According to FINRA, D. Allen Blankenship appealed an Office of Hearing Officers decision to the National Adjudicatory Council after being barred from association with any FINRA member in all capacities for engaging in a pattern of unsuitable trading in Class A mutual fund shares.

The findings stated that Blankenship engaged in unsuitable short-term trading of mutual fund shares, selling shares that had been held a year or less. Blankenship also engaged in mutual fund switching, using proceeds from sales of one mutual fund to switch to a mutual fund in a different fund family, thereby imposing new sales loads on customers and garnering new commissions for himself. The hearing panel found that Blankenship had no reasonable basis for believing that the short-term trading and mutual fund switching were suitable for any customer.

Additionally, because most of Blankenship's mutual fund purchases—96 percent—were made in increments below $20,000, his customers missed breakpoint discounts to which they were entitled. Breakpoints provide reduced sales charges for larger purchases, and by making purchases in smaller increments, Blankenship's customers paid higher sales charges than necessary.

The overall result was that customers paid more than they should have for their investments, while Blankenship received more in compensation than he should have. Such a pattern of trading is unsuitable for any investor because it enriches the representative at customers' expense.

The findings also stated that Blankenship facilitated the unsuitable trading by circumventing his member firm's supervision. Blankenship broke up almost all his mutual fund purchases into multiple consecutive transactions of less than $20,000. The firm's automated system for flagging mutual fund transactions for review was not triggered by purchases below $20,000, allowing Blankenship's unsuitable trading pattern to evade detection.

Additionally, Blankenship failed to complete and submit to the firm for review and approval a form required to ensure that customers received appropriate disclosures and pricing on their transactions. This deliberate circumvention of supervisory systems demonstrates that Blankenship knew his trading pattern was problematic.

The findings also included that Blankenship caused his firm's books and records to be inaccurate by falsely marking mutual fund transactions as unsolicited when they were not. This false marking further concealed the true nature of his trading pattern from firm supervision.

The sanction is not in effect pending review by the National Adjudicatory Council. Investors should understand that an appeal does not indicate that the findings are incorrect, but rather provides the respondent an opportunity to challenge the decision before a higher regulatory authority.