Kevin McCallum Embroiled in Multiple Unsuitability Disputes
Kevin McCallum (CRD #:2222586), a broker previously registered with LPL Financial, is involved in multiple unsuitability disputes, according to his BrokerCheck record, accessed on January 17, 2022.
Investor Allegations
Between 2019 and 2021, Kevin McCallum has been involved in eight investor disputes.
Unsuitability Disputes
Kevin McCallum has been involved in five unsuitability investor disputes, each alleging that he made discretionary investments and concentrated customers’ accounts in closed-end management companies which were not consistent with his client’s investment objectives.
Three cases are still pending, with investors seeking a total of $8,800,000. The other two cases have since been settled for $200,000.
On December 14, 2021, Kevin McCallum was involved in an investor dispute. According to the allegations, Kevin McCallum concentrated investments in a publicly-traded BDC and engaged in an options trading strategy that was inappropriate for his customers’ investment objectives. The investors are seeking $725,650. The case is still pending.
According to allegations filed on April 19, 2019, Kevin McCallum engaged in fraudulent transactions and risky investments, including the unauthorized use of margin. The case was settled for $500,000.
FINRA Disclosure
Kevin McCallum Allegedly Recommended an Unsuitable BDC
According to an Acceptance, Waiver, and Consent agreement dated June 17, 2021, Kevin McCallum consented to the findings that he allegedly made unsuitable recommendations to 12 customers, resulting in their overconcentration in a high-risk, publicly-traded business development company (BDC).
According to FINRA, the BDC that Kevin McCallum recommended held loans and equity in medium-sized companies. The risk of loss for investments in this BDC was magnified because it borrowed money. Additionally, the illiquidity of the BDC’s investments presented a risk that it would be difficult for the BDC to sell such investments if required, causing it to realize significantly less than the value at which the BDC recorded the investments. Further, the BDC was exposed to interest rate risk that could affect its investment returns. Kevin McCallum’s alleged recommendations resulted in the 12 customers concentrating as much as approximately 17% to over 60% of their liquid net worth to the BDC. Four customers reportedly sold their positions and realized losses totaling $1,222,092.29.
These recommendations led to $37,492,.78 in commissions—allegedly $14,231.61 was paid to Kevin McCallum.
What are BDCs?
Business Development Companies (BDCs) are closed-end investment companies. BDCs are speculative investments that involve significant risks. As a result, BDC investments may not be suitable for all investors.
Brokers must consider the factors listed below when recommending investments to investors:
- The investor’s current financial state and tax status
- The investor’s financial goals
- The investor’s risk tolerance
According to FINRA Rule 2111, brokers may be liable for investor unsuitability claims if they fail to take the factors listed above into account and recommend investments that are not suitable. A broker must have exercised due diligence and have an adequate reason for believing that an investment will be suitable or beneficial for the investor.
FINRA Sanctions
As part of the AWC, Kevin McCallum consented to the following FINRA sanctions:
- A one-year suspension from associating with any FINRA member in all capacities
- A $25,000 fine
- Disgorgement of $14,231.61
- Restitution of $1,222,092.29
You can read the whole AWC here.
Kevin McCallum Background Information
Kevin McCallum has passed the following exams:
- Series 65 – Uniform Investment Adviser Law Examination
- Series 63 – Uniform Securities Agent State Law Examination
- SIE – Securities Industry Essentials Examination
- Series 7 – General Securities Representative Examination
- Series 52 – Municipal Securities Representative Examination
- Series 24 – General Securities Principal Examination
- Series 53 – Municipal Securities Principal Examination
He has also worked with the following firms:
- NBC Securities (CRD#:17870)
- Colonial Brokerage (CRD#:111668)
- Amsouth Investment Services (CRD#:15692)
Kurta Law Can Help
If you have been victimized by Kevin McCallum as a broker, don’t hesitate to get in touch with us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.
For nearly 20 years, Kurta Law has advocated for investors to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm and exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.