Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) sanctioned financial advisor John H. Towers (Towers) of VSR Financial Services, Inc. (VSR) concerning allegations of unsuitable sales of over $6,000,000 in alternative investments including oil and gas interests, real estate investment trusts (REITs), and other speculative private placement investments to an investor. FINRA’s determinations in this matter is significant because some in financial industry take the position that wealthy customers are automatically sophisticated and therefore fair game to recommend positions in speculative private placement securities. The theory goes that if you have a lot of money then it is ok for you to lose some of it speculating in alternative investments.
Towers entered the securities industry in 1970. From 2002 until December 2013, Towers was associated with VSR. According to Towers’ BrokerCheck at least 14 customers have filed complaints against Towers. The vast majority of those complaints involve claims concerning the improper sale of various private placement securities.
FINRA alleged that in September 2005, Towers recommended that a married couple invest $25,000 in APC 2005-B, a high risk private placement. Over the next five years, FINRA found that Towers continually recommended that the couple make an additional eighty-eight investments in private placements and REITs totaling approximately $6,259,400 and representing approximately 72% of their investments purchased at VSR. FINRA alleged that the private placements and REITS were all described in the offering documents as high risk investments. FINRA also found that the couple had stated a moderate risk tolerance on their new account forms and specified that no more than 10% of their accounts were to be invested in high risk products.