Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Simone alfredo Garofalo (Garofalo), previously associated with Cambridge International Securities, LLC, has at least one disclosable event. These events include one tax lien, alleging that Garofalo recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on September 05, 2024.
Without admitting or denying the findings, Garofalo consented to the sanctions and to the entry of findings that while registered with FINRA as a foreign associate, he engaged in securities activities with and for persons in the United States without the required registration to do so. The findings stated that Garofalo used email and phone communications to discuss securities transactions and exchange related paperwork with investors and broker-dealers located in the United States. Garofalo through his member firm earned a commission by facilitating a private secondary securities transaction between two investors located in the United States. Garofalo helped to introduce and exchange documents and information between the investors, through two other broker-dealers also located in the United States. In addition, Garofalo introduced a seller of certain private company shares to an investor, and exchanged documents and information between them, through other broker-dealers. All of the parties except Garofalo were located in the United States. Eventually, one investor wired $2.5 million to buy the shares before learning, through a different firm, that the seller did not own the shares. The investor’s funds were returned.
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 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.
In addition to specific investments being recommended, under Reg BI, a broker must also understand the type of account that their client would need in order to meet their care obligations. The SEC has stated that the type of securities account an investor has can greatly affect a customers’ costs and overall investment returns. Further, different account types can offer and support different features, products, securities, or services, and account type would not be appropriately applied in a one size fits all manner.
Garofalo has been in the securities industry for more than 4 years. Garofalo has been registered as a Broker with Cambridge International Securities, LLC since 2018.
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.
