Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Christopher Reynolds (Reynolds), previously associated with Pruco Securities, Llc., has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Reynolds recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on August 16, 2024.
Without admitting or denying the findings, Reynolds consented to the sanction and to the entry of findings that he caused his member firm to maintain inaccurate books and records by forging customer signatures. The findings stated that Reynolds, without having the customers’ permission to do so, electronically signed or hand signed customers’ names on hard copy documents for three customers on 11 account documents. These account documents included transfer of assets forms and 1035 exchange/rollover/transfer forms and were required books and records of the firm. For two of these customers, Reynolds signed the customers’ names on withdrawal forms without the customers’ permission or authorization for the withdrawal or surrender. The findings also stated that Reynolds willfully violated Rule 15/-1 of the Securities Exchange Act of 1934 (Regulation BI or Reg Bl) by recommending that customers make annuity withdrawals or surrenders and reinvest the proceeds in a registered index-linked annuity without having a reasonable basis to believe those transactions were in his customers’ best interests. As a result, Reynolds’ customers incurred penalties such as surrender charges, the imposition of new, lengthier surrender periods, and tax consequences. The tax consequences could have been avoided if Reynolds recommended 1035 exchanges, as opposed to recommending full withdrawals or surrenders and then moving the money into the new product. After discovering Reynolds’ misconduct, his firm either reversed or stopped the customers’ transactions or, when that was not possible, paid the customers restitution. Reynolds also did not conduct a comparative analysis of the advantages and disadvantages of the existing annuities and the new registered index-linked annuity or make a determination that the customers would benefit from the new products. Reynolds thus failed to consider whether the purchases were in the customers’ best interest in light of the disadvantages of giving up the prior annuity contracts. Overall, Reynolds’ recommendations caused the customers to incur over $32,000 in surrender fees, in addition to adverse tax consequences. The findings also included that Reynolds caused his firm to fail to retain emails and text messages as part of its books and records by using his personal email account and cell phone to exchange securities-related communications with firm customers. Reynolds did not forward his emails or text messages to the firm for review or retention.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $195,485.00 on July 10, 2023.
Customer alleges that the rep did not fully disclose all the facts regarding the replacement of a policy that was not suitable for his needs. Customer also alleges that a policy was surrendered instead of 1035 exchanged which generated multiple taxable events.
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. Reg BI applies when brokers recommend a retail investor engage in securities transaction or an investment strategy involving one or more securities. Reg BI also applies to financial advice concerning the transfer of funds and opening 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. Using the foregoing information, the associated person then must consider reasonably available investment option to accomplish the investor’s goals as well as alternative investment options that may be cheaper or other important qualities. Finally, the advisor must conclude that there is a reasonable basis to believe that the recommendation being provided is in the 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.
Reynolds has been in the securities industry for more than 5 years. Reynolds has been registered as a Broker with Pruco Securities, Llc. since 2021.
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.
