FINRA

Hicks was named a respondent in a FINRA complaint alleging that he recommended unsuitable investments to five senior customers (three of whom were widows) to purchase speculative non-traded real estate investment trusts (REITs) and non-traded business development companies (BDCs). The complaint alleges that the prospectuses and subscription agreements for these non-traded REITs and non-traded BDCs stated that investing in these securities involved a high degree of risk, was speculative, was not suitable for persons who require immediate liquidity, guaranteed income, or seek short-term investments, and was only appropriate for those investors who could afford a complete loss of their investments. The five senior customers, at issue, in this case, were not seeking to make speculative, high-risk investments. When Hicks first recommended non-traded REITs and non-traded BDCs to them, their ages ranged between 73 and 87 years old. None of these customers was still working. The customers' account documents indicate that they were seeking either to preserve their capital or for their capital to appreciate. Some of these customers have encountered difficulties liquidating the investments to obtain funds that they needed to pay for medical care. In the aggregate, Hicks recommended purchases of unsuitable non-traded REITs and non-traded BDCs to the five senior customers totaling approximately $665,000. Hicks received a seven percent commission from each sale, totaling approximately $46,550. Hicks finds his customers primarily by cold calling telephone numbers on club directories he obtains around his North Carolina community. Most of his customers are senior retirees with limited financial resources and knowledge. Before Hicks recommended non-traded REITs and non-traded BDCs, he had recommended that four of his senior customers at issue here invest their funds in variable annuities, which had guaranteed income riders. Later, however, Hicks began recommending that these senior customers liquidate some or all of their variable annuities (at times incurring withdrawal penalties) to invest in non-traded REITs and non-traded BDCs. Furthermore, Hicks' recommended that three of these senior customers invest in non-traded REITs and non-traded BDCs that were also unsuitable because the recommendations resulted in those customers being over-concentrated in speculative, illiquid investments. The excessive concentrations were unsuitable in light of the customers' investment profiles, including their financial situations, risk tolerances and investment objectives. The complaint also alleges that Hicks failed to conduct reasonable due diligence on the investments, the REITs and BDCs. In addition, Hicks failed to understand the risks and features associated with those investments before recommending them to his customers. Hicks lacked a reasonable basis to recommend the REITs and BDCs.

Decision

Bar (Permanent)

All capacities

indefinite

1/11/2022

Disgorgement

$38,812.60

Monetary Penalty other than Fines

$7,636.25

Hearing Panel decision rendered May 19, 2021. The sanctions are based on findings that Hicks recommended purchases of high-risk, illiquid non-traded securities offered by several real estate investment trusts and a business development company to senior customers, without first satisfying the suitability rule's requirements. The findings stated that Hicks' recommendations were specifically unsuitable for each of the customers considering their ages, financial situations, and investment profiles. The prospectuses of the investments Hicks recommended describe the inherent risks of investing in unequivocal terms. Typically, they warn that investing in them involves a high degree of risk, one of which is a complete loss of investments. The prospectuses also contain warnings that the investments are suitable only for persons who will not need liquidity. None of the customers had a tolerance for high-risk investments. Such recommendations have been recognized as unsuitable for customers situated similarly to those here: retired, 73 years old and older, with conservative risk investment objectives. Hicks received commissions totaling $38,812.60 from his recommendations. Furthermore, for some customers, Hicks' recommendations excessively concentrated their liquid assets in high-risk, illiquid securities. The findings also stated that Hicks failed to conduct a reasonably diligent investigation of the investments he recommended. Consequently, he was ignorant of significant features of the securities, including their numerous inherent risks, and did not have a reasonable basis to believe the recommendations were suitable for anyone. On July 7, 2021, Hicks appealed the decision to the NAC. On January 11, 2022, the NAC dismissed Hicks' appeal as abandoned and the Hearing Panel decision is final.

Hearing Panel decision rendered May 19, 2021 wherein Hicks is barred from association with any FINRA member in all capacities and ordered to pay disgorgement to FINRA in the amount of $38,812.60 in commissions received. Hicks is also ordered to pay $7,636.25 for the costs of the proceeding. The sanctions are based on findings that Hicks recommended purchases of high-risk, illiquid non-traded securities offered by several real estate investment trusts and a business development company to senior customers, without first satisfying the suitability rule's requirements. The findings stated that Hicks' recommendations were specifically unsuitable for each of the customers considering their ages, financial situations, and investment profiles. The prospectuses of the investments Hicks recommended describe the inherent risks of investing in unequivocal terms. Typically, they warn that investing in them involves a high degree of risk, one of which is a complete loss of investments. The prospectuses also contain warnings that the investments are suitable only for persons who will not need liquidity. None of the customers had a tolerance for high-risk investments. Such recommendations have been recognized as unsuitable for customers situated similarly to those here: retired, 73 years old and older, with conservative risk investment objectives. Hicks received commissions totaling $38,812.60 from his recommendations. Furthermore, for some customers, Hicks' recommendations excessively concentrated their liquid assets in high-risk, illiquid securities. The findings also stated that Hicks failed to conduct a reasonably diligent investigation of the investments he recommended. Consequently, he was ignorant of significant features of the securities, including their numerous inherent risks, and did not have a reasonable basis to believe the recommendations were suitable for anyone. On July 7, 2021, Hicks appealed the decision to the NAC. The sanctions are not in effect pending the review.

