FINRA Penalizes Hightower Securities with $353,000 Fine & Restitution for Violations in Alternative Fund Sales

Posted on July 10th, 2023 at 11:46 AM
FINRA Penalizes Hightower Securities with $353,000 Fine & Restitution for Violations in Alternative Fund Sales

From the desk of Jim Eccleston at Eccleston Law 

The Financial Industry Regulatory Authority (FINRA) has censured Hightower Securities, the broker-dealer for Hightower Advisors, a Chicago-based advisory firm.

As part of the settlement, Hightower Securities has been ordered to pay over $353,000 in penalties. This includes a $100,000 fine and $253,177 in restitution. The restitution will be divided between two groups of investors affected by the violations.

A portion of the restitution, amounting to $133,600, will be paid to customers who invested in a GPB Capital automotive fund. In 2021, the Securities and Exchange Commission accused GPB Capital of fraud. The remaining $119,577 will be paid to investors in the LJM Preservation & Growth Fund, an options fund that experienced a significant loss in value in a single day in February 2018.

FINRA alleged that Hightower failed to disclose crucial information to potential investors in GPB sales. This information included GPB missing regulatory reporting deadlines in 2018 due to an audit following allegations of fraud by a former executive. Despite being aware of the delayed reports, Hightower sold 16 limited partnership interests worth $1.67 million in 2018. The amount of restitution corresponds to the commissions earned by Hightower from these sales, according to AdvisorHub.

The GPB sales violated FINRA's catch-all Rule 2010, requiring high standards. FINRA also stated that Hightower Securities was found to have inadequate supervision measures in place for monitoring the sales of intricate financial products. In addition, advisors at Hightower were found to have inappropriately sold approximately $190,000 worth of shares of the LJM Preservation & Growth Fund to three clients, including two customers with a low-risk tolerance. These sales took place between March 2016 and February 2018.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

 

Tags: eccleston, eccleston law

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