← Broker database 2023-04-14
Steven Netzel Suspended Four Months for Altering Documents and Unsuitable Recommendations
According to FINRA, Steven M. Netzel was assessed a deferred fine of $10,000, suspended for four months, and ordered to pay $9,788.80 in deferred partial restitution to customers for causing his firm's books and records to be inaccurate by submitting altered customer documents and making unsuitable recommendations that resulted in customers being overconcentrated in alternative investments.
In connection with at least six customers' alternative investment purchases, Netzel submitted investor profiles that he knew reflected inaccurate information. There were visible indications on the documents that information had been whited-out and written over to change customer information, such as inflating customers' net worth and liquid net worth. By increasing customers' net worth figures, their percentage holdings in alternative investments were artificially reduced, and Netzel was able to obtain the necessary approval for alternative investment purchases that would otherwise have been rejected.
Netzel also made unsuitable recommendations to customers that resulted in them being overconcentrated in alternative investments that were unsuitable based on their actual net worth, investment objectives, and risk tolerance. The partial restitution ordered equals the portion of commissions Netzel received for these unsuitable alternative investment purchases. Some customers did not receive partial restitution because they had previously settled claims with Netzel's member firm.
This case illustrates the serious nature of falsifying customer documents to circumvent suitability controls. Alternative investments often have high fees, limited liquidity, and significant risks, making concentration limits particularly important. By inflating net worth figures, Netzel made it appear that customers could appropriately hold larger positions in these risky products than their actual financial situations warranted. Investors should be concerned if their registered representative suggests providing inaccurate financial information to obtain investment approvals.