$10,921.27

Tax

IRS deferred collection action

$1,300.99

Tax

IRS deferred collection action

$6,267.21

Civil

I have disputed faulty repair plumbing job in June, 2013.

CAPITAL INVESTMENT GROUP, INC.

Discharged

MISREPRESENTING HIMSELF AS A CLIENT IN DEALING WITH AN INSURANCE COMPANY. VIOLATION OF FIRM POLICY AND INDUSTRY STANDARDS.

CLIENT [REDACTED], UPSET WITH LOSSES AND INVESTMENT RESTRICTIONS IN PRUDENTIAL ACCOUNT, TOLD ME TO LIQUIDATE PRUDENTIAL ACCOUNT AND TRANSFER TO ANOTHER ACCOUNT. NO CUSTOMER COMPLAINT. CLIENT WAS WRITTEN NOTARIZED LETTER INDICATING THAT I ACTED ON HIS ORDERS.

$2,991.00

Tax

IRS AUDIT -TAX PAYER REPRESENTATIVE IS SARAH SPAINHOWER WITH OMNI FINANCIAL.

CANTELLA AND CO., INC.

Permitted to Resign

MR. HICKS SUBMITTED CLIENT SIGNED VARIABLE ANNUITY CONTRACTS TO THE HOME OFFICE FOR APPROVAL. THE CONTRACTS WERE FOR A HUSBAND AND WIFE - [CUSTOMERS]. DURING THE PRINCIPAL REVIEW PROCESS CANTELLA FOUND THAT THE APPLICATIONS CONTAINED SOME INCORRECT FEES. WE ASKED MR. HICKS TO INPUT THE CORRECTED FEES AND THEN HAVE THE CLIENTS INITIAL EACH CHANGE, THEREBY CONFIRMING THEIR UNDERSTANDING OF THE PROPER FEES. UPON RECEIPT OF THE INITIALED FORMS AND A SUBSEQUENT PHONE CALL TO THE CLIENTS IT WAS DETERMINED THAT MR. HICKS, NOT THE CLIENTS, HAD INITIALED THE FORMS. THIS WAS THEN RECONFIRMED DURING A PHONE CALL WITH MR. HICKS. HE EXPLAINED THAT THE CLIENTS WERE GOING OUT OF TOWN AND RATHER THAN WAIT FOR THEIR RETURN HE CALLED THEM, EXPLAINED THE CHANGES AND RECEIVED VERBAL AUTHORIZATION TO INITIAL THE CHANGES. THE CLIENTS HAVE SINCE SIGNED NEW PAPERWORK WITH THE PROPER FEES AND SIGNED A LETTER CONFIRMING THAT THE CHANGES TO THE FEES WERE FULLY EXPLAINED AND THAT THEY HAD GIVEN MR. HICKS THE AUTHORIZATION TO INITIAL ON THEIR BEHALF. WHILE CANTELLA DOES NOT CONDONE MR. HICKS' BEHAVIOR WE DO NOT FEEL THAT IT WAS DONE IN A MALICIOUS MANNER OR WITH ANY INTENT TO HARM THE CLIENTS; RATHER, HE SHOWED POOR JUDGEMENT.

I CALLED CLIENTS (SCOTT), ASKED FOR THEIR INITIALS ON CORRECTED FORMS. MRS. SCOTT ASKED ME TO INITIAL AS THEY WERE LEAVING TOWN. I WRONGLY APPLIED THEIR INITIALS.

$43,106.24

Tax

HAVE BEEN IN DISPUTE WITH IRS REGARDING BUSINESS DEDUCTIONS DISALLOWED. I AM REPRESENTED BY OMNI FINANCIAL IN DENVER, CO (SARAH SPAINHOWER, 800-540-0433 EXT 1235.) I AM CURRENTLY MAKING MONTHLY PAYMENTS OF $346.35.

ROBERT THOMAS SECURITIES, INC

Discharged

N/A NOT FOLLOWING FIRM POLICY. NO DAMAGE TO CUSTOMER AND NO CUSTOMER CORRESPONDENCE RELATED TO THIS ISSUE. IT WAS NOT A CUSTOMER COMPLAINT.

MY TERMINATION BY ROBERT THOMAS WAS THE RESULT. I DID NOT FOLLOW FIRM PROCEDURE WHEN PROCESSING A LOA AND VIOLATED ONE OF MY FIRM'S MANY COMPLIANCE POLICIES WHICH RESULTED IN MY DISCHARGE.