The Financial Industry Regulatory Authority censured and fined broker-dealer and investment adviser Centaurus Financial Inc. and suspended and fined Donnie E. Ingram.
Between September 2016 and September 2018, Donnie E. Ingram, a registered representative with respondent Centaurus Financial Inc. and an investment advisor through his own SEC-registered investment advisory firm, Ingram Advisory Services LLC, recommended to 81 customer accounts that they purchase 595 “standard version” unit investment trusts (UITs) when there was an equivalent, lower cost “fee-based” UIT available.
FINRA says by recommending the standard version UITs instead of the fee-based UITs, Ingram caused his customers to incur initial and deferred sales charges that would have been waived had Ingram recommended the fee-based UITs. Ingram’s recommendations caused his customers to incur more than $300,000 of unnecessary, additional expenses, which resulted in a direct benefit to Centaurus and Ingram while providing no additional benefits to the customer.
Similarly, during this same time period, Ingram recommended that his customers invest in Bluerock Residential Growth REIT Inc.’s preferred stock offering and MacKenzie Realty Capital Inc., a non-traded business development company, through Centaurus, instead of through Ingram Advisory, which caused his customers to pay selling commissions. FINRA says these commissions could have been avoided had Ingram taken advantage of his investment advisory relationship with the customers and purchased them through Ingram Advisory. Ingram’s conduct allowed him and Centaurus to share in the selling commissions that his customers incurred while providing his customers with no additional benefits.
According to FINRA, Ingram’s recommendations to these customers were unsuitable because Ingram had no reasonable basis to recommend the higher cost UITs, Bluerock Residential, and MacKenzie Realty when he could have recommended lower cost options. In so doing, FINRA says Ingram violated one of the industry’s fundamental principles, a registered representative cannot seek to maximize his own compensation to the detriment of his customers.
The firm agreed to a censure, to pay a $50,000 fine, and restitution of $388,962.13.
Ingram consented to a six-month suspension from association with any FINRA member firm, a $15,000 fine and restitution of $388,962.13.
According to BrokerCheck, Ingram has worked for a string of at least 10 firms since 1985, Centaurus being the most recent.
As The DI Wire previously reported in February 2023, the SEC announced Centaurus branch manager Ricky A. Mantei and registered representative Atul Makharia agreed to settle charges in connection with the unsuitable recommendation of variable interest rate structured products to ninety-four retail customers.
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