Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Edward Kotak (Kotak), currently associated with Equity Services, Inc., has at least 2 disclosable events. These events include 2 tax liens, alleging that Kotak recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on November 21, 2024.
NYDFS alleged that Mr. Kotak demonstrated untrustworthiness and/or incompetence within the meaning of Section 2110(a)(4) of the Insurance Law in that Mr. Kotak’s relicensing application to act as an agent pursuant to Section 2103(a) of the Insurance Law, certified and submitted to the Department on or about August 4, 2022, contained false and/or inaccurate information in connection with Mr. Kotak having completed fifteen hours of Continuing Education, when in fact Mr. Kotak had not taken the required courses, in violation of Section 2132(g) of Insurance Law
FINRA BrokerCheck shows a final customer complaint on May 20, 2024.
Without admitting or denying the findings, Kotak consented to the sanctions and to the entry of findings that he certified to the State of New York that he had personally completed 15 hours of continuing education required to renew his state insurance license when, in fact, another person had completed that continuing education on his behalf.
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. The cost of the recommendation and information about the investor 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. Accordingly, a brokerage firm may not rely blindly upon the issuer for information concerning a company in lieu of conducting its own reasonable investigation.
Another protective measure is to require broker discloses. Brokers are required to reveal important events, such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters, publicly on their BrokerCheck reports. FINRA has recognized that recent studies indicate future regulatory and customer complaint issues can be predicted for brokers who have experienced them before. 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.
Kotak entered the securities industry in 2012. Kotak has been registered as a Broker with Equity Services, Inc. since 2024.
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.
