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High-Risk Investments Like Giving a Dragster to a Granny

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New York, NYThe requirement and responsibility for any financial advisor to be sensitive to an investor's risk tolerance is akin to a mechanic performing an appropriate fix on an elderly widow's staid Crown Victoria. Thus, the allegations surrounding Bill Tatro and Eagle Steward are not far removed from a scenario that sees our kindly widow getting her car back outfitted with a souped-up, turbocharged Hemi with mag wheels, air spoiler and hydraulic shocks.

This is beyond a great-grandmother's comfort zone. Conversely, placing an investor's money in products that carry more risk than is appropriate for a client's age and circumstances—let alone an investor's stated wishes—suggests insensitivity bordering on fraud.

Such are the allegations against William Tatro, a financial advisor who is alleged, at various times, to have sold Real Estate Investment Trusts (REITs) and other products that carried high commissions and equally high levels of risk to clients for whom such investments were unsuitable. Various complaints about Tatro have surfaced over the years, including a William Tatro Securities fraud lawsuit that was launched by a disgruntled investor in 2003.

Stats from the Financial Industry Regulatory Authority (FINRA) suggest in excess of 60 accumulated complaints involving Bill Tatro securities, with more than $3 million in settlements on record.

And yet, according to the Rochester Democrat and Chronicle back in the summer, many of those complaints have been dismissed. Specifically, the 2003 lawsuit filed by investor Deborah Souter alleging a host of unauthorized trades that was alleged to have significantly diminished the value of her Individual Retirement Account (IRA) was dismissed three years later.

Another complaint against Bill Tatro securities filed in 2010 by Mid-Lakes Management Corporation of Clifton Springs was also, ultimately, dismissed. That case grew from an arbitrator's opinion that Tatro owed Mid-Lakes more than $500,000 for conducting high-risk trades alleged to have negatively impacted the value of the company's pension trust for employees. Hence, the allegation of Bill Tatro fraud.

It is not known if the aforementioned cases have been or are subject to appeal.

However, a more recent complaint against William Tatro Securities was filed in June. That complaint, forwarded to FINRA, alleges that Tatro placed investor funds into variable annuities, REITs and leveraged exchange-traded funds that also carried high commissions and fees.

"Regardless of customers' needs, Tatro undertook a course of conduct that generated excessive commissions," stated the text of the complaint to FINRA. "As a result, claimants are now left with only a small fraction of what they initially invested."

Tatro's co-accused are Walnut Street Securities Inc. and First Allied Securities Inc. Tatro, according to the Rochester Democrat and Chronicle, was registered at various times with the two firms spanning a 19-year period between 1991 and 2010.

Financial advisors carry a fiduciary duty under FINRA regulations to invest client funds according to stated risk tolerances, and in the best interest of the investor.

However, beyond that is the moral obligation of giving a customer what she asks for. And if the gentle octogenarian prefers not to be labeled The Little Old Lady from Pasadena with the lead foot and the smokin' Crown Vic, her wishes should be granted. Just change the oil, if you please. A trip to the drag strip is not her cup of tea.

All kidding aside, any reduction in retirement funds when you can least afford, or access time to make up for any shortfall, is a heartbreaking tragedy. Such an allegation involving Bill Tatro—or any similar allegation or lawsuit targeting a financial advisor—carries that issue at its heart.

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