According to FINRA, Joseph A. Ambrosole was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony in connection with an investigation concerning a customer complaint alleging unsuitable trading.
The investigation stemmed from an amended Form U5 filed by Ambrosole's former member firm disclosing a customer complaint that alleged he engaged in unsuitable trading. Suitability is a fundamental obligation in the securities industry. Brokers must have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer based on the customer's investment profile, including age, financial situation, investment experience, investment objectives, risk tolerance, liquidity needs, and time horizon.
Unsuitable trading can take many forms. It can involve recommending investments that are too risky for a conservative investor, too illiquid for someone with short-term cash needs, or too concentrated for someone requiring diversification. It can also involve recommending trading strategies, such as frequent trading or using margin, that are inappropriate given a customer's profile. The costs of unsuitable recommendations can be substantial, including losses from inappropriate risk exposure and unnecessary fees and expenses.
When FINRA sought Ambrosole's testimony to investigate the customer's allegations, he refused to appear. His testimony would have been important to understanding the basis for his recommendations, his knowledge of the customer's investment profile, and his investment rationale. By refusing to cooperate, Ambrosole prevented FINRA from fully investigating whether the trading was indeed unsuitable and, if so, whether other customers might have been similarly affected.
The permanent bar sanction reflects the serious view FINRA takes of non-cooperation with investigations. This case reminds investors of their rights under suitability rules and the importance of providing accurate information about their financial situations and investment objectives to their brokers. Investors who believe they have received unsuitable recommendations should file complaints with their firms and report concerns to FINRA. They can also verify a broker's disciplinary history through FINRA's BrokerCheck system.
