Finra alleges former broker made unsuitable energy investments for elderly clients

The Financial Industry Regulatory Authority Inc. has filed a complaint against an ex-broker for making unsuitable recommendations in gold and energy investments to elderly retirees.

Christopher Ariola, while working for Bay Mutual Financial, recommended that three elderly retirees invest a substantial portion of their retirement assets in certain gold and energy stocks from December 2011 through July 2012, Finra charged in a complaint Thursday. He helped a fourth customer make similar investments in a retirement account at TD Ameritrade that he controlled, according to the complaint.

The four investors, who all retired from the same bus company in California, lost a total of about $140,000 as result of their investments being “unduly concentrated” in gold and energy stocks, according to the complaint. All the elderly retirees had limited financial resources and investment experience, as well as low-to-moderate risk tolerances.

Mr. Ariola made recommendations to “invest heavily in gold and energy stocks, including high-yield dividend producing stocks that exposed his customers to significant investment risk,” Finra charged in the complaint. James River Coal and Hugoton Royalty Trust were among the investments he suggested, according to the document.

While at Bay Mutual Financial, Mr. Ariola worked on a team servicing a 401(k) retirement plan for a bus transportation company in California. When employees of the bus company elected to roll over their 401(k) money into an individual retirement account at Bay Mutual Financial, he provided them with investment recommendations.

His customers included a married couple, ages 72 and 64, who had worked as bus drivers for more than 30 years before retiring from the company in 2010, according to Finra. One had two years of college education and the other held a high-school diploma.

Both had been relying on their financial advisers for help selecting investments in their 401(k)s, which were valued at a combined $523,000 in February 2010, according to Finra. That’s when Mr. Ariola helped them roll their savings into an IRA with Bay Mutual Financial. The couple had no other retirement accounts and became about 80% exposed to gold and energy stocks, according to Finra.

A third customer, who was a driver for the same bus company for 37 years, rolled the $454,000 he’d saved through his employer-sponsored retirement plans into an IRA with the help of Mr. Ariola when he retired in 2010. He was 44% allocated to gold and energy stocks on Mr. Ariola’s recommendation, Finra said in its complaint.

In 2009 Mr. Ariola visited the fourth customer’s home, helping him set up a retirement account through TD Ameritrade’s online platform. Starting in March 2012, he began purchasing the same gold and energy stocks in the TD Ameritrade account that he was recommending to the other three customers.

While Mr. Ariola had control over the TD Ameritrade account, he traded in it without providing written notice to Bay Mutual Finance, according to Finra.

He worked for Bay Mutual Financial from September 2004 to September 2012, when he was permitted to resign, according to the complaint. He hasn’t been a registered broker since September 2014.