Grove Point Investments
Grove Point Investments (CRD #: 1763) is a broker-dealer with headquarters in Rockville, Maryland. This firm is a subsidiary of Grove Point Financial. Investors may also have engaged advisory services through Grove Point Advisors, another subsidiary of Grove Point Financial. Grove Point Investments has been in business since 1984 and was previously also registered as an investment advisory firm called H. Beck Inc. (CRD #: 8-31165).
The firm also conducts business under the following names:
- Capital Financial Securities Corporation
- Hibbard-Beck Inc.
- Estate Investment Company
What Types of Products Does Grove Point Offer?
In addition to stocks and bonds, Grove Point offers the following securities:
How is My Financial Professional Regulated?
Investors should understand that different rules apply to different financial professionals. Registered Investment Advisors (RIAs) who work with Grove Point Advisors are fiduciaries, meaning they must act in their clients’ best interests.
Grove Point brokers are registered with FINRA. They must adhere to FINRA’s suitability requirements and Regulation Best Interest. This means that their recommendations should fit the investor’s profile, which includes their age, risk tolerance, tax status, and financial goals. Brokers must also exercise reasonable care and skill when they make a recommendation and are required to disclose the firm’s conflicts of interest.
Many Grove Point representatives are registered as both. Investors should always ask their representative how they are registered and look up their FINRA license on BrokerCheck.
Grove Point Investments has 20 disclosures on its BrokerCheck record. Disclosures describe regulatory actions and settlement agreements. BrokerCheck is the FINRA-maintained database.
Below you will find summaries of the three most recent regulatory actions. You can see a complete list of regulatory actions in the firm’s detailed BrokerCheck record.
Please note that all of its regulatory actions were filed against H. Beck, Grove Point’s previous name.
$400,000 Fine for Variable Annuity L-Class Recommendations
H. Beck allegedly failed to supervise variable annuity share class recommendations, according to an Acceptance, Waiver, and Consent agreement (AWC) dated October 2018. AWCs are settlements that firms enter into with FINRA to avoid litigation.
L-share variable annuity share contracts have shorter surrender periods than B-share contracts, making them unsuitable for investors with long-term investment plans. For instance, variable annuities might be combined with long-term riders like Guaranteed Minimum Income Benefit Rider or Guaranteed Minimum Withdrawal Benefit Rider – these require the customer to hold the variable annuity for five years, whereas L-share contracts have surrender periods of three to four years.
FINRA Rule 2330 requires brokers to have a “reasonable basis to believe that the customer has been informed of the various features of variable annuities, such as the potential surrender period and surrender charges.”
FINRA alleges that from January 2013 through December 2014 alone, H. Beck sold at least 2,835 L-share contracts with revenues of about $13.3 million. Many of these L-share contracts had long-term riders. FINRA Rule 3110 requires firms to supervise broker recommendations and ensure they suit their investor’s needs.
As part of the terms of the AWC, H. Beck consented to a censure and a fine of $400,000.
Non-Traditional Exchange-Traded Funds
According to an Acceptance, Waiver, and Consent agreement from July 2017, a Grove Point (H. Beck) representative recommended unsuitable Non-traditional Exchange-Traded Funds (NT-ETFs). NT-ETFs are not designed to be held long-term. The AWC alleged that the customer in question intended to invest in long-term investments. Furthermore, he was an inexperience investor and therefore should not have been recommended a complex NT-ETF. H. Beck allegedly did not have a supervisory system designed to reasonably address the unique risks associated with investing in non-traditional ETFs.
The firm consented to a censure and a $50,000 fine.
Failure to Conduct Due Diligence for Private Placement Funds
H. Beck allegedly failed to conduct adequate ongoing due diligence on three private placement funds. The firm allegedly received an email containing audited financial statements for the funds. Those statements allegedly showed a deterioration in the financial condition of the funds. The firm allegedly failed to investigate further.
As part of the terms of the Acceptance, Waiver, and Consent agreement, the firm consented to a fine of $40,000.
Fees and Conflicts of Interest
Fees and ongoing payments offered by certain investments create conflicts of interest.
- Transaction-based fees: Because Grove Point receives a fee for securities transactions, they have an incentive to encourage you to trade more frequently and in larger amounts.
- Commission payments: Mutual funds and variable annuities come with ongoing payments for the firm, giving Grove Point an incentive to recommend these securities.
- Third-party payments: Certain investments pay Grove Point commissions and other fees. The firm therefore has an incentive to recommend these investments over others.
- Advisory fees charge a percentage of the total assets.
- Grove Point charges a mark-up for services provided through the primary custodian, incentivizing the firm to recommend accounts with the primary custodial rather than with other custodians that do not pay those fees.
- Grove Point also charges custodial, management, and administrative service fees.
Grove Point Broker Disciplinary Records
Grove Point’s Form CRS recommends that investors ask their broker: “Do you have any disciplinary history? For what type of conduct?”
Grove Point has hired brokers with disciplinary histories. Investors should take note of the following recent disputes:
- An investor alleged that a Grove Point broker misrepresented a transaction-based compensation as a performance-based compensation arrangement. The client further alleged that the broker placed discretionary trades in a non-discretionary account.
- A successor trustee alleged that a Grove Point broker violated Regulation Best Interest when they liquidated a conservative, low-risk portfolio to purchase speculative mutual funds that came with sales charges.
- According to another allegation, a broker with Grove Point Investments allegedly misrepresented the fee structure associated with non-traded Real Estate Investment Trusts (NT-REITs).
Did You Lose Money with a Grove Point Broker?
If you lost money with a Grove Point broker, reach out to an investment fraud lawyer. Our securities attorneys can help you recover losses through FINRA arbitration, the process that many investors would use instead of suing in a civil court. Contact (877) 600-0098 or firstname.lastname@example.org