Former Woodbury Investment Advisor Lisa Brumm Suspended and Fined for Making Unsuitable Recommendations to Investors
Lisa Ann Brumm, also known as Lisa Ann Moon (CRD#: 2834764) was an Investment Advisor at Woodbury Financial Services, Inc., in Portland, OR from April 2017 to December 2020. She entered the securities industry in 1997 and previously worked for AXA Advisors, LLC; Park Avenue Securities, LLC; Ameritas Investment Corp.; Sunamerica Securities, Inc.; World Group Securities, Inc.; WMA Securities, Inc.; and Waddell & Reed, Inc.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in February 2021, FINRA sanctioned Lisa Brumm, suspending her for six months beginning on February 16, 2021 and imposing a civil/administrative penalty of $7,500.
The FINRA sanction states, “Without admitting or denying the findings, Brumm consented to the sanctions and to the entry of findings that she recommended two unsuitable variable annuities totaling $400,000 to a customer. The findings stated that Brumm lacked a reasonable basis to believe that the customer would benefit from the features of deferred variable annuities or that the particular deferred variable annuities, including the rider, were suitable for the customer. The findings also stated that Brumm borrowed $40,000 from the same customer. Brumm’s member firm’s written procedures did not permit her to borrow from the customer. Brumm and the customer reduced their agreement to writing in the form of a promissory note and Brumm repaid the loan with $2,000 of agreed-upon interest. The findings also included that Brumm negligently misrepresented to another customer the effect of a withdrawal from a variable annuity. At the time, the customer received a systematic payment from the variable annuity each month. Brumm misrepresented to the customer that the withdrawal would reduce the monthly payments but would not eliminate them. Brumm should have known that the customer would not continue to receive monthly payments. The customer also incurred charges and fees associated with the withdrawal and subsequently entered into a settlement with the firm that made the customer whole for her losses.”
For a copy of the FINRA sanction, click here.
In addition, Lisa Brumm has been the subject of two customer complaints, including the following:
• May 2019—“CLIENT ALLEGES THAT VARIABLE ANNUITIES RECOMMENDED BY FP IN 2016 AND 2017 WERE UNSUITABLE.” The complaint was deemed unfounded by the firm and denied.
• August 2017—“CLIENT ALLEGES MISREPRESENTATION IN THE SALE OF A VARIABLE ANNUITY IN 2008.” The complaint was denied after it was determined to be unsubstantiated.
For a copy of Lisa Brumm’s FINRA BrokerCheck, click here.
Making suitable investment recommendations is the cornerstone of proper investment advice. All brokerage firms and financial advisors have a duty to recommend suitable investments that are consistent with the needs and objectives of the investor. Brokerage firms and financial advisors must learn all material facts about an investor before making any recommendations and must match all investments with a customer’s stated investment profile. Failure to recommend suitable investments may result in a claim to recover attenuating investment losses.
FINRA Rule 2330 states that no associated person shall recommend to any customer the purchase of a deferred variable annuity unless such associated person has a reasonable basis to believe, among other things, that (a) the customer would benefit from certain features of deferred variable annuities, such as tax-deferred growth, annuitization, or a death or living benefit; and (b) the particular deferred variable annuity as a whole including its riders and similar product enhancements are suitable for the particular customer
FINRA has defined the standards in which investment recommendations made by brokerage firms and registered financial advisors are evaluated. The FINRA suitability rule focuses on three fundamental concepts: (1) reasonable basis suitability, (2) quantitative suitability, and (3) customer-specific suitability.
Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.
Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, other investments, financial situation and needs, tax status, and investment objectives. Other considerations include the customer’s time horizon, liquidity needs, risk tolerance, and any other information disclosed by the customer.
Failure by a financial advisor to adhere to these requirements is evidence of negligence or, worse, investment fraud. If you as the investor can establish, at a minimum, negligent misconduct, you may be entitled to recovery of your investment losses.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at email@example.com.
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