Reg BI

Victor Lessinger Suspended Over Reg BI Violation

December 2, 2024 | by Staff Attorney

Financial advisor Victor Lessinger (Lessinger), formerly employed by brokerage firm Colorado Financial Services Corporation (Colorado Financial) has been suspended by The Financial Industry Regulatory Authority (FINRA). In addition, Lessinger has been subject to at least four other regulatory complaints and one customer complaint during the course of his career.

In October 2024 Lessinger consented to a FINRA finding to the sanctions that he willfully violated Exchange Act Rule 15l-1(a)(1) by recommending that a retail customer invest in three high-risk closed-end management investment companies that were not in the customer’s best interest based on her investment profile. According to the FINRA findings the customer, who is a senior, reported that her risk tolerance was moderate, and her investment objective was income. But FINRA found that Lessinger recommended that the customer invest up to 37 percent of her net worth in the high-risk closed-end funds and as a result the customer lost $5,029.85.

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.

Did Your Financial Advisor Recommend Super Micro Computer? – Investor Loss Recovery

November 25, 2024 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating claims that investors were recommended to invest substantial amounts of their savings in high risk stock Super Micro Computer, Inc. (SMCI). Investors whose advisors failed to act in their clients best interests may seek recovery before The Financial Industry Regulatory Authority (FINRA).

Super Micro Computer stock investors have been on the proverbial “wild ride” of the year. At the beginning of 2024 Super Micro Computer stock traded under $30 per share. By March of 2024 – in only 3 months – the stock was trading just shy of $120 per share and nearly a 300% gain during that time. Since March 2024 however, Super Micro Computer stock investors have watched the stock slide all the way down back to under $20 in November 2024 only to then begin to rebound.

What’s causing the wild moves? Super Micro Computer has been one of the big gainers in the artificial intelligence (AI) space and demand for its server systems has surged. Super Micro Computer’s revenues have more than doubled in 2024 and the consensus estimates see another additional 80% increase potentially. With that said, Super Micro Computer has been plagued by an accounting scandal and potential delisting from the stock exchange. Recently, Super Micro Computer hired BDO as its public auditor to replace the quitting Ernst & Young firm that resigned in October after it raised concerns regarding the company’s financial statements. With a new auditor, Super Micro Computer hopes to file two overdue financial reports including its 10-K report for the fiscal year ending June and its most recent quarterly filing for September. Super Micro Computer has also submitted a compliance plan to stay on the stock exchange. However, in August Hindenburg Research pointed to multiple red flags in the company’s accounting practices and The Wall Street Journal reported in late September that the U.S. Justice Department may be probing the company.

Advisor John Micera Has Structured Products Complaint

November 24, 2024 | by Staff Attorney

The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor John Micera (Micera), currently employed by RBC Capital Markets, LLC (RBC) has been subject to at least two customer complaints during the course of his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), Micera’s most recent customer complaint alleges that Micera recommended unsuitable investments in structured products and makes allegations concerning misconduct relating to the handling of the customer’s accounts.

In April 2024 a customer complained that Micera violated the securities laws by alleging that Micera recommended unsuitable investments in high risk, illiquid, high commission/fee structured notes. The claim alleges $2.275 million in damages and is currently pending.

Structured products are a class of derivative products that derive their performance from market linked data. A structured product generally references a source against which market risk is taken. The source can be a single security, a basket of securities such as a market index, commodities, interest rates, or a real estate loan portfolio. The variety of products that can be structured demonstrates the difficulty in formulating a single unified definition of a structured product.

Sam Schoner Has Customer Complaints Related to First Republic Preferred Stock

November 18, 2024 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Sam Schoner (Schoner), currently associated with J.P. Morgan Securities LLC (JP Morgan), has been subject to at least four customer complaints during his career. The most recent complaints against Schoner alleged that Schoner recommended unsuitable investments in stocks and preferred stocks, including in First Republic Bank, among other allegations of misconduct relating to the handling of their accounts.

In December 2023 a customer complained that Schoner, from January 2012 to September 2023, engaged in unsuitable investment advice. The claim alleges $2.5 million in damages and is currently pending.

In September 2023 a customer complained that Schoner, from 2017 through 2023, engaged in unsuitable investment advice. The claim alleged almost $7.5 million in damages and settled for $950,000.

In May 2023 a customer complained that Schoner, from January 2021 to November 2021, engaged in unsuitable investment advice. The claim alleged $6.5 million in damages and settled for $950,000.

Preferred stocks are a hybrid of debt and equity and have attributes of both securities. Preferred stocks pay a stream of fixed or floating-rate payments similar to debt coupon payments but provide no participation in the issuer’s residual (equity) gains or any voting rights. Preferred stocks are far less stable than bonds and can even be more volatile than stocks based on market conditions. When a company is under stress, its equity and preferred stock can trade nearly in tandem with little difference in performance. The in tandem trading demonstrates that the market believes that there is little additional security protection provided by preferred stocks being higher up in the capital structure than common equity.

UBS Advisor Barry Schwartz Has Customer Complaint

November 11, 2024 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Barry Schwartz (Schwartz), currently associated with UBS Financial Services Inc. (UBS), has been subject to at least two customer complaints and one regulatory action during his career. The most recent complaint against Schwartz alleged that Schwartz recommended unsuitable investments in various equity and alternative investments among other allegations of misconduct relating to the handling of their accounts.

In December 2023 a customer complained that Schwartz, from January 2021 to February 2022, engaged in unsuitability and overconcentration of certain investments, and that such investments resulted in principal losses. The investor also alleges misrepresentation with respect to the handling of Claimants’ investment accounts and violated the securities laws claiming $1 million in damages. The claim is currently pending.

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.