investment recommendations to clients
- The State of Missouri fined VSR $50,000 and ordered VSR to pay $5,470 for the cost of its investigation relating to failure to make, maintain and preserve records relating to private securities transactions in December 2011
- The NASD, FINRA’s predecessor, fined Beary $14,955 in April 1993 and $10,000 in January 1991 and $5,000 in 1986 stemming from various charges
Link to Investment News article (May 17, 2013)
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