The Financial Industry Regulatory Authority announced that it has banned two brokers and suspended a third, for misconduct in the sale of complex Collateralized Mortgage Obligations to retail customers.

The brokers neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. Two brokers were permanently barred from the securities industry, and the other was suspended for two years.

FINRA found that they made unsuitable recommendations and misrepresented material facts in connection with sales of these complex products. They also failed to conduct proper suitability analyses, it said.

“These are FINRA’s first enforcement actions arising from our ongoing investigations into abuses in the marketing and sales of mortgage-backed securities such as CMOs to retail customers,” said Susan Merrill, FINRA executive vice president and chief of enforcement.

“Brokers and firms have an obligation to ensure that they recommend these securities only to those customers for whom they are a suitable investment – namely sophisticated investors with a high-risk profile. [These three brokers] failed to fulfill this obligation when they recommended ‘inverse floaters’ to retail customers with little or no investment experience. And they compounded this misconduct by permitting the head trader to exercise discretionary authority in the customers’ accounts to purchase CMOs,” Merrill added.