FINRA fined and suspended former Grove Point Investments and Aegis Capital (Burlingame, California) broker Clayton Kwok Shum for failing to disclose an outside business in recommending reverse mortgages to senior customers and for lacking a reasonable basis to recommend an elderly customer purchase a variable annuity rider.
According to FINRA's report, Shum recommended reverse mortgages to several customers, some of whom were senior citizens. The findings state Shum did not disclose the outside business activity to Grove Point although in one case he did enter into a financial planning services agreement, which Grove Point approved. Investigators found, however, that in approving the agreement, Grove Point specifically told Shum that he could not recommend reverse mortgages to customers, which Shum purportedly did anyway.
FINRA also cited Shum for violation of Regulation Best Interest, which requires brokers making a recommendation to act in the best interest of their customer. Shum purportedly recommended an 84-year-old customer invest $400,000 in an existing variable annuity and purchase a living benefit rider, which allows annuitants to draw from their death benefit while they are alive.
In exchange, living benefit riders often come with costs and higher fees, depreciation of the death benefit and a new surrender schedule. Some firms have specific policies in place that restrict brokers from recommending unsuitable living benefit riders. Investigators found that Grove Point's standing practice was to deny living benefit riders to seniors over 70-years-old, meaning that Shum went against the firm's standing practice in recommending the rider to his 84-year-old customer.
Grove Point discharged Clayton Shum (CRD #4412927) in 2023 for violating multiple firm policies. After his termination from Grove Point, Shum joined Aegis Capital.
FINRA found that as part of his transition, Shum e-mailed confidential Grove Point forms containing customers' private information to a third-party business center. Investigators thus cited Shum for failing to safeguard the confidentiality of customers' nonpublic information by e-mailing them to a third party.
A 2006 customer dispute in Shum's BrokerCheck file lists a $560,000 settlement after Shum "may have misappropriated certain assets of [a customer's] trust."
If you invested with Clayton K. Shum at Grove Point or Aegis Capital, or with any broker or financial adviser who recommended unsuitable investments or purchases that resulted in higher costs, commissions, or fees, or have otherwise led to losses or other damages, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.