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Advisor Put Transit Workers on Risky Investment Path, FINRA Says

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Regulators have filed a complaint against a former advisor for making unsuitable recommendations to older investors who lost some $140,000.

Specifically, Christopher Ariola urged several retirees of a California transportation company to put funds into energy stocks and gold-related investments, according to the Financial Industry Regulatory Authority complaint filed Thursday in California.

At the time, Ariola was working for Bay Mutual Financial when the recommendations were made from December 2011 to July 2012; he resigned from Bay Mutual in September 2012.

“These recommendations were unsuitable given these [three] customers’ financial circumstances, investment objectives and low risk tolerances, and because the recommendations resulted in these customers’ accounts being unduly concentrated in gold and energy stocks,” according to the FINRA complaint.

A client with funds in a TD Ameritrade account, who also had worked for the bus company, was similarly harmed by Ariola’s investment strategies.

In one case, an IRA valued at about $290,000 with its main holdings (74%) in bond mutual funds and dividend-yielding stocks (23%) was reallocated to gold and energy stocks (80%). By May 2012, the account had lost 60% of its value.

Some of the concentrated positions Ariola urged clients to buy included shares in James River Coal, which later declared bankruptcy, and the natural gas firm Hugoton Royalty Trust (HGT).

The FINRA complaint states that Ariola’s recommendations exposed the investors “to significant investment risk.”

Furthermore, the risk of loss related to concentrated positions in gold and energy stocks, along with high-yield, high-risk securities that Ariola urged clients to purchase “were inconsistent with the customers’ risk tolerances and made [the advisor’s] recommendations unsuitable,” the complaint states.