(FINRA Case #2016049239101)
Richard Charles Foster (CRD #4557045, Tulsa, Oklahoma) – An AWC (Accept, Waiver & Consent) was issued in which Foster was assessed a deferred fine of $10,000 and suspended from association with any FINRA member firm in all capacities for six months.
Without admitting or denying the findings, Foster consented to the sanctions and to the entry of findings that he made an unsuitable recommendation that a customer liquidate an individual retirement account (IRA) and give Foster the proceeds to trade in an outside brokerage account utilizing a risky and costly options trading strategy.
The findings stated that Foster’s recommendation that the customer place all of his retirement account assets, and at least one-third of his net worth, into a high-risk options trading strategy was itself unsuitable.
Foster sought and received authorization from his member firm to operate an income fund, which, when seeking approval from the firm, he represented would be a personal trading vehicle and would not involve any customers. Foster also sought and received authorization to open a brokerage account for the income fund at another broker-dealer. That account was opened and funded with Foster’s own money. Foster planned to trade exchange-traded funds (ETF) options in the income fund’s account.
While Foster had prior experience trading covered calls in both personal and customer accounts, he had not previously traded ETF options. The customer sought Foster’s advice on investment options for his IRA at Foster’s firm, at which point Foster described the ETF options trading he was engaged in through the income fund account.
The customer then agreed to invest with Foster in the income fund account. The customer liquidated his IRA, then worth approximately $169,000, and gave $160,000 to Foster to trade in the income fund account. Foster was unaware of any material changes to the customer’s financial position between the time the customer completed the new account application and when the IRA was liquidated. The income fund account lost significant value based both on trading losses and the commission costs associated with Foster’s high-volume ETF option trading strategy.
Foster knew that the funds to be invested in an income fund account that he operated were in an IRA, and that the customer would face a tax penalty for making an early withdrawal. The customer learned that he had incurred an $81,000 tax penalty based on the early liquidation of his firm IRA. The customer therefore requested that Foster return whatever was left of his funds so that he could pay the tax penalty. Foster returned $52,000 to the customer, which was the remaining balance of the customer’s funds in the income fund account.
The findings also stated that Foster commingled his own funds with the customer’s funds when he deposited the customer’s $160,000 into the income fund account. In connection with the commingling of the customer’s funds with his own, Foster failed to inform his firm that his prior representation that there would be no customer funds in the income fund account was no longer accurate.
Foster subsequently voluntarily resigned from the firm. Foster was employed by Cetera Investment Services LLC (CRD# 15340) from October 2012 to April 2014. Previously he was employed by Money Concepts Capital Corp (CRD# 12963) from February 2011 until September 2012.
The suspension is in effect from February 5, 2018, through August 4, 2018.
If you are an investor that lost money Richard Charles Foster or any Broker you should consider all legal options. If you wish to discuss your particular situation and the potential for the recovery of your investment losses, please contact Darren Blum at 1-877-786-2552 (1-877-STOCK LAW), www.stockattorneys.com for a FREE EVALUATION of your potential case.