According to FINRA, Walter Charles Bish was fined $5,000 and suspended from association with any FINRA member firm for three months for recommending a trading strategy without understanding its features and risks.

Bish recommended a trading strategy to certain customers that primarily invested in a high-risk exchange-traded note (ETN) without having a reasonable basis to recommend the strategy to any customer. Prior to making recommendations, Bish did not conduct his own due diligence on either the strategy or the ETN.

The investigation revealed that Bish did not fully understand how the trading strategy worked or its potential risks and rewards. Critically, Bish was not aware that the ETN used in the strategy could be accelerated or terminated, or under what circumstances that could occur. This lack of understanding meant he could not properly evaluate or explain the risks to customers.

This case is related to the Smith, Brown & Groover action from the same month, which involved the firm's development of this problematic ETN strategy. Affected customers are receiving partial restitution through a separate settlement with the firm.

Brokers have an obligation to understand the products they recommend before making those recommendations to customers. This reasonable-basis suitability requirement exists to protect investors from being sold products that even their representatives do not understand. Investors should ask detailed questions about any complex product recommendations and be wary if representatives cannot fully explain the risks.