Massachusetts regulator charges securities firm with improper sale to elderly investor

Massachusetts’ securities regulator William Galvin has charged a securities firm operating at Citizens Bank locations with “dishonest and unethical conduct” for selling an elderly woman funds that were riskier than her stated investment tolerance.
Mr. Galvin, the secretary of the commonwealth, is seeking restitution from the firm, Citizens Securities, for the unnamed investor, who lost about $7,000 when she got out of the investment portfolio, according to a statement from his office.
Despite indicating a low tolerance for risk, the investor was sold aggressive investment strategies including alternative and emerging markets funds, as well as funds that buy high-yield bonds, according to the statement.
The Citizens Bank branch where she initially met the financial consultant didn’t adequately disclose the location’s brokerage activities and didn’t identify who the consultant worked for, leaving the impression he worked for the bank, according to the statement.
“Banks that offer non-bank financial services have an obligation to make clear the distinction between the banking services and the other financial services provided at the same location,” Mr. Galvin said in the statement. “This is particularly important when dealing with their senior customers who may have a traditional view of banks.”
Citizens is looking into the complaint.
“We take our responsibility to help customers make informed decisions about their finances very seriously,” Jim Hughes, a spokesman for Citizens, said in an emailed statement. “We are reviewing this complaint.”
The elderly woman also bought a market-linked certificate of deposit without understanding the higher degree of risk compared to a regular certificate of deposit, which she knew from her previous banking experience, according to the statement.
Citizens Securities consultants offer investments through Envestnet, an automated advisory platform. The complaint states that based on limited information provided by investors through the financial consultants to Envestnet, Citizens Securities offers a small number of fund complexes from which a portfolio can be generated. Once a fund complex is selected, the financial consultant cannot alter what the computer produced.
“Investment advisers are a fiduciary and they cannot walk away from that obligation by saying the robo adviser told me to do it,” Mr. Galvin declared.