Brett W. Burgesser, of Orlando, Florida, a stockbroker with Wells Fargo Advisors, LLC, was fined $5,000.00 and suspended for sixty-days from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity after consenting to findings that he engaged in the unsuitable switching of mutual funds in customer accounts. Letter of Acceptance, Waiver and Consent, No. 2012033224601 (Apr. 25, 2016).

According to the AWC, from January 2009 through May 2012, Burgesser had prompted eighty-three unsuitable transactions to be executed in customer accounts. The transactions came by way of short term mutual fund switching, specifically concerning Class A shares, in three customer accounts belonging to MH, MG, and HP.

The AWC stated that Burgesser would hold onto the Class A shares for only a brief period (shorter than intended), typically no longer than a couple months, and then sell the position(s) in order to purchase another one(s). In addition, Burgesser reportedly sold shares of the same mutual fund that he would later purchase again for the same customers.

FINRA found that Burgesser failed to have an adequate basis to conclude that his short term switching strategy was actually suitable for the affected customers, particularly when taking into account the frequency and nature of the transactions. FINRA also noted that Burgesser failed to consider his customers’ investment profile (investment risk tolerance, objectives, financial status) when determining the amount and the size of the transactions he recommended.

The AWC stated that the Class A funds (that Burgesser would purchase and sell for his customers) were the only share class he utilized. These Class A shares carried front-end sales loads that investors would bear each time a trade was effected. In the aggregate, the customers dished out a minimum of $119,209.00 in sales charges associated with Burgesser’s trading.

The AWC further stated that the affected customers were never consulted with by Burgesser concerning the different available share classes for investment, particularly the expenses associated with such shares classes and how returns were impacted based on the assessment of the various sales charges. Apparently, Burgesser also failed to discuss with his customers’ available cost-saving measures that could have been applied. The AWC stated the affected customers lost $63,738.00 in the aggregate as a result of the unsuitable recommendations made by Burgesser.

Public disclosure records reveal that prior to Burgesser was terminated by Wells Fargo Advisors, LLC on June 12, 2012, amid allegations of Burgesser’s aforementioned misconduct. FINRA ultimately found that Burgesser’s unsuitable recommendations and trading was violative of FINRA Rule 2010 and NASD Rule 2310, as well as IM-2310-2.

Guiliano Law Group

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