It was reported by AdvisorHub on January 24, 2017 that the firm terminated three high producing brokers who were being investigated internally. The three brokers were members of the PC Wealth Management Group.
The first broker, Michael Paesano, was reported to
have been terminated over “concerns” of his “exercise of discretion and investment strategy,” according to the AdvisorHub article. According to Mr. Paesano’s publicly available BrokerCheck report, as maintained by the Financial Industry Regulatory Authority (FINRA), he has been the subject of 15 customer complaints, spanning his employment and registration at two broker-dealers, including Morgan Stanley from May 2011 to January 2017 and UBS Financial Services, Inc. from August 2005 to May 2011. According to Mr. Paesano’s BrokerCheck report and the AdvisorHub article, the most recent customer complaint, alleging unsuitable investments and $1,000,000 in damages, resulted in a settlement of $245,000 to the customer.
The AdvisorHub article reported that two other brokers who were terminated, Jeffrey Cadan and Richard Perkins. According to his BrokerCheck report, Mr. Cadan also was registered with Morgan Stanley from May 2011 to January 2017 and with UBS Financial Services, Inc. from August 2005 to May 2011, and he has been the subject of 11 customer complaints.
Mr. Perkins was registered with Morgan Stanley from May 2011 to January 2017 and with UBS Financial Services, Inc. from July 2009 to May 2011 and he has been the subject of one customer complaint alleging unsuitable investments, according to his BrokerCheck report.
Brokers are said to have “discretionary power” if they can effect purchases and sales of securities without the customer’s same day, prior consent. For retail investors, accounts are more typically nondiscretionary, where the broker must contact the investor and recommend trades for the client to accept or reject.
Discretionary accounts generally require additional supervision. FINRA’s Rule 2510 mandates that in discretionary accounts, no purchases or sales may be made that are “excessive in size or frequency in view of the financial resources and character of such account.” Further, the employing broker-dealer must approve all discretionary orders and review the account regularly to enforce the bar against excessive transactions.
Brokers are also obligated by FINRA Rule 2111 to recommend securities that are suitable for their customers. To ensure recommendations are suitable, each broker must consider a client’s age, tax status, net worth, investment experience, and risk tolerance, among other factors.