Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Debbie Cavanaugh (Cavanaugh), currently associated with Centaurus Financial, Inc., has at least one disclosable event. These events include one tax lien, alleging that Cavanaugh recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on February 07, 2025.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Centaurus Financial, Inc. (‘Centaurus’), Debbie M. Cavanaugh (‘Cavanaugh’), Michael Y. Hamilton (‘Hamilton’), Dana Matthew Hawkins (‘Hawkins’), and Timothy N. Tremblay (‘Tremblay’) (collectively, the ‘Respondents’). In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (‘Offers’) which the Commission has determined to accept. On the basis of this Order and Respondents’ Offers, the Commission finds that: Between June 30, 2020, the compliance date for Regulation Best Interest (‘Regulation BI’), and approximately April 16, 2021 (the ‘Relevant Period’), Respondents did not comply with Regulation BI in connection with their recommendations of corporate bonds called ‘L Bonds’ offered by GWG Holdings, Inc. (‘GWG’) to certain retail customers. According to GWG’s disclosures during the Relevant Period: (a) L Bond investments involved a high degree of risk, including the risk of losing an investor’s entire investment; (b) L Bond investments May be considered speculative; (c) L Bond investments were only suitable for investors with substantial financial resources and no need for liquidity in the investment; and (d) GWG May use a portion of the L Bond proceeds to repay existing L Bond holders. Despite these disclosures, Centaurus and its registered representatives – Respondents Cavanaugh, Hamilton, Hawkins and Tremblay, recommended the purchase of L Bonds to 18 retail customers for whom Respondents did not have a reasonable basis to believe that the recommendations were in those customers’ best interest based on those customers’ investment profiles and the potential risks, rewards, and costs associated with the L Bonds. As a result, Centaurus, Cavanaugh, Hamilton, Hawkins and Tremblay did not comply with the Customer-Specific Prong of Regulation BI’s Care Obligation found in Exchange Act Rule 15l-1(a)(2)(ii)(B). Centaurus also did not reasonably enforce its own written policies and procedures requiring personnel to take training related to Regulation BI and training related to a 2020 Offering of GWG L Bonds. As a result, Centaurus did not comply with Regulation BI’s Compliance Obligation found in Exchange Act Rule 15l-1(a)(2)(iv). By not complying with these Regulation BI component obligations, the Respondents each willfully violated Regulation BI’s General Obligation found in Exchange Act Rule 15l-1(a)(1).
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 Reg BI standard of care applies to registered representatives making recommendations to customers in the purchase, sale, or exchange of securities or the implementation of investment strategies involving securities and non-securities. The rule also applies to the handling of opening accounts such as account transfers and types of accounts being recommended to be opened. 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.
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.
Cavanaugh entered the securities industry in 1984. Cavanaugh has been registered as a Broker with Centaurus Financial, Inc. since 2020.
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.
