Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Michael Shoniker (Shoniker), previously associated with Paychex Securities Corporation, has at least one disclosable event. These events include one tax lien, alleging that Shoniker recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on December 02, 2024.
Without admitting or denying the findings, Shoniker consented to the sanctions and to the entry of findings that he did not timely and fully disclose to his member firm his OBA. The findings stated that Shoniker formed a company to invest in real estate but did not disclose the company to his firm for four months. Shortly after disclosing the real estate business to his firm, Shoniker used it to provide consulting and marketing services to a third-party investment advisor. Shoniker began referring customers of his firm to the advisor for compensation. Shoniker also began working with the advisor to obtain customers for them and received referral for himself and his firm. In exchange for Shoniker’s referrals and consulting and marketing services, the advisor paid Shoniker, through Shoniker’s company, half of the investment advisory fees, less expenses, that it received from over 96 customers of Shoniker’s firm. Shoniker received compensation of approximately $740,000 from the advisor for referrals and consulting and marketing services. Shoniker submitted to his firm OBA forms that described his company as a real estate business but did not describe the referral, consulting, or marketing services he provided to the advisor. In addition, Shoniker submitted five annual compliance questionnaires in which he falsely stated that he provided no financial consulting services to any third party and that he had completely and accurately disclosed his OBAs to his firm.
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. Every recommendation’s cost and investor details 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. So, a brokerage firm should not depend solely on information from the issuer regarding a company, but must perform its own thorough investigation.
Additional investor safeguards include broker disclosure requirements. Brokers are required to disclose reportable events such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters on FINRA’s BrokerCheck reports for public viewing. FINRA has acknowledged that recent studies provide evidence of the predictability of future regulatory and customer complaint issues for brokers with a history of such events. 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.
Shoniker has been in the securities industry for more than 7 years. Shoniker has been registered as a Broker with Paychex Securities Corporation since 2015.
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.
