Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Ron Itin (Itin), previously associated with Garden State Securities, INC., has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Itin recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on July 12, 2024.
Without admitting or denying the findings, Itin consented to the sanctions and to the entry of findings that he failed to establish and implement a supervisory system reasonably designed to detect and prevent fraudulent fund transmittals and identify theft. The findings stated that Itin was his member firm’s designated person responsible for establishing, maintaining, and enforcing its supervisory systems. Itin failed to reasonably design his firm’s supervisory system, including WSPs, to achieve compliance with the firm’s regulatory obligations, and failed to reasonably supervise these two areas. The firm’s WSPs were generic and were not tailored to the firm’s business. The firm began receiving trading instructions and withdrawal requests from a customer’s email address, sent by hackers who had gained unauthorized access to it. The firm received multiple requests to liquidate securities in the customer’s joint account, and to transfer nearly the account’s entire value to outside bank accounts. Itin was aware of these email communications and instructions and knew that the registered representative servicing the account had not spoken with the customer to confirm the authenticity of those instructions. Itin also knew that the representative was concerned about a possible email hack. Despite this, Itin reviewed and approved multiple Request Forms submitted by the hackers, without ever speaking to or communicating with the customer, or requiring contact with the customer through any method other than the hacked email account, even when presented with numerous red flags including the refusal to contact the firm via telephone to verify the requested transactions, and their insistence that accept order and wire instructions by email only. As a consequence of ltin’s approval of multiple request forms and failure to identify, investigate and address the red flags detailed above, the hackers were able to transfer nearly the full value of the account to outside bank accounts that they controlled, causing the majority of funds in the account to be stolen. The findings also stated that Itin caused his firm to violate SEC Regulation S-ID. Itin failed to develop a program that satisfied the requirements of Regulation S-ID. The firm’s WSPs referenced identity theft but did not contain guidance to identify or detect it. Instead, the WSPs stated that the firm’s IT department would prohibit unauthorized access to the firm’s systems in the event of a customer complaint of identity theft, when, in fact, the firm did not have an IT department.
FINRA BrokerCheck shows a award / judgment customer complaint with a damage request of $4,000,000.00 on May 09, 2023.
Allegations per arbitration filing
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. Reg BI applies when brokers recommend a retail investor engage in securities transaction or an investment strategy involving one or more securities. Reg BI also applies to financial advice concerning the transfer of funds and opening 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 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.
Itin has been in the securities industry for more than 31 years. Itin has been registered as a Broker with Garden State Securities, INC. since 2024.
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.
