The Financial Industry Regulatory Authority on Wednesday suspended a former NEXT Financial Group Inc. broker from the securities industry for two years for unsuitable and excessive trading of mutual funds and variable annuities.
Finra officials said William Bailey, of Mesa, Ariz., also engaged in discretionary trading without receiving prior written approval from his customers.
According to Finra officials, Bailey between January 2006 and December 2007 recommended 484 short-term mutual fund switch transactions in seven customer accounts.?? In each account, Bailey, on his customers' behalf, repeatedly sold mutual funds less than one year after purchasing them and bought new mutual funds with the proceeds. Bailey's frequent switches meant his customers held their mutual funds for only 60 days, on average.
Bailey's seven customers ranged in age from 66 to 93 and were all unsophisticated investors. They incurred more than $147,000 in sales charges and trading fees, Finra said in a statement.
Bailey received more than $120,000 in commissions from these sales, Finra said. To facilitate his mutual fund trading scheme, Bailey frequently traded in his customers' accounts without first obtaining their permission and improperly completed customer account forms to make it appear the customers approved of the trading.
Finra also found that Bailey convinced three customers to switch their variable annuities for new ones after holding them for a short time. These exchanges were unsuitable based on the customers' financial objectives and needs, and did not improve the customers' financial situations.
In settling the matter, Bailey neither admitted nor denied the charges, but consented to the entry of Finra's findings.
--Jim McConville