According to BrokerCheck records, without admitting or denying the findings, Southwick consented to the sanction and to the entry of findings that he failed to perform a reasonable basis suitability analysis prior to recommending investments to his customers. The findings also stated that Southwick recommended unsuitable transactions in the securities accounts of two customers by recommending purchases that resulted in an over-concentration of illiquid private offerings, inconsistent with their investment objectives and risk tolerance. Southwick has been suspended from the securities industry for six months.
Moreover, Southwick has been subject to two customer complaints.
In December 2016, a customer alleged Southwick offered conflicting advice, sold an unsuitable investment, breached his fiduciary duty and misrepresented material facts. The customer is requesting $300,000 in this pending dispute.
In 2009, a customer alleged that a purchase of investment grade bonds resulted in violation of the customer’s investment policy statement. This dispute settled for $195,000.
All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. In order to make suitable recommendations, the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.
A brokerage firm owes a duty to all of its customers to properly monitor and supervise its employees. The duty to supervise is a critical component of the securities regulatory scheme. Regulatory authorities such as the SEC and FINRA have steadily heightened the supervisory obligations of brokerage firms in recent years. Supervisors have an obligation to respond vigorously to indications of irregularity, often times referred to as “red flags.” A supervisor cannot ignore or disregard red flags and must act decisively to detect and prevent improper activity.
Southwick has 14 years of experience in the securities industry and was most recently registered with CSSC Brokerage Services Inc. from 2012 to 2015. Previous registrations include FSC Securities Corporation, NRP Financial Inc., Morgan Stanley & Co., Morgan Stanley DW Inc., and UBS Financial Services Inc.
At Gana LLP, our securities attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.