Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Chris Stocks (Stocks), currently associated with Prospera Financial Services, Inc., has at least one disclosable event. These events include one tax lien, alleging that Stocks recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on December 04, 2024.
Without admitting or denying the findings, Stocks consented to the sanctions and to the entry of findings that he engaged in an OBA without providing prior written notice to his member firm. The findings stated that Stocks formed business entities for the purpose of purchasing and operating a hotel. After the hotel was purchased, Stocks remained involved with the hotel’s operations, including by making hiring decisions, interacting with the hotel’s general manager, and participating in contract negotiations. Stocks expected to receive compensation from this OBA by sharing in the hotel’s profits. Stocks failed to provide written notice to his firm for more than three years, during which he completed two firm annual compliance attestations in which he falsely stated that he had disclosed all of his OBAs.
Under the securities laws brokers are obligated to act in their clients’ best interests and provide only suitable recommendations for investments to the client. In addition, the SEC has promulgated ‘Regulation Best Interest (Reg BI)‘ which according to the SEC enhanced the broker-dealer standard of conduct beyond existing suitability obligations and requires broker-dealers to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities. Regulation Best Interest and the fiduciary standard for investment advisers are drawn from key fiduciary principles that include an obligation to act in the retail investor’s best interest and not to place their own interests ahead of the investor’s interest.
Brokers have an obligation to first obtain and evaluate sufficient information about a retail investor to form a reasonable basis to believe the account recommendations are in the retail investor’s best interest. Recommendations cannot be based on materially inaccurate or incomplete information. Every recommendation’s cost and investor details are always part of material information. Types of costs that must be considered including account fees, commissions and transaction costs, tax considerations, as well as indirect costs.
In addition to obligation to understand the customer the broker must also investigate the product being sold. FINRA firms have an obligation to conduct a reasonable investigation of the issuer and the securities they recommend in offerings. A brokerage firm has a special relationship with a customer from the fact that in recommending the security, the broker represents to the customer that a reasonable investigation has been made. So, a brokerage firm should not depend solely on information from the issuer regarding a company, but must perform its own thorough investigation.
Additional investor safeguards include broker disclosure requirements. Brokers are required to disclose reportable events such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters on FINRA’s BrokerCheck reports for public viewing. FINRA has recognized that recent research shows past regulatory and customer complaint issues can indicate future problems for brokers. FINRA’s Office of the Chief Economist (OCE) published a study showing the predictability of disciplinary and disclosure events based on past similar events. The OCE study showed that past disclosure events, including regulatory actions, customer arbitrations and litigations of brokers, have significant power to predict future investor harm. The data shows that where a member firm on-boards brokers with a significant history of misconduct there is a high likelihood that the broker will continue to engage in similar behavior.
Stocks entered the securities industry in 1995. Stocks has been registered as a Broker with Prospera Financial Services, Inc. since 2022.
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.
