Former Next Financial Broker Suspended For Two Years For Excessive Trading Of Mutual Funds And Annuities For Elderly Clients
The Financial Industry Regulatory Authority (FINRA) has announced that it has suspended William Bailey, a former NEXT Financial Group Incorporated broker from Mesa, Arizona, for two years for unsuitable and excessive trading of mutual funds and variable annuities in his elderly clients’ accounts. According to the release, Mr. Bailey also was found to have engaged in discretionary trading for his customers without having their approval to do so.
Mr. Bailey’s customers ranged in age from 66 to 93 and all of them were unsophisticated investors. He recommended 484 short term mutual fund switches in seven of his customers’ accounts between January 2006 and December 2007, generating more than $147,000 in sales charges and trading fees, of which he received $120,000. The mutual funds were repeatedly sold in less than one year from the time they were bought and then the proceeds were used to purchase a new mutual fund. The average time a mutual fund was held by his customers was only 60 days. To make matters worse, customer account documents were altered to make it appear that Bailey had discretionary authority to trade the accounts without getting their approval.
In three of his customers’ accounts, FINRA discovered that Bailey had talked the investors into switching their variable annuities for new ones after holding them for a short time, making those trades unsuitable based on the fact that they did not fit the investment objectives or needs of the client, nor did it serve to improve their financial situation.
The FINRA Executive Vice President and Chief of Enforcement, Brad Bennett, said that “Mr. Bailey rapidly switched his elderly and unsophisticated customers in and out of mutual funds with high costs, providing benefit to Bailey instead of his customers.” Mr. Bailey consented to the entry of the findings to get the matter settled, without admitting or denying the charges.