Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Richard Reynolds (Reynolds), previously associated with Sw Financial, has at least one disclosable event. These events include one regulatory event, alleging that Reynolds recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on August 22, 2024.
. Without admitting or denying the findings, Reynolds consented to the sanctions and to the entry of findings that he excessively and unsuitably traded the account of a senior customer with a medium risk tolerance. The findings stated that Reynolds recommended high frequency in-and-out trading to the customer, even when the price of his recommended securities did not materially change. The customer relied on Reynolds’ advice and routinely followed his recommendations. Reynolds recommended transactions in the customer’s account that generated total trading costs of $39,436, including $35,950 in commissions.
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.
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.
Reynolds has been in the securities industry for more than 28 years. Reynolds has been registered as a Broker with Sw Financial since 2021.
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.
