Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Robert Hillard (Hillard), currently associated with Arlington Securities, Inc., has at least 2 disclosable events. These events include 2 tax liens, alleging that Hillard recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on March 04, 2025.
Respondent was subject of an AWC for violating FINRA Rules 2330(b), 2111 and 2010. The Enforcement Section alleges that these actions constitute sufficient grounds to suspend Respondent’s Missouri registration as a broker-dealer agent and investment adviser representative in accordance with Sections 409.4-412(b) and 409.4-412(d)(5)(C).
FINRA BrokerCheck shows a final customer complaint on December 11, 2024.
Without admitting or denying the findings, the firm and Hillard consented to the sanctions and to the entry of findings that Hillard recommended that 14 customers liquidate their lower-cost Class A and Class C mutual funds to purchase higher-cost variable annuities without having a reasonable basis to believe the transactions were suitable. The findings stated that when some of the Class C share mutual funds that Hillard had previously sold to his customers began to convert to Class A shares, these conversions resulted in a substantial decrease in Hillard’s personal income. Hillard expected other Class C shares would also convert to Class A shares, further reducing Hillard’s ongoing trail commissions. The investment-only variable annuity, unlike the customers’ mutual fund holdings, charged additional fees, resulting in an increase in the customers’ annual expense. Hillard provided substantially identical written rationales for all of these recommendations without consideration of the differences in the individual profiles of each customer. As a result of Hillard’s unsuitable recommendations, his customers collectively paid an additional $67,026.47 in annual fees. The findings also stated that the firm’s supervisory system, including its WSPs, were not reasonably designed to achieve compliance with FINRA’s suitability requirements regarding recommendations to sell mutual funds or purchase variable annuities. The firm’s WSPs failed to describe the steps that supervisors must take to review the suitability of these transactions, including the identification of potential red flags that the recommendation is not consistent with the customer’s investment profile. The firm also failed to analyze whether there was any benefit to purchasing an investment-only variable annuity in a qualified account, or whether the customers’ objective of making fund transfers easier could be accomplished through cost-free exchanges within the same mutual fund family. Finally, the firm failed to reasonably review the suitability of Hillard’s recommendations that his customers liquidate their mutual funds in order to purchase higher-cost variable annuities. The firm failed to consider that the customer’s ongoing fees on their existing mutual funds had or would decrease by converting to Class A shares, which would further increase the differential in fees with the investment-only variable annuity.
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.
An advisor must understand the type of account, securities, and their client in order to meet their care obligations. The type of securities account has the potential to greatly affect retail customers’ costs and investment returns. Different types of securities accounts can offer different features, products, or services, and not all types of accounts or services would be in every investor’s best interest.
Hillard entered the securities industry in 1981. Hillard has been registered as a Broker with Arlington Securities, Inc. since 1990.
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.
