PROVIDENCE – A Rhode Island investment adviser is in trouble with authorities in Massachusetts for a transaction that allegedly cost a couple nearly $60,000.
The adviser, Stephen F. Davis of Barrington, was charged with breaching his fiduciary duty to his clients for allegedly recommending “unsuitable investments” to a Massachusetts couple, Mass. Secretary of the Commonwealth William F. Galvin’s office announced Tuesday.
Galvin’s office also charged broker-dealer Royal Alliance Associates Inc. for failing to supervise Davis.
According to an administrative complaint filed by Galvin’s Securities Division, Davis took over the Royal Alliance account of the two investors after their previous adviser retired with “the knowledge that the investors were inexperienced and would rely heavily on his advice.”
In 2015, Galvin’s office alleged, Davis advised the couple to exchange an annuity product three years before its expiration for another product with a much lower interest rate, which cost the couple more than $43,000 in lost interest.
Davis also failed to file the correct paperwork for the exchange in a timely manner, leading to the couple being charged more than $15,000 in penalties, while Davis received more than $17,000 in commissions for the sale, Galvin’s office said.
Royal Alliance denied responsibility for Davis’ actions when the couple complained, and it failed to enforce its own internal policies and procedures, which require investment advisers to demonstrate an economic justification for recommending that a client switch from one financial product to another, Galvin’s office said.
Galvin’s office is seeking an administrative fine and an order requiring the respondents to “disgorge” profits related to the alleged wrongdoing and make restitution to the investors. His office also is seeking sanctions and censure.
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com
