Abacus Investments and advisor Fred Hohensee have recently come under regulatory scrutiny, highlighting persistent concerns in the financial industry about product suitability and the dangers of self-dealing. Based in Oconomowoc, Wisconsin, Fred Hohensee has spent four decades advising clients, mostly serving as a broker with Abacus Investments since 1994 and maintaining a parallel advisory registration with Hohensee Financial Services. Until recently, his record was spotless—but a series of unsuitable recommendations involving structured notes has brought unwanted attention and regulatory action from the Financial Industry Regulatory Authority (FINRA).
Recent FINRA Action Against Fred Hohensee
In April 2026, FINRA concluded an enforcement action (AWC No. 2023079674901) against Fred Hohensee following the sale of risky structured notes to two retail clients, both of whom had conservative investment profiles. One of these clients was a senior citizen—an investor demographic that is often at higher risk of financial exploitation and therefore warrants greater care from financial professionals. The structured notes in question were neither principal protected nor liquid, had significant risk disclosures, and carried maturities of at least five years.
Fred Hohensee recommended these notes despite both clients indicating low risk tolerance and short-term liquidity needs. According to the FINRA BrokerCheck (CRD #1431948) report and regulatory filings, he advised these clients to allocate “a substantial portion” of their net worth into these complex instruments—contrary to their investment objectives. When the value of the notes dropped and several ceased paying interest entirely, the financial consequences were borne by the investors, who were left with less income and diminished confidence in their financial advisor.
Penalties and Regulatory Findings
As a result of these actions, Fred Hohensee was suspended from FINRA membership for six weeks and fined $10,000, in addition to being ordered to pay restitution of $7,530—the same amount he earned in commissions from these transactions. FINRA concluded that by prioritizing the sale of these structured notes, he violated both Regulation Best Interest (Reg BI) and FINRA Rule 2010, which requires members to adhere to principles of commercial honor and equitable trading. The regulatory notice emphasized that Hohensee “failed to sufficiently consider these risks in light of the customers’ investment profiles.”
Reg BI, adopted by the Securities and Exchange Commission (SEC) in 2020, requires broker-dealers to act in the best interests of their retail customers when making recommendations. Simply put, advisors cannot merely meet the basic definition of suitability—they must reasonably believe their recommendation is in the client’s best interest, weighing costs, risks, and potential alternatives (see more at Investopedia). FINRA Rule 2010—effectively a sweeping ethics provision—prohibits behavior that is inconsistent with just and equitable trading practices, including cases where advisors may prioritize their own compensation over their clients’ welfare.
Background on Fred Hohensee and Career Overview
Fred Hohensee is a veteran of the securities industry with an active registration as a broker at Abacus Investments since 1994. He also operates as an advisor with Hohensee Financial Services and has prior work experience with firms including First Securities Corporation, Dean Witter Reynolds, Investacorp, and Offerman & Company. Over his career, Hohensee has amassed an array of professional securities licenses, including:
| License/Examination |
|---|
| Securities Industry Essentials Examination (SIE) |
| Series 7 – General Securities Representative |
| Series 4 – Registered Options Principal |
| Series 14 – Compliance Officer |
| Series 24 – General Securities Principal |
| Series 63 – Uniform Securities Agent State Law |
| Series 99TO – Operations Professional |
He is licensed to operate in several states, including Arizona, Florida, Illinois, Indiana, Texas, and Wisconsin. Notably, prior to the most recent FINRA sanctions, his CRD record showed no customer complaints, regulatory actions, civil judgments, liens, or bankruptcies. This spotless record over 40 years underscores the importance of ongoing vigilance: even long-tenured advisors can make errors in judgment that do real harm.
Structured Notes Explained: Risks for Inappropriate Investors
Structured notes are a complex type of fixed-income investment whose performance is tied to the returns of underlying assets, indexes, or baskets of securities. While some variations offer certain protections or features, others—such as those sold by Fred Hohensee in this case—provide no protection of principal and often involve multiple risks (including market, liquidity, and issuer risk).
To visualize: imagine a client loans money to a bank, but the return is determined by how the stock market performs over five years. Should the market downturn, these investors could lose significant principal, and sometimes even the periodic interest payments may stop. For conservative or elderly investors, structured notes without downside protection or immediate liquidity make a poor match. A responsible advisor should steer clients toward investments aligned with their stated needs and risk profiles.
Regulation Best Interest outlines four core obligations for any broker-dealer:
- Disclosure: Clearly explain conflicts of interest to clients.
- Care: Exercise due diligence and care when making investment recommendations.
- Conflict of Interest: Establish and enforce policies that mitigate potential conflicts.
- Compliance: Maintain and supervise compliance programs.
In Hohensee’s case, the “care” obligation was cited as the point of failure. According to FINRA, he did not have a reasonable basis to recommend the structured notes to these particular clients, either due to insufficient research or failure to heed the obvious risks.
Investment Fraud and Bad Financial Advice: Context and Lessons
The issue of unsuitable recommendations is not unique to Fred Hohensee. In fact, research shows that approximately 7% of financial advisors have at least one disclosure event—such as a complaint, arbitration, or regulatory sanction—listed on their regulatory record, according to a 2023 study. Advisors with disciplinary events may continue managing assets for millions of clients, often without most investors realizing the risk (see Forbes: How to vet your adviser for complaints).
Investment fraud and bad financial advice cost Americans billions annually. According to the FBI’s 2022 report, elder financial abuse alone led to losses exceeding $3 billion, often through deceptive sales practices similar to what was alleged in Fred Hohensee’s case.
Consequences and Takeaways for Investors
The penalties for Fred Hohensee—a six-week suspension, $10,000 fine, and repayment of $7,530 in commissions—are only one dimension of the fallout. Reputation, professional trust, and client assets are often the true casualties when advisors provide recommendations that put their interests ahead of the client’s best interests. The impact on investors can include loss of principal, missed income, and a diminished sense of financial security.
For everyday investors, several important lessons emerge:
- Ask probing questions about risks, costs, and alternatives when presented with complex investment proposals.
- Verify credentials and review the history of your advisor using resources such as FINRA BrokerCheck and specialized sites like Financial Advisor Complaints.
- Look for red flags: If an advisor’s recommendation does not align with your stated goals
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