As someone with extensive experience in both finance and law, I understand the serious implications of the recent allegations against Victor Lessinger. According to a FINRA disciplinary action, Mr. Lessinger recommended unsuitable closed-end fund investments to an elderly retail customer, resulting in an overconcentration of 28-37% of her net worth in these risky securities. This conduct was especially egregious given the customer’s limited investment experience, low income, and modest net worth under $100,000.
Allegation’s Seriousness, Case Information, and Impact on Investors
FINRA found that Mr. Lessinger’s recommendations violated the SEC’s Regulation Best Interest as well as FINRA Rule 2010. As a result, he faces a three-month suspension from associating with any FINRA member firm, a $5,000 fine, and an order to pay over $5,000 in restitution to the affected customer. This disciplinary action sends a strong message that brokers have an obligation to make recommendations that are in their customers’ best interests, taking into account their financial situation, risk tolerance, and investment objectives.
When brokers fail to uphold this fundamental duty, it erodes investor trust and confidence in the financial markets. Retail investors, especially seniors and those with limited means, can suffer devastating losses when their life savings are concentrated in inappropriately risky investments. While the specific dollar amounts may seem small in this case, the overconcentration represented a substantial portion of the elderly customer’s total net worth. For someone living on a fixed income, investment losses can severely impact their financial security and standard of living.
This case also underscores the importance of robust supervision and compliance oversight at brokerage firms. Firms must have systems in place to detect and prevent unsuitable recommendations, as well as to respond promptly to customer complaints and regulatory inquiries. Failure to adequately supervise brokers can result in additional liability for the firm.
The Financial Advisor’s Background and Disclosures
A review of Mr. Lessinger’s FINRA BrokerCheck record reveals a lengthy career in the securities industry, spanning over 40 years. Most recently, he was registered with Colorado Financial Service Corporation in Boca Raton, Florida from 2012-2023. However, his record also contains some troubling disclosures.
In 2007, the Ohio Division of Securities denied Mr. Lessinger’s application for a securities salesperson license, finding that he lacked “good business repute.” Just two years prior, in 2005, the SEC sanctioned him for failing to reasonably supervise a registered representative at his previous firm. The SEC’s allegations included allowing the solicitation of penny stock transactions despite a prohibition. As a result, Mr. Lessinger was barred from association with any broker or dealer in a supervisory capacity for two years.
While a long career in the industry can indicate substantial experience, multiple regulatory disclosures may be a red flag for investors. It’s crucial to thoroughly review a broker’s background and disciplinary history before deciding to entrust them with your hard-earned money. Investopedia notes that FINRA BrokerCheck is a valuable tool for researching a broker’s background and disciplinary history.
Understanding FINRA Rules and Regulation Best Interest
FINRA Rule 2010 requires associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. This broad ethical rule underlies many of FINRA’s more specific rules and regulations. In addition, the SEC’s Regulation Best Interest imposes a heightened standard of conduct for brokers when making recommendations to retail customers.
Under Reg BI, brokers must act in their retail customers’ best interests and cannot place their own interests ahead of the customer’s interests. They are required to understand the potential risks, rewards, and costs associated with a recommendation, and have a reasonable basis to believe it is in the customer’s best interest based on their investment profile. Reg BI also requires brokers to mitigate conflicts of interest and provide increased disclosures to retail customers.
Consequences and Lessons Learned
The consequences for brokers who violate FINRA rules and securities regulations can be severe, including monetary fines, suspensions, bars from the industry, and customer restitution. But the fallout goes beyond the individual broker—it can also damage the reputation and credibility of the brokerage firm and the industry as a whole.
For investors, the key takeaway is to thoroughly vet any potential financial advisor, remain vigilant for signs of misconduct, and don’t hesitate to ask questions or raise concerns. As Pulitzer Prize-winning author James B. Stewart wrote, “The only sure bulwark of continuing liberty is a government strong enough to protect the interests of the people, and a people strong enough and well enough informed to maintain its sovereign control over the government.”
By staying informed and engaged, investors can better protect their rights and interests, even in the face of complex financial markets and less-than-ethical industry practices. If you believe you’ve lost money due to unsuitable investment recommendations, don’t suffer in silence. Reach out to an experienced securities attorney to discuss your legal options.
One sobering fact to keep in mind: A 2016 study by the National Bureau of Economic Research found that 7% of financial advisors have been disciplined for misconduct. While most advisors are trustworthy professionals, a meaningful number have a history of customer disputes, regulatory actions, or even criminal charges. Trust but verify.
In summary, the allegations against Victor Lessinger serve as a cautionary tale for both investors and industry members. By holding bad actors accountable and increasing transparency around broker misconduct, we can work towards a fairer, more ethical financial services industry that truly puts investors’ interests first. As a financial analyst and legal expert, that is a mission I am deeply committed to.
