Commonwealth Ordered to Pay $125,000 to NASCAR Champ Kyle Busch
A North Carolina arbitration panel has ordered Commonwealth Financial Network and one of its brokers to pay $125,000 to stock car racing champion Kyle Busch and his wife for unsuitably managing their investments.
The broker, Charles F. Parks, kept about half of the Busches’ investment portfolio in cash in a fee-based advisory account, and took inappropriate risk with much of the rest of their money by day-trading energy stocks, said Brandon Taaffe, one of the lawyers from the firm of Shumaker, Loop & Kendrick who represented the Busches.
Parks’ BrokerCheck history includes a single complaint over his 37-year brokerage career in which customers who appear to be the Busches filed a 2017 complaint over being charged an advisory fee on their cash positions.
“The clients, who have a litigious history, are high net worth individuals for whom a conservative and cautious investment strategy was implemented,” Parks commented in his response to the complaint. “They suffered no damages whatsoever. Their accounts grew by hundreds of thousands of dollars during the period in question.”
Kyle Busch, 35, NASCAR’S Cup Series champion in 2015 and 2019, is a wealthy but unsophisticated investor, said Taafe.
Arbitrators appeared to accept the testimony of expert witnesses that it was unsuitable to put more than 20% of the Busches’ portfolio in cash and to include money-market investments in assessing an advisory account fee, he said.
The arbitrators denied Parks’ request to expunge the Busches’ complaint from his regulatory records, according to the award document.
As is typical, the document did not provide details about the underlying claims or directly address allegations about Parks’ management of the accounts.
Fees on the advisory accounts effectively erased the Busches’ investment returns over the 2014-2017 period at issue, according to Taaffe.
“The cash went well beyond what can be called caution, and the investments that were made went well beyond what was suitable,” he said.
Parks, who began his career at Edward D. Jones in 1983 and has been an independent broker since 1985, did not respond to a request for comment on the award.
The three arbitrators found Commonwealth and Parks liable for $110,000 for violating the Financial Industry Regulatory Authority’s suitability rule and for breach of contract, according to the award document that Finra accepted on Tuesday.
They also ordered Commonwealth to pay $25,000 for negligent supervision.
A Commonwealth spokeswoman did not return a request for comment.
The Busches initially sought damages of $1.7 million plus attorneys’ fees and costs, but withdrew the request for specific damages in an amended filing. The arbitrators did not find fraud under the North Carolina Securities Act and did not grant lawyers’ fees or costs to the claimants.
”This award will go a long way to see that registered representatives and firms do not take advantage of young professional athletes in the investments of proceeds from their professional pursuits,” Taaffe and his father, Michael, said in a prepared statement.