On August 22, 2025, a broker faced a four-month suspension from the securities industry after regulators found he had allocated up to 91% of a client’s net worth into illiquid alternative investments. The broker, based in suburban Dallas, was also fined $10,000.00, according to his BrokerCheck profile.

Most firms limit alternative investment allocations to around 10% of a client’s net worth to manage risk. Alternative investments, such as nontraded real estate investment trusts (REITs), business development companies (BDCs), and interval funds, are less liquid and carry higher risks than traditional stock and bond funds. While commissions on these products have declined in recent years, their management fees and other costs often make them more expensive than low-cost index funds tracking benchmarks like the S&P 500.

FINRA’s investigation revealed that from February 2017 to April 2020, the broker advised three clients to invest heavily in alternative investments, disregarding their risk profiles. These clients, who had low to moderate risk tolerance and prioritized capital preservation and income generation, were recommended to allocate between 51% and 91% of their net worth to these high-risk, illiquid products. This exceeded internal firm guidelines and was not accurately reflected in the transaction paperwork. The regulators emphasized that the investments were inconsistent with the clients’ objectives due to their illiquidity and potential for significant losses.

This case highlights ongoing regulatory scrutiny of alternative investment sales practices and the importance of aligning recommendations with clients’ risk tolerance and financial goals.