According to FINRA, Alan Mason was fined $5,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay disgorgement of commissions in the amount of $1,324.38 plus interest.

Mason willfully violated Regulation BI (Regulation Best Interest) by recommending that a retail customer invest at least 20 percent of her liquid net worth in a speculative, unrated debt security that was not in her best interest. The customer had reported a moderate risk tolerance with a liquid net worth between $200,001 and $500,000. Her stated investment objective was growth and income and did not include speculation.

Mason recommended that the customer invest $50,000 in bonds from a third offering of a publicly traded financial services company that focused on providing liquidity to holders of illiquid investments and alternative assets. Mason later recommended that the customer invest an additional $50,000 in a fourth offering of bonds by the same company, earning $1,324.38 in commissions on the second recommendation. Mason's recommendation that the customer invest an additional $50,000 in the bonds was not in her best interest based on her investment profile, including her moderate risk tolerance, in light of the high degree of risk associated with the bonds.

The customer ultimately brought and settled an arbitration claim against the firm relating to her bond investments, indicating that the unsuitable recommendations resulted in losses.

Regulation BI, which went into effect in June 2020, requires broker-dealers and their associated persons to act in the best interest of retail customers when making recommendations. This represents an enhanced standard of care that goes beyond the previous suitability standard. Under Regulation BI, brokers must not place their own interests ahead of the customer's interest.

In this case, Mason recommended a speculative investment that comprised 20 percent or more of the customer's liquid net worth to a customer with a moderate risk tolerance seeking growth and income. This was clearly not in the customer's best interest, regardless of the commissions Mason earned. The disgorgement of commissions ensures that Mason does not profit from the unsuitable recommendation.

Investors should ensure their broker understands their risk tolerance, investment objectives, and financial situation, and should question any recommendations that seem inconsistent with those factors.