Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Mark Kemp (Kemp), currently associated with Mcnally Financial Services Corporation, has at least 2 disclosable events. These events include one customer complaint, one tax lien, alleging that Kemp recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on October 14, 2024.
The majority of Kemp\\u2019s clients were elderly investors on the brink or at the beginning of retirement and were rolling over their employee-sponsored 401Ks who were looking for a way to replace their loss of income to help them get through retirement. To replace the clients\\u2019 loss of income, Kemp used reverse convertibles, which typically generate a higher stream of income than is available from other bonds or bank products. Kemp purchased reverse convertibles in certain client accounts and in quantities that exceeded the risk tolerances these clients were willing to endure. Kemp had no reasonable basis to believe that recommending reverse convertibles was in the best interest of his clients. Kemp\\u2019s purchasing of high-risk, complex reverse convertibles notes that were linked to volatile equities in certain client accounts was unsuitable given the customers’ risk tolerance, investment objective(s), and limited investment experience and therefore constitutes an inequitable practice in the sale of securities. Pursuant to Section 4007.105(a)(3)(A) of the Texas Securities Act, the aforementioned inequitable practice in the sale of securities constitutes a basis for\, the issuance of an order suspending Kemp\\u2019s registrations with the Securities Commissioner.\,
FINRA BrokerCheck shows a pending customer complaint with a damage request of $209,816.00 on July 18, 2024.
Complaintant alleges unsuitable investments.
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 a registered representative is providing investment advice through making recommendations customers and covers securities transaction, investment strategies, and recommendations concerning advice on opening of an account or 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.
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.
Kemp entered the securities industry in 1990. Kemp has been registered as a Broker with Mcnally Financial Services Corporation since 2010.
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.
