Skip to content

FINRA Punishes Former Transamerica Broker for Unsuitable Non-Traded REIT Sales

The Financial Industry Regulatory Authority suspended and fined a former Transamerica broker for allegedly exceeding REIT concentration limits and other violations, according to a letter of acceptance, waiver and consent issued by FINRA.

Gary Saitowitz, while registered with Transamerica, allegedly had customers sign blank and incomplete brokerage forms, which he placed in customer files maintained as books and records of the firm. Some of the pre-signed forms authorized fund movement or loans from customer accounts, while others related to customer financial information, used by the Transamerica to supervise whether transactions solicited by Saitowitz were suitable for customers.

FINRA noted that maintaining these pre-signed forms enhanced the risk that customers would be placed in unsuitable investments or subject to unauthorized account activity.

Transamerica imposed limits on the proportion of a customer’s liquid assets that could be invested in non-traded REITs, which are generally less liquid and entail greater risk than traditional investments. To circumvent the concentration limits, Saitowitz maintained forms overstating the liquid net worth of four customers in connection with sales of non-traded REITs to these customers.

Because their net worth was overstated, the customers appeared to fit within Transamerica’s REIT concentration limits, which they did not. FINRA said that his alleged conduct caused the firm to maintain inaccurate books and records.

Saitowitz also allegedly recommended that four customers allocate unsuitable amounts of their assets to non-traded REITs. For example, he recommended that one client, an 82-year old retired clergyman with moderate risk tolerance, to surrender a fixed annuity to invest approximately $133,000 in a non-traded REIT. Based on Saitowitz’s recommendation, his client incurred a surrender charge of $11,455, and invested the proceeds in the non-traded REIT. After the purchase, approximately 35 percent of the elderly client’s liquid net worth was invested in non-traded REITs.

Similarly, for three other customers, he recommended and invested between 32 and 74 percent of each customer’s liquid net worth into non-traded REITs. FINRA said that these allocations were unsuitable to the customers’ investment objectives and risk tolerances.

Saitowitz also participated in a private securities transaction without providing written notice to Transamerica. A customer wanted to sell interests in a non-traded REIT that were acquired based on Saitowitz’s recommendation earlier that year. Saitowitz solicited another client to purchase the non-traded REIT interests for approximately $46,600. While Saitowitz filled out the required forms, submitted the forms to the distributor of the non-traded REIT, and coordinated the payment to his client, he did not process the transaction through Transamerica or notify the firm of his participation in the transaction.

FINRA said that, due to his alleged conduct, Saitowitz violated FINRA Rule 2010, 4511, 2111 and was discharged by Transamerica “due to violations of the firm’s policies and procedures.”

Saitowitz, who signed the AWC letter without admitting or denying the findings, was suspended from association with any FINRA member in any capacity for 18 months, issued a $10,000 fine, and was ordered to pay restitution of $11,455, plus interest.

Click here to visit The DI Wire directory page.