Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker John Lowry (Lowry), currently associated with Spartan Capital Securities, LLC, has at least 3 disclosable events. These events include 2 customer complaints, one tax lien, alleging that Lowry recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a pending customer complaint on November 08, 2024.
Lowry was named a respondent in a FINRA complaint alleging that while acting as his member firm’s CEO, he failed to timely provide information and documents requested by FINRA pursuant to FINRA Rule 8210 until after FINRA issued two follow-up requests and initiated two expedited proceedings to compel compliance. The complaint alleges that the firm’s Chief Administrative Officer (CAO) failed to timely respond to five requests made pursuant to Rule 8210 until after FINRA issued six follow-up requests and initiated five expedited proceedings to compel compliance. FINRA initially began investigating the firm’s sales of membership interests in unregistered private funds, an OBA of Lowry and the CAO. FINRA’s requests sought information and documents about the private funds and later sought information and documents relating to the firm’s net capital calculations. FINRA was required to exert a significant amount of regulatory pressure to obtain the information and documents that were important to its ongoing investigation into the firm’s and its registered representatives’ dealings with the private funds. The complaint also alleges that Lowry failed to maintain a reasonable system for the firm’s compliance with Rule 8210 and failed to supervise the CAO’s responses to Rule 8210 requests. After delegating his responsibility for supervising the firm’s compliance with Rule 8210 and his responsibility for some of FINRA’s requests to the CAO, Lowry did not review his delegations of authority to ensure that they were being properly exercised. Lowry failed to intervene and take corrective measures as necessary after learning of red flags suggesting that the CAO was not carrying out her delegated authorities.
FINRA BrokerCheck shows a pending customer complaint with a damage request of $375,000.00 on July 16, 2024.
Failure to Supervise
FINRA BrokerCheck shows a pending customer complaint with a damage request of $1,590,434.34 on April 04, 2024.
Unsuitable recommendations and failure to supervise.
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. The cost of the recommendation and information about the investor are always 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 to mandate broker discloses. Brokers are required to reveal important events, such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters, publicly on their BrokerCheck reports. 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.
Lowry entered the securities industry in 2001. Lowry has been registered as a Broker with Spartan Capital Securities, LLC since 2008.
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.
