Finra Suspends Indy Firm Executive for Unsuitable ETF Recommendations
James Dresselaers, the “chief relationship officer” and former president of independent broker-dealer H. Beck, Inc., must be ruing the day that a professional athlete with no investment experience opened an account with the firm in 2004.
The executive agreed to a 60-day suspension and $10,000 fine and to disgorge almost $19,000 in commissions, according to a letter of acceptance, waiver and consent that the Financial Industry Regulatory Authority accepted on Wednesday. He allegedly sold more than $2.3 million in nontraditional exchange-traded funds and $500,000 of metals and mining stocks to the athlete between 2008 and 2011.
Reached at his H. Beck office, Dresselaers said the consent letter “speaks for itself.” He declined to identify the athlete, who was identified in the Finra consent letters with Dresselaers and with H. Beck as “EB.”
The customer characterized himself on his new account form as having a moderate risk tolerance and a long-term growth investment goal, according to the consent letter, and told Dresselaers “that he needed his earnings as an athlete to last the rest of his life.”
Over three years he lost almost $852,000 on the ETFs, which included leveraged, inverse funds that regulators have said are “complex” instruments, and $264,618 of another $375,000 investment in metals and mining stocks, according to the consent letter.
Dresselaers, who has been a registered representative since 1983 and who joined H. Beck in 2003, had previously reached a $1.5 million settlement with the customer. He alleged that he was sold the investments without being told of their riskiness and had requested $917,314 in damages in an arbitration complaint, according to Dresselaers’ BrokerCheck record and the Finra consent letter.
H. Beck, which in August agreed to be purchased by Kestra Financial, itself agreed to a censure and $50,000 fine for failing to supervise Dresselaers’ “unsuitable” sales to the athlete, according to a separate consent letter posted Thursday on Finra’s enforcement website.
Dresselaers, who accepted the findings without admitting or denying them, agreed to disgorge commissions of $18,708 plus interest to Finra and to pay the $10,000 fine, in addition to the two-month suspension.
Dresselaers stepped down as president of Bethesda, Maryland-based H. Beck in 2016, according to a company website.
The decision continues a string of recent regulatory actions involving advisors to athletes and celebrity clients. In August, the Securities and Exchange Commission charged a former UBS and Morgan Stanley with earnings $900,000 by overbiling a professional athlete.