According to FINRA, Thomas Gregory Scheiman was fined $5,000, suspended from association with any FINRA member in all capacities for two months, and ordered to pay disgorgement of $2,600 in commissions plus interest for willfully violating Regulation Best Interest by recommending a speculative and unrated corporate bond that was not in the customer's best interest.
The findings revealed that Scheiman recommended and sold a $100,000 bond to an elderly retail customer with an investment objective of income that did not include speculation. The bond was speculative and unrated, making it inappropriate for a customer seeking income without speculative risk. Scheiman earned $2,600 in commission from this recommendation—a substantial commission on a single transaction that created a financial incentive to recommend the unsuitable investment.
Like his colleague Stephen Michael Franko, Scheiman failed to exercise reasonable diligence, care, and skill required under Regulation Best Interest. He did not have a reasonable basis to believe that the bond recommendation was in his customer's best interest based on her investment profile and the potential risks, rewards, and costs associated with the recommendation.
The customer's elderly status and income-focused investment objective made the speculative bond particularly unsuitable. Elderly investors typically have limited ability to recover from losses, may depend on investment income for living expenses, and generally should not be exposed to speculative risks unless they have specifically requested such exposure and have the financial capacity to absorb potential losses.
Following the customer's complaint to Scheiman's member firm, the firm took responsibility for the unsuitable recommendation and returned the customer's principal amount. This firm action demonstrates the seriousness of the violation and the firm's recognition that the recommendation should never have been made.
The disgorgement of commissions is appropriate in this case because Scheiman should not profit from unsuitable recommendations. By ordering disgorgement of the $2,600 commission plus interest, FINRA ensures that Scheiman does not retain the financial benefit of his Reg BI violation.
The two-month suspension, in effect from December 15, 2025, through February 14, 2026, along with the $5,000 fine and disgorgement order, reflects the seriousness of violating Regulation Best Interest through unsuitable recommendations to elderly investors.
Investors, particularly seniors, should be cautious about recommendations for unrated bonds or other speculative investments when their stated objective is income without speculation. Questions about the appropriateness of any recommendation should be directed to the firm's compliance department or to regulators.
