Were you the victim of former LPL Financial LLC broker Kevin McCallum (CRD# 2222586) regarding investment losses due to business development companies (BDC) losses? He was registered with LPL Financial LLC in Birmingham, Alabama from 2012 to 2019.
In June 2021, FINRA was sanctioned to pay a $25,000 civil and administrative penalty and fine, $1,222,092.29 in restitution, as well as disgorgement in the amount of $14,231.61. He was also suspended for one year. According to the Acceptance, Waiver, & Consent (AWC) he “consented to the sanctions and to the entry of findings that he made unsuitable recommendations to 12 customers, resulting in their overconcentration in a high-risk, publicly-traded business development company (BDC).”
According to the FINRA complaint, “The findings stated that the BDC that McCallum recommended held first and second lien secured loans, unsecured loans, and equity in small and medium-sized companies in a variety of industries, including construction, banking, telecommunications, pharmaceutical, and oil and gas 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 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.” The FINRA complaint also explained that the BDC exposed investors to “interest rate risk that could affect its investment returns… McCallum’s recommendations resulted in the 12 customers concentrating as much as approximately 17% to over 60% in their liquid net worth the BDC.”
FINRA found that customers who sold their investments saw losses of more than $1.22 million. The FINRA findings found that he sent emails to his clients that made claims and provided opinions and forecasts, as well as that he did not provide customers with risks and benefits of the BDC. Furthermore, it is alleged that he advised clients that stock price would increase to 80-90% of the net asset value (NAV) and that he did not anticipate downside in the client’s investment portfolio.
Kevin McCallum Customer Complaints
Kevin McCallum has been the subject of eight customer complaints between 2019 and 2021, according to his CRD report:
December 2021. “Customers allege that between 2016 and 2020, representative made concentrated investments in customers’ accounts in a publicly traded BDC and engaged in options trading that were inappropriate for the customers’ investment objectives.” The customer is seeking $725,650 in damages. The complaint was regarding closed end funds.
October 2021. “Customer alleges that between 2015 and 2019, representative made discretionary investments and concentrated customer’s accounts in Medley Capital Corporation.” The customer sought $5,000 in damages and the case was settled for $13,000. The complaint was regarding closed end funds.
August 2021. “Customer allege that between late 2016 and late 2018, representative made discretionary investments and concentrated his account in a non-diversified, closed end management company that was not consistent with his investment objectives.” The customer is seeking $4 million in damages. The complaint was regarding closed end funds.
February 2021. “Customer alleges that between August 2019 and October 2019 IAR made unsuitable investment recommendations and concentrated account in Medley Capital Corporation.” The case is currently pending. The complaint was regarding closed end funds.
December 2020. “4.Customers allege that between October 2017 through December 2018 representative made discretionary investments and concentrated their accounts in a non-diversified, closed end management company that was not consistent with their investment objectives.” The customer is seeking $4,800,000 in damages. The complaint was regarding closed end funds.
October 2020. “Customer alleges that between October 2018 and December 2018 representative made unsuitable investment recommendations and concentrated claimants’ accounts in Medley Capital Corporation.” The case was settled for $130,000. The complaint was regarding closed end funds.
November 2019. “Customer alleges that between 2011 and 2019 advisor made unauthorized and unsuitable purchases of thinly traded shares of medley capital corporation resulting in more than 50% concentration in the customer’s account.” The case was settled for $70,000. The complaint was regarding common and preferred stocks.
April 2019. “Claimaints allege that between 2012 and the present, advisor engaged in fraudulent transactions and risky investments, including the unauthorized use of margin.” The customer sought $2.2 million and the customer was granted $500,000 in damages. The complaint was regarding common and preferred stocks, mutual funds, options, and exchange traded funds (ETFs).
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, LPL Financial LLC may be liable for investment or other losses suffered by Kevin McCallum’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If you have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.