According to FINRA, Concorde Investment Services, LLC was censured, fined $110,000, and ordered to pay $20,382.39 plus interest in partial restitution for failing to supervise unsuitable alternative investment recommendations.

The firm's representatives recommended alternative investments related to an asset management firm to six retail customers who had conservative or moderate risk tolerances. These recommendations were unsuitable given the substantial risks of the limited partnership interests being sold.

Five of the affected customers were seniors, and the recommendations resulted in them holding over 30% of their exclusive net worth in alternative investments, exceeding the firm's own suitability guidelines. This concentration was apparent on suitability paperwork submitted to the firm, but the firm failed to respond to these red flags or conduct further inquiry.

The situation became even more serious when the SEC subsequently filed fraud charges against the asset management firm and its principals. The Department of Justice brought criminal charges, and executives were found guilty of securities fraud, mail fraud, and wire fraud.

This case illustrates the critical importance of proper due diligence and suitability analysis for alternative investments. Conservative and moderate investors should generally have limited exposure to high-risk alternatives. Firms must have robust procedures to identify and prevent unsuitable concentration in risky investments, particularly for senior investors who may have less time to recover from losses.

The firm has since stopped allowing representatives to recommend these investments and updated its supervisory controls.