Securities Lawyers Blog
Maurice Joseph Chelliah (Chelliah) was recently barred from the financial industry by The Financial Industry Regulatory Authority (FINRA) over allegations that Chelliah converted $90,000 from two World Group Securities, Inc. (WGS) clients and made unsuitable recommendations to five WGS customers. FINRA alleged that Chelliah recommended that these customers refinance their primary residences and use the proceeds to purchase securities and insurance policies that they did not need and that were beyond the customers’ ability to afford. FINRA found that as a result of Chelliah’s recommendations some of the customers lost their securities, their life insurance policies, and their residences when they were unable to keep their mortgages current.
FINRA alleged that Chelliah violated NASD Rule 2110 and FINRA Rule 2010 by converting customer funds. These rules provide that a member, “in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.” FINRA found that two of Chelliah’s customers were 80 and 75 years-old respectively and were unsophisticated investors. Chelliah recommended that the customers liquidate their mutual fund shares. Following the liquidation, $90,000 in proceeds was transferred to Chelliah’s three outside businesses. The customers had provided these funds to Chelliah in order for him to pay monthly bills and expenses on their behalf but instead Chelliah used these funds for his own personal benefit.
FINRA also alleged that Chelliah made unsuitable transactions in at least five customer accounts. NASD Rule 2310 provides that “in recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs…”