Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Frank Vecchio (Vecchio), previously associated with Newbridge Securities Corporation, has at least one disclosable event. These events include one tax lien, alleging that Vecchio recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on September 12, 2024.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Frank M. Vecchio (‘Respondent’). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement which the Commission has determined to accept. The commission finds that in or around August 2018, Vecchio was hired as a sales agent by StraightPath Venture Partners LLC (the ‘SP Fund Manager’) to solicit investments in unregistered membership interests in limited liability companies (the ‘SP Funds’) that purportedly owned shares of private companies that had prospects of going public through initial public offerings (‘IPOs’). On September 10, 2024, a final judgment was entered by consent against Vecchio, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 (‘Securities Act’), and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder, in the civil action entitled Securities and Exchange Commission v. Scott J. Hollender, et al., Civil Action Number 23 Civ. 2456, in the United States District Court for the Southern District of New York. The Commission’s complaint alleged that, despite being paid 10 percent upfront fees, Vecchio told investors he solicited on behalf of the SP Funds that there were no upfront fees and that the only way he or the SP Fund Manager earned any money was via backend fees on any profits earned by the investors on the pre-IPO shares after an IPO occurred, and that Vecchio knew or recklessly disregarded that these representations were false or misleading. The Commission’s complaint also alleged that while actively soliciting investors on behalf of the SP Funds, Vecchio was not registered with the Commission as a broker-dealer or associated with a Commission registered broker-dealer.
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.
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.
An advisor must understand the type of account, securities, and their client in order to meet their care obligations. The type of securities account has the potential to greatly affect retail customers’ costs and investment returns. Different types of securities accounts can offer different features, products, or services, and not all types of accounts or services would be in every investor’s best interest.
Vecchio has been in the securities industry for more than 12 years. Vecchio has been registered as a Broker with Newbridge Securities Corporation since 2007.
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.
