Source Capital Group Pays $1.25 Million for Failure to Supervise

Elderly Investors Win FINRA Arbitration Award from Source Capital Group

According to Investment News, Source Capital Group, a Connecticut investment bank must pay $1.25 million for alleged sale of unsuitable securities to elderly investors in a recent FINRA award.

Retirees Keith and Joyce McCrea, and William Lashlee, 88, alleged in their claim that a broker at Source Capital Group Inc. sold them stock in a now defunct health care technology start-up.

The elderly retirees invested a total of $810,000 in the company, called iPractice Group. It shut down in early 2013 and soon thereafter declared bankruptcy, according to reports.

The claimants alleged that Source Capital failed to supervise its broker, adding that the evidence in the arbitration hearing showed that the broker was assigned to a Bowling Green, Ky., branch of the firm but the manager of the office was never told that he was responsible for supervising the broker.

The Financial Industry Regulatory Authority Inc. panel awarded the claimants their out-of-pocket losses of $810,000 as well as interest of $147,000. The three-person panel also awarded $20,000 in sanctions for Source Capital’s violation of panel discovery orders and almost $25,000 in costs. Source Capital was also ordered to pay $250,000 in attorney’s fees. The award was finalized on Wednesday.

FINRA also alleged Source Capital abdicated its responsibility to supervise its office in Bowling Green from September 2009 to September 2014, in a separate complaint.

Instead, the firm permitted the principals of two companies selling stock to supervise the firm’s brokers and manage the firm’s systems, operations and activities, according to the FINRA complaint. The complaint is pending.

Brokerage firms are required to adequately supervise their agents to ensure they are complying with FINRA rules and they can held responsible for any losses in a FINRA arbitration claim if it is determined that they failed to properly supervise their agent.

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This information is provided by The White Law Group, a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. For more information on The White Law Group, visit https://whitesecuritieslaw.com.