Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Richard Michalski (Michalski), currently associated with Laidlaw & Company (uk) Ltd., has at least 3 disclosable events. These events include one customer complaint, 2 tax liens, alleging that Michalski recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a pending customer complaint with a damage request of $399,000.00 on September 23, 2024.
Client alleges breach of fiduciary duty from 2018 to 2023
FINRA BrokerCheck shows a final customer complaint on December 12, 2023.
On November 20, 2023, without admitting or denying the findings, Michalski consented to the entry of an Order Instituting Administrative and Cease-and-Desist Proceedings with the SEC wherein the SEC found that, during the period of July 2020 through October 2021, Michalski violated Exchange Act Rules 15l-1(a)(2)(ii)(C) and 15l-1(a)(1) (Regulation Best Interest rules) by making a series of recommendations to four retail customers without a reasonable basis for believing the series of recommended transactions were not excessive in light of the retail customers’ investment profile and engaging in an investment strategy of frequent in-and-out trades that placed the broker’s interest in generating commissions and fees ahead of the customers’ interest in making a profit.\<char_lb_r>\, The cost-to-equity ratios and annual turnover rates for the four customers’ exceeded thresholds indicative of excessive trading with cost-to-equity ratios ranging from 20.38% to 33.14% per account and annual turnover rates ranging from 7.9 to 16.5, generating approximately $260,916.73 in commissions and fees with approximately $88,506 paid to Michalski.\<char_lb_r>\, Michalski consented to cease and desist from committing any violations of Exchange Act Rules 15l-1(a)(1) and (2), a censure, a six-month suspension from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and the payment of disgorgement of $88,506 and prejudgment interest of $4,260.55 and a civil money penalty fine in the amount of $44,253.
FINRA BrokerCheck shows a final customer complaint on November 20, 2023.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, against Richard Michalski (‘Michalski’) and Michael Murray (‘Murray’) (together, ‘Respondents’). In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (the ‘Offers’) which the Commission has determined to accept. The commission finds that during the period of July 2020 through October 2021 (the ‘Reg. BI Period’), Respondents violated Exchange Act Rule 15l-1(a)(2)(ii), the Regulation Best Interest (‘Reg. BI’) Care Obligation, when they made a series of recommendations to four retail customers without a reasonable basis to believe that the series of recommended transactions were not excessive when taken together in light of the retail customer’s investment profile, and because the series of recommended transactions placed the financial interest of the registered representatives ahead of the interest of the retail customer (the ‘quantitative prong’ of the Care Obligation). As a result of the conduct described above, Respondents willfully violated Exchange Act Rules 15l-1(a)(2)(ii)(C) and 15l-1(a)(1).
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.
Finally, an advisor must also analyze the specific account features offered and determine whether their client can benefit from them in order to meet their care obligations. While securities and investments come with costs that must be considered, the type of securities account also has changes the cost equation for the investor and can change the retail customers’ future investment returns. The associated person must consider the different types of securities accounts for their client and determine whether or not the cost or features are reasonably needed for the client or if the customer’s current account costs and features are superior to solutions available to the advisor. In any event, the type of account and services recommended must be in the investor’s best interest.
Michalski entered the securities industry in 2002. Michalski has been registered as a Broker with Laidlaw & Company (uk) Ltd. 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.
