Super Micro Computer stock investors have been on the proverbial “wild ride” of the year. At the beginning of 2024 Super Micro Computer stock traded under $30 per share. By March of 2024 – in only 3 months – the stock was trading just shy of $120 per share and nearly a 300% gain during that time. Since March 2024 however, Super Micro Computer stock investors have watched the stock slide all the way down back to under $20 in November 2024 only to then begin to rebound.
What’s causing the wild moves? Super Micro Computer has been one of the big gainers in the artificial intelligence (AI) space and demand for its server systems has surged. Super Micro Computer’s revenues have more than doubled in 2024 and the consensus estimates see another additional 80% increase potentially. With that said, Super Micro Computer has been plagued by an accounting scandal and potential delisting from the stock exchange. Recently, Super Micro Computer hired BDO as its public auditor to replace the quitting Ernst & Young firm that resigned in October after it raised concerns regarding the company’s financial statements. With a new auditor, Super Micro Computer hopes to file two overdue financial reports including its 10-K report for the fiscal year ending June and its most recent quarterly filing for September. Super Micro Computer has also submitted a compliance plan to stay on the stock exchange. However, in August Hindenburg Research pointed to multiple red flags in the company’s accounting practices and The Wall Street Journal reported in late September that the U.S. Justice Department may be probing the company.
Brokers are required to adhere to the SEC’s Regulation Best Interest (Reg BI) standard of care under the Securities Exchange Act of 1934 which establishes a “best interest” standard for broker-dealers and associated persons. This standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.
There are several different aspects of the rule that brokers must comply with. One of which is the care obligations which requires brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations includes three components. First, the advisor must have an understanding of the potential risks, rewards, and costs associated with a product, investment strategy, account type, or series of transactions. Next, the advisor must have a reasonable understanding of the specific retail investor’s investment profile. The customer’s profile information generally includes an investor’s financial situation and needs; investments; assets and debts; marital status; tax status; age; investment time horizon; liquidity needs; risk tolerance; investment experience; investment objectives and financial goals; and any other information the retail investor may disclose in connection with the recommendation or advice. Finally, the advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided is in the retail investor’s best interest.
An advisor must understand the type of account, securities, and their client in order to meet their care obligations. The type of securities account has the potential to greatly affect retail customers’ costs and investment returns. Different types of securities accounts can offer different features, products, or services, and not all types of accounts or services would be in every investor’s best interest.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.