Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Jack Faller (Faller), previously associated with Lga Capital, has at least one disclosable event. These events include one tax lien, alleging that Faller recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on December 11, 2024.
Without admitting or denying the findings, Feller consented to the sanctions and to the entry of findings that he created reports purporting to reflect branch inspections that he completed at his former member firm when he had not conducted any such branch inspections. The findings stated that Feller was the designated principal at his firm responsible for the firm’s compliance with branch inspections but failed to prepare any branch office inspection reports for the firm’s sole branch office. When the firm’s Chief Compliance Officer asked Faller if he had copies of the branch inspections, Faller responded that he did not complete the branch inspections for those years but offered to create the reports for the years in question, even though he had not been associated with the firm for over a year at that time. The firm submitted the reports to FINRA in response to its request. Neither Faller nor the CCO disclosed to FINRA that the branch inspection reports were recently created in response to FINRA’s request until after FINRA discovered they were not contemporaneous records. The findings also stated that by participating in the creation of the branch inspection reports, Faller caused the firm to maintain inaccurate books and records.
Under the securities laws brokers are obligated to act in their clients’ best interests and provide only suitable recommendations for investments to the client. In addition, the SEC has promulgated ‘Regulation Best Interest (Reg BI)‘ which according to the SEC enhanced the broker-dealer standard of conduct beyond existing suitability obligations and requires broker-dealers to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities. Regulation Best Interest and the fiduciary standard for investment advisers are drawn from key fiduciary principles that include an obligation to act in the retail investor’s best interest and not to place their own interests ahead of the investor’s interest.
Brokers have an obligation to first obtain and evaluate sufficient information about a retail investor to form a reasonable basis to believe the account recommendations are in the retail investor’s best interest. Recommendations cannot be based on materially inaccurate or incomplete information. Data on the investor and the expense of the advice are consistently part of material information. Types of costs that must be considered including account fees, commissions and transaction costs, tax considerations, as well as indirect costs.
In addition to obligation to understand the customer the broker must also investigate the product being sold. FINRA firms have an obligation to conduct a reasonable investigation of the issuer and the securities they recommend in offerings. A brokerage firm has a special relationship with a customer from the fact that in recommending the security, the broker represents to the customer that a reasonable investigation has been made. Thus, without conducting its own reasonable investigation, a brokerage firm cannot depend solely on the issuer for information about a company.
Another protective measure for investors is the requirement for brokers to disclose. Brokers are required to disclose reportable events such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters on FINRA’s BrokerCheck reports for public viewing. FINRA has recognized that recent research shows brokers with a past record of regulatory or customer complaint issues are more likely to have such problems again in the future. FINRA’s Office of the Chief Economist (OCE) published a study showing the predictability of disciplinary and disclosure events based on past similar events. The OCE study showed that past disclosure events, including regulatory actions, customer arbitrations and litigations of brokers, have significant power to predict future investor harm. The data shows that where a member firm on-boards brokers with a significant history of misconduct there is a high likelihood that the broker will continue to engage in similar behavior.
Faller has been in the securities industry for more than 23 years. Faller has been registered as a Broker with Lga Capital since 2023.
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.
