Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Kenneth Nahrstedt (Nahrstedt), currently associated with L.m. Kohn & Company, has at least one disclosable event. These events include one tax lien, alleging that Nahrstedt recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on January 29, 2025.
Without admitting or denying the findings, Nahrstedt consented to the sanctions and to the entry of findings that he submitted a false attestation to his member firm and caused the firm to maintain inaccurate books and records. The findings stated that the firm received an email from an individual posing as a firm customer. The email requested a $500,000 wire transfer from the customer’s account to a bank in Mexico for the purported purpose of purchasing an apartment there. Unbeknownst to the firm, an imposter had sent the email to the firm without the customer’s authorization. To initiate the wire transfer request, Nahrstedt signed a ‘Change of Ownership’ form in which he falsely attested that he had spoken with the customer in connection with the requested wire transfer, as was required by firm policy. In fact, Nahrstedt had not spoken with the customer concerning the wire transfer. As a result of Nahrstedt’s false statement, the firm processed the $500,000 wire transfer from the customer’s account to an unknown third party.
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 financial advisor must use their knowledge of both their reasonable diligence into investment options as well as their knowledge of the investor’s client specific needs to consider reasonably available investment options. Those investment options must allow the broker to determine that there is a reasonable basis that the recommendation is in the retail investor’s best interest.
Brokerage firms and advisors must also understand the features and limitations of various account types as part of meeting Reg BI’s care obligations. Firms typically offer a variety of account options and services with different trading costs, services, such as account and activity monitoring. An advisor’s recommendation as to what type of securities account to open can alter the customers’ overall costs and investment returns. The advisor must determine that the client can benefit from the type of account being recommended to be opened and in the investor’s best interest taking into account the costs, benefits, and needs of the client.
Nahrstedt entered the securities industry in 2000. Nahrstedt has been registered as a Broker with L.m. Kohn & Company 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.
