Articles Tagged with suitability

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Solomon David Krispeal.  Since January 2016, Mr. Krispeal has been employed and registered with PHX Financial, Inc., a Hauppauge, New York broker-dealer, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA).  He was previously registered with Legend Securities, Inc. from March 2013 to February 2016, Aegis Capital Corp. from April 2012 to March 2013 and with John Thomas Financial from January 2008 to April 2012, according to BrokerCheck records.

In 2017, Mr. Krispeal was fined and suspended from association with any FINRA member broker-dealer for 30 days by FINRA, after submitting a Letter of Acceptance, Waiver and Consent No. 2014042764601.  According to the AWC, Mr. Krispeal violated FINRA Rule 1122 (Filing of Misleading Information as to Membership or Registration) and Rule 2010 (Standards of Commercial Honor and Principles of Trade) because he did not disclose an arbitration he was named as a respondent in, and when he did make the disclosure, he “inaccurately disclosed that the matter was ‘withdrawn,’ rather than ‘settled.’”  FINRA Rule 1122 require that brokers and brokerage firms accurately disclose information regarding membership and registration to FINRA and correct any filings when required.

In addition to this regulatory matter, Mr. Krispeal has been made the subject of seven customer complaints, including two matter that have resulted in a settlement or an award, according to BrokerCheck records.  In one case (FINRA Case No. 13-00830) where which Mr. Krispeal was listed as a respondent and the customer made allegations of unauthorized trading, unsuitability and churning, the customer was awarded $75,000 (nearly all of the stated damages of $95,000), according to FINRA Dispute Resolution records.  Mr. Krispeal’s BrokerCheck Report also disclosed that the second case resulting in settlement concerned a customer’s allegations of unauthorized trading and alleged forgery.

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 securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Matthew Meehan.  Mr. Meehan was last employed and registered with E.J. Sterling, LLC, a Garden City, New York, broker-dealer, from November 2011 to October 2015, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA).  He was previously registered with Aegis Capital Corp. from March 2010 to November 2011 and with Gunnallen Financial, Inc. from September 2008 to March 2010, according to BrokerCheck records.

In 2017, Mr. Meehan was fined and suspended from association with any FINRA member broker-dealer for 12 months by FINRA, after submitting a Letter of Acceptance, Waiver and Consent No. 2016050114901 .  According to the AWC, Mr. Meehan violated FINRA Rule 2111 (Suitability) and FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) because from January 2014 through June 2015, he exercised discretion without the customers’ written authorization to do so, and engaged in unsuitable trading in several customers’ accounts “resulting in annualized turnover rates of 12, 21, and 32, respectively, and annualized cost-to-equity ratios of 54%, 110%, and 179%, respectively.”  Trading at these levels of turnover and cost-to-equity ratios could be considered churning, which is defined as excessive trading by the broker in the client’s account to generate commissions.

FINRA Rules require that recommendations made by the broker to the customer be suitable.  This means that the broker must consider the investor’s age, investment experience, age, tax status, other investments, as well as other factors when making a recommendation to buy or sell securities.

The securities and investment fraud attorneys at Malecki Law are interested in hearing from investors who have purchased Variable Universal Life Insurance (VUL) policies.

According to Investopedia, VUL policies combine a death benefit with investment feature.  The investment feature generally includes sub-accounts, as with other variable annuities, that invest in stocks and bonds, or mutual funds that have exposure to stocks and bonds.  While a VUL investment feature may offer an opportunity to gain an increased rate of return by investing in securities, it generally comes with higher management fees and commissions.  As a result, these commissions and fees must be weighed against the risk of loss in the securities purchased.  These risks must be disclosed to the investor prior to investment.

Issues surrounding VUL policies are not new.  A U.S. News and World Report article from 2011 highlighted that these types of policies generally come with higher fees, fewer investment options and sometimes surrender policies.

First Wells Fargo, now Morgan Stanley.

On the heels of Wells Fargo’s cross-selling scandal, the broker-dealer Morgan Stanley has been accused of inappropriately promoting  “securities based loans” to customers, according to an article published in the Wall Street Journal on October 3, 2016.  The complaint, filed by Massachusetts securities regulators, alleges that Morgan Stanley’s lax compliance and supervisory oversight led the broker-dealer to breach their own fiduciary duties owed to their wealth management customers by pushing the loans and minimizing the risks associated with the accounts.

