According to an Order with the Financial Industry Regulatory Authority (FINRA), Jeffrey Dragon, while registered with Berthel, Fisher & Co., as a broker, allegedly violated securities laws. Mr. Dragon was accused of recommending and engaging in short-term unit investment trust (UIT) trading in 19 accounts belonging to 12 of his customers. This occurred over a two-year period between 2013 and 2014. Over the two-year period, Dragon’s UIT trading in the customer’s accounts involved a total of 666 UIT purchases in 84 UITs, of which 73 were offered by Guggenheim Funds Distributors. His recommendations for the customers were to purchase UITs during their initial offering periods, liquidate them before the end of their term, usually after holding them for six months or less and using the proceeds from this liquidation to purchase other UITs, thereby incurring new sales charges.
In one instance, Dragon recommended that an 81-year-old customer make 177 separate UIT purchases during the two-year period. Of those, four positions were held for four days or fewer, 76 additional positions were liquidated 60 or fewer days after purchase, another 89 positions were liquidated between 61 and 90 days after purchase, only four positions were held for longer than 120 days and zero were held for longer than 294 days. Another 84 year-old client was recommended 82 UIT purchases, with similar holding periods. Only 20 of the UIT positions that resulted from the purchases were held for longer than one year or to termination. For this misconduct, Mr. Dragon was suspended from associating with a FINRA member in any capacity for 21 months and fined $5,000.
A broker must only recommend and sell those investments that are safe for his clients. He does so by doing his due diligence on every investment and by taking into account his customer’s net worth, age, sophistication and risk objectives. If he does not, his brokerage firm may be liable for losses. In this case, many of Mr. Dragon’s clients were elderly and the UITs were not suitable for them. Nor did he hold them for long enough. This resulted in losses for the customers. Berthel, Fisher may be sued in the FINRA arbitration forum on a contingency fee basis for losses.
Jeffrey Paul Dragon, according to online FINRA records, was previously registered with John Hancock Mutual Life Insurance Company, John Hancock Distributors, GNA Securities, Citizens Investment Securities, Citigroup Global Markets, Merrill Lynch, and Berthel, Fisher & Company in Burlington, Massachusetts from March 2007 until September 2016. He has two customer disputes against him, one of which is pending, alleging misrepresentation and failing to follow instructions. He is not currently registered as a broker.