← Broker database 2022-11-11
Michael Lancaster Suspended for Unsuitable Recommendation and Attempted Settlement
According to FINRA, Michael Joseph Lancaster was assessed a deferred fine of $10,000, suspended for four months in all capacities, and ordered to pay deferred disgorgement of $4,410 in commissions for recommending an unsuitable investment and making unauthorized settlement payments to the customer.
Lancaster recommended that a 72-year-old customer invest $70,000 in a commercial equipment leasing and finance fund, an alternative investment, even though it was inconsistent with the customer's investment profile and financial situation. The required liquid net worth for the investment amount exceeded the customer's liquid net worth, and the high-risk illiquid nature was inconsistent with the customer's moderate risk tolerance. The customer used retirement account funds to make the investment based on Lancaster's recommendation to hold the investment even as it declined in value. The customer ultimately liquidated the investment nearly 10 years later at a loss and was compensated by Lancaster's firm.
After the customer complained about the performance, Lancaster made payments totaling $14,460.40 to attempt to settle the complaint without his firm's knowledge or approval. Lancaster then falsely certified on compliance questionnaires that he had not made any private settlement of claims or reimbursed customers for losses.
Making unauthorized settlement payments to customers is prohibited because it conceals complaints from the firm and prevents proper investigation and disclosure. The false compliance questionnaire responses compounded the violation by actively misleading the firm.
The four-month suspension and disgorgement of commissions hold Lancaster accountable for recommending an unsuitable investment to an elderly customer and then attempting to secretly settle the resulting complaint while falsely denying having done so.