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Kevin McCallum: Birmingham LPL Rep Suspended over BDCs
Former Birmingham stockbroker Kevin McCallum (CRD# 2222586) was recently sanctioned by the Financial Industry Regulatory Authority. A former representative of LPL Financial, he was suspended over findings of concentration and unsuitable trading. Records also show a pending investor complaint against him, alleging damages of $4 million.
According to a Letter of Acceptance, Waiver and Consent (No. 2019062569501) released in June 2021, Kevin McCallum was registered with LPL Financial from 2012 until his voluntary resignation in June 2019. FINRA’s findings state from May 2017 until June 2019, he “recommended concentrated investments to 12 customers in a high-risk and highly speculative publicly-traded BDC that exhibited signs of financial distress.” The customers in question had “low or moderate risk tolerances and investment objectives,” according to FINRA, and no experience with BDC investments. The findings go on to explain that the securities held by the BDC he recommended the customers had a “magnified” risk off loss, were illiquid, and the BDC as a whole was “exposed to interest rate risk that could affect its investment returns.” Its net asset value underwent decline during the period in question, in which in recommendations led to his customers “concentrating as much as approximately 17% to over 60% their liquid net worth” in it. His customers eventually suffered losses, with four of them sustaining realized losses of more than $1.2 million; others filed arbitrations against LPL Financial, which the AWC Letter states led to FINRA’s investigation. The BDC recommendations generated more than $37,492.78 in commissions for the firm, including $14,231.61 that went to Mr. McCallum.
FINRA’s findings go on to describe emails Mr. McCallum sent to his customers about the BDC which “violated the content standards for registered representative’s communications with the public.” More specifically, the emails he sent 19 customers about the BDC were “unbalanced,” 11 of them “failed to provide a sound basis for evaluating the facts,” 13 of them “contained unwarranted and promissory statements,” and 15 contained “impermissible projections and/or exaggerated or unwarranted claims, opinions or forecasts.” In one email cited by FINRA, he allegedly made unwarranted promissory statements when he informed a customer that the BDC’s stock price “would increase to 80% to 90% [sic] of the NAV,” and that he was confident the customer’s portfolio “would rise back to previous levels or higher.” FINRA states that the statements he made in these emails violated FINRA rules.
As a result of the above findings, FINRA suspended Kevin McCallum from associating with any FINRA member in any capacity for one year. It also ordered him to pay a fine of $25,000, disgorgement of $14,231.61 plus interest, and restitution of $1,222,092 plus interest.
Kevin McCallum’s BrokerCheck report discloses several investor complaints. A complaint filed in 2019, for instance, alleged that he made fraudulent and risky transactions; the customer ultimately won an award in 2021 of $500,000. A 2020 complaint alleged that he made unsuitable recommendations and concentrated the customer’s accounts, eventually settling for $130,000. A pending complaint filed in 2021 alleges that he made discretionary investments and concentrated the account, seeking damages of $4,000,000.
According to the Financial Industry Regulatory Authority, Kevin McCallum holds 26 years of securities industry experience and is presently suspended from acting as a broker. His past registrations include LPL Financial, NBC Securities, Colonial Brokerage, and AmSouth Investment Services, all in Birmingham, Alabama. He does not presently hold any state licenses. (Information accessed on January 11, 2022.)
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