FINRA bars broker for refusing to testify about Puerto Rico bonds

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A broker will be barred from the industry after refusing to provide testimony in connection with allegedly unsuitable recommendations he made to customers about Puerto Rico bonds.

Charles Doraine settled with the Financial Industry Regulatory Authority on Monday without admitting or denying FINRA’s findings.

FINRA was investigating whether Doraine had made unsuitable recommendations to customers resulting in short-term trading in mutual fund shares, short-term trading of Puerto Rico municipal bonds, and an overconcentration of customer accounts in those Puerto Rico bonds.

The Financial Industry Regulatory Authority said broker Charles Doraine did not provide on-the-record testimony.

“In connection with that investigation, on April 22, 2020, enforcement sent Doraine through his counsel a request pursuant to FINRA Rule 8210 that Doraine appear and provide on-the-record testimony on May 5, 2020,” FINRA said.

FINRA Rule 8210 says that no person should fail to provide information or testimony.

FINRA said Doraine’s lawyer informed it in an email dated April 22 that Doraine had received his request for testimony, but would not appear at any time. Therefore, FINRA found, Doraine violated FINRA Rules 8210 and 2010, on conducting business with high standards.

Doraine had a collection of customer complaints from 2018 to 2019, according to BrokerCheck, FINRA’s public online database providing information about brokers and brokerage firms.

In May 2018, a customer alleged that from October 2012 through 2017, Doraine made mutual fund trades that were unsuitable for a low risk tolerance account and requested $2.5 million in damages. That customer dispute was settled for $375,000, according to BrokerCheck.

In September 2018, a customer alleged that from 2012 to 2015, Doraine excessively traded bonds and mutual funds and recommended “an unsuitable concentration” in Puerto Rico bonds. Puerto Rico entered a restructuring process shortly after that time period, and its financial struggles were well-known for years before that.

That customer requested $10 million in damages and settled for $3.05 million, according to BrokerCheck.

In September 2019, customers alleged that between 2012 to 2018, Doraine engaged in improper mutual fund switches and requested $500,000 in damages. That customer dispute is still pending, according to BrokerCheck.

Doraine entered the securities industry in December 1972 as a broker at Merrill Lynch, Pierce, Fenner & Smith. In March 2007, Doraine became associated with the NEXT Financial Group as a general securities representative. Doraine left NEXT in September 2019, signing a Form U5, meaning Doraine voluntarily left the firm.

Doraine’s lawyer did not immediately respond to a request for comment.

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