Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Matthew Forlano (Forlano), previously associated with Morgan Stanley Smith Barney, has at least one disclosable event. These events include one regulatory, alleging that Forlano recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on September 09, 2024.
The Securities and Exchange Commission (‘Commission’) deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted against Matthew P. Forlano (‘Forlano’ or ‘Respondent’). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement which the Commission has determined to accept. The commission finds that this proceeding concerns insider trading by Forlano in the securities of Maxar Technologies, Inc. (‘Maxar’) based on material nonpublic information provided to him by his nephew, Stephen A. Forlano Jr. (‘Forlano Jr.’). Forlano Jr. had received the material nonpublic information from his friend Anthony Viggiano (‘Viggiano’) who was employed at a global investment bank (the ‘Investment Bank’). Viggiano, in connection with his employment at the Investment Bank, was notified about a potential acquisition of Maxar by at least November 15, 2022. That same day, Viggiano tipped Forlano Jr. about the acquisition. Forlano Jr., in turn, tipped Forlano. Between December 2 and December 15, 2022, Forlano purchased Maxar securities in his brokerage account and tipped a close friend (the ‘Friend’) who also purchased Maxar securities. On December 16, 2022, a press release announced that Maxar had agreed to be acquired in an all-cash transaction valued at approximately $6.4 billion (the ‘Maxar Deal’) and Maxar’s stock price increased nearly 125%. As a result of their purchases of Maxar securities, Forlano profited by more than $8,000 and the Friend generated a profit of over $10,000. Forlano’s conduct violated Section 10(b) of the Exchange Act and Rule10b-5 thereunder.
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. Finally, the advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided 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.
Forlano has been in the securities industry for more than 15 years. Forlano has been registered as a Broker with Morgan Stanley Smith Barney since 2011.
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.
