Texas State Securities Board Bans Broker from Selling Alternative Investments
The Texas State Securities Board has barred a Calton & Associates broker from recommending or selling any alternative investments, including non-traded REITs, non-traded BDCs, and any private offerings.
Mickey Long II, who was registered as an investment advisor and agent with VSR Financial Services until June 30th 2016, “routinely” recommended his clients invest in non-traded REITs and interests in exploratory drilling programs sold through private placements.
VSR has policies and procedures in place to determine whether or not alternative investments are suitable based on a client’s financial status, investment experience and knowledge, financial objectives, and risk tolerance. When a client opens a VSR account, they are asked to identify the risk percentage they can tolerate from six categories that span from highest risk/aggressive to lowest risk/conservative. VSR categorizes non-traded REITs as high/risk moderate and exploratory drilling programs as highest risk/aggressive.
A 70-year old client of Long’s elected to have no more than 20 percent of his assets allocated into the highest risk tolerance level and no more than 60 percent in the high risk/moderate level. Nevertheless, Long allocated 36 percent of the client’s assets into the highest risk level and 78 percent in the high risk level.
The securities commissioner concluded that Long did not have a reasonable basis to believe that the investment allocations were suitable and barred him from recommending or selling any alternative investment, even if they were approved by Calton’s compliance department.
In addition to the selling ban, Long was suspended for 45 days and will be under heightened supervision by Calton for two years.
