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Brokerage Firms
HSBC Fined $375,000 for Unsuitable Sale of CMOs
FINRA fined HSBC $375,000 for selling unsuitable inverse floating rate Collateralized Mortgage Obligations (CMOs) to unsophisticated retail customers, often without the required supervision.
Inverse floating rate CMOs are risky, fixed-income securities that FINRA considers "only suitable for sophisticated investors with a high-risk profile." According to the investigation, HSBC failed to inform its sales representatives of the risks involved with the specific CMOs available for sale and to advise the representatives that the securities were only suitable for sophisticated clients seeking high-risk investments.
"The losses incurred by HSBC's customers likely would have been avoided had the firm sufficiently trained its brokers on the suitability and risks of inverse floating rate CMOs and reasonably supervised their brokers to ensure that they were making suitable recommendations," said James S. Shorris, FINRA Executive Vice President and Acting Chief of Enforcement.
HSBC has consented to the entry of FINRA's findings and has paid $320,000 in restitution to investors so far.
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Labels: Broker misconduct
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