If the allegations turn out to be true, the Massachusetts allegations would further exemplify the conflict of interest between broker-dealers pushing risky products on their clients without providing the balanced view of the products that industry rules require, which could be breaches of duties to certain of their customers.  At the very least, FINRA Rule 2111 requires that broker-dealers ensure that recommendations of products are suitable for each customer, which requires a careful assessment of each customer’s respective investment objectives, risk tolerance, age, tax bracket, other investments, liquidity needs, as well as other factors.

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Megan Resch.  Ms. Resch is currently registered to sell securities with LPL Financial LLC in the broker-dealer’s Morristown, New Jersey office, according to her publicly available BrokerCheck records maintained by the Financial Industry Regulatory Authority (FINRA). Ms. Resch has been registered with LPL Financial since November 2010, and before then was registered to sell securities with Multi-Financial Securities Corporation in Martinsville, New Jersey from January 2006 to November 2010, according to her BrokerCheck records.

Ms. Resch’s BrokerCheck records indicate that two customers have raised disputes regarding her recommendations, including 2014 allegations of an unsuitable limited partnership investment that causes losses, which was settled for $78,400.  Additionally, a customer alleged in 2011 that there were misrepresentation and suitability issues on investments from April 2007 to December 2010, which dispute was settled for $105,000, according to the BrokerCheck records.

Generally speaking, FINRA Rules require that recommendations made by the broker to the customer be suitable.  This means that the broker must consider the investor’s age, investment experience, tax status, other investments, as well as other factors when making a recommendation to buy or sell securities.

The securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints against stockbroker Christopher B Ariola.  Mr. Ariola was last employed and registered with Financial Telesis, Inc., an Aliso Viejo broker-dealer, from November 2012 to September 2014, according to his publicly available BrokerCheck, as maintained by the Financial Industry Regulatory Authority (FINRA).  He was previously registered with Bay Mutual Financial LLC from September 2004 to September 2012, according to BrokerCheck records.

FINRA filed Disciplinary Proceeding No. 2012034139101 against Mr. Ariola on August 25, 2016 alleging that he recommended that three elderly retiree investors invest a “substantial portion of their limited retirement assets in certain gold and energy stocks.”  The Complaint further alleged that these recommendations were unsuitable because they were not appropriate given each investor’s respective financial circumstances, investment objectives and low risk tolerances, and because the recommendations resulted in each account becoming concentrated in gold and energy stocks.  Gold is a commodity, which like energy stocks, can be traded.  Both commodities and energy stocks tend tobe risky investments and can lead to large losses.

According to his BrokerCheck report, Mr. Ariola has been the subject of four customer complaints.  The latest customer complaint led to a FINRA arbitration proceeding, according to BrokerCheck records.  The BrokerCheck records reveal that the customer alleged churning and unsuitability.  Churning is generally defined as excessive trading by the broker in the client’s account to generate commissions.  FINRA Rules require that recommendations made by the broker to the customer be suitable.  This means that the broker must consider the investor’s age, investment experience, age, tax status, other investments, as well as other factors when making a recommendation to buy or sell securities.

The investment and securities fraud attorneys at Malecki Law are interested in hearing from investors who have complaints regarding Garden State Securities financial advisor Anthony Joslin.

According to his BrokerCheck report maintained by the Financial Industry Regulatory Authority (“FINRA”), Mr. Joslin was most recently with JP Turner & Co and Grayson Financial. Grayson Financial has since been expelled by FINRA according to industry records.

Mr. Joslin has at least seven customer disputes and 2 regulatory events in his history, per FINRA.

First, it was M.I.T., Yale and N.Y.U. Then, Duke University, Johns Hopkins, University of Pennsylvania, and Vanderbilt were sued for excessive fees in their employees’ retirement accounts, according to a New York Times report. With these class-action suits filed, let’s examine what are the common problems and allegations made against 403(b) plans.

403(b) plans, are similar to 401(k) retirement plans available to employees of public schools and nonprofit institutions like universities and hospitals. The most common allegation that has been reported against 403(b) plans is excessive fees that result in lost retirement savings for the investors. These universities reportedly used multiple ‘record keeper’ providers and paid excessive revenue sharing payments to these providers, amounting to millions of dollars in lost savings.

While the employee investors would have benefited more from fewer simplified options that leveraged economies of scale, there were 400+ investment options which were confusing for them and made them opt for duplicative strategies according the same news report. Allegedly, millions of dollars in retirement assets were unsuitably invested in underperforming funds in a retail share class as opposed to a less-expensive institutional share class. The investment advisors for these plans allegedly breached their fiduciary duty which mandates the reduction of excessive fees and conflicts of interest that erode retirement savings for all investors.