Securities Lawyers Blog
According to BrokerCheck records financial advisor Stephen Whittaker (Whittaker), formerly employed by First Financial Equity Corporation (First Financial) and previously with Morgan Stanley has been subject to at least 2 customer complaints, one bankruptcy filing, and two terminations for cause during the course of his career. According to records kept by The Financial Industry Regulatory Authority (FINRA), Whittaker’s customer complaints allege that Whittaker recommended unsuitable securities recommendations among other allegations of misconduct in the handling of customer accounts.
In May 2012 Whittaker was forced to resign from Morgan Stanley after the firm found that Whittaker communicated with third parties regarding two client accounts without written authorization and his potential involvement in unapproved outside business activities (OBAs).
In April 2015 Whittaker declared bankruptcy. FINRA discloses information concerning a broker’s financial condition because a broker’s inability to handle their own personal finances has also been found to be material information in helping investors determine if they should allow the broker to handle their finances.
In April 2019 Whittaker was terminated by First Financial after the firm found out that Whittaker was engaged in undisclosed business activities including tax planning for firm clients.
Brokers are required under the securities laws to treat their clients fairly. This obligation includes the duties to disclose material risks of the investments they recommend and to present products, particularly complex or confusing products, in a fair and balanced manner that allows the client to evaluate the recommendation. Another important obligation advisors have is to make only suitable recommendations for investments to the client. There are many investments that are not appropriate for the majority of investors or for certain investors given their risk tolerance, age, and other factors. Advisors should not present these investment options to clients. There are two screens that advisors must employ to determine whether an investment is suitable for a client. First, there must be a reasonable basis for the recommendation – meaning that the product has been investigated and due diligence conducted into the investment’s features, benefits, risks, and other relevant factors. The advisor must conclude that the investment is suitable for at least some investors and some securities may be suitable for no one. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases. In addition, research has show a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints. These lower quality firms may average brokers with five times as many complaints as the industry average.
Whittaker entered the securities industry in 2003. From June 2009 until June 2012 Whittaker was associated with Morgan Stanley. From May 2012 until April 2019 Whittaker was associated with First Financial out of the firm’s Surprise, Arizona office location.
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.