According to FINRA, Robert C. David Jr. was fined $15,000 and suspended for 20 months for falsifying customer account information and engaging in unsuitable trading.

David falsely increased the net worth and liquid net worth of customers and changed the risk tolerance of one customer's account in his firm's systems. He did this to circumvent the firm's solicitation restrictions and concentration limits for non-investment grade, fixed-income securities. By falsifying this information, David made customers eligible for purchases of risky securities for which they would have otherwise been ineligible under the firm's procedures. This caused the firm to maintain inaccurate books and records.

The non-investment grade fixed-income securities that David sold to customers entailed a high degree of risk, including the risk of default, and subjected the customers to substantial risk of loss. David overconcentrated some customers in these risky securities, meaning too much of their portfolios was invested in high-risk bonds. This type of concentration magnifies the risk of significant losses if the bonds default.

Additionally, David exercised discretion in customer accounts without prior written authorization from the customers and without the firm having accepted the accounts as discretionary. This represents unauthorized trading, which deprives customers of control over their investments and eliminates important protections.

The falsification of customer account information is particularly serious because firms use this information to enforce suitability requirements and protect customers from inappropriate investments. By manipulating the data, David disabled these protective mechanisms and exposed customers to investments they should not have been sold.

Investors should understand that account profile information, including net worth, liquid net worth, investment experience, and risk tolerance, is used to protect them from unsuitable investments. Brokers should never alter this information without customer knowledge and approval. High-risk investments like non-investment grade bonds may be appropriate for some investors, but concentration in these securities can lead to devastating losses. Investors should regularly review their account profile information and concentration levels, and should report any unauthorized changes or suspicious activity.