Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Jonathan Best (Best), previously associated with Raymond James Financial Services, Inc., has at least one disclosable event. These events include one tax lien, alleging that Best recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a pending customer complaint on December 13, 2024.
Best was named a respondent in a FINRA complaint alleging that Best effected trades in a senior customer’s account without first obtaining the customer’s required authorization or consent, or the authorization or consent of someone authorized to act on the customer’s behalf. The complaint alleges that the customer was the only person authorized to transact in the account, and it was non-discretionary. Further, Best’s member firm prohibited discretionary trading in retail brokerage accounts, including the customer’s account. On February 15, 2013, when the customer executed estate planning documents, one of the documents provided that Best and the customer’s accountant would be granted co-power of attorney in the event that two physicians provided written statements, under oath, that they deemed the customer to be incapacitated. The firm prohibited representatives from serving as power of attorney for customers unless, in exceptional cases, approval was granted by the representative’s supervisor and the firm’s central compliance department. Beginning in 2014, Best became aware that the customer was exhibiting signs of diminished capacity. In or around June 2015, Best informed the customer’s relative, who had been appointed medical power of attorney for the customer, that he could not effect any transactions in the customer’s account due to her diminished capacity. In addition, Best requested that the relative obtain a second physician’s letter deeming the customer incapacitated in order to trigger his appointment as the customer’s co-power of attorney pursuant to the estate planning documents that she had executed. The relative did not obtain a second physician’s letter at any point in 2015 or 2016. Best subsequently submitted an OBA request to his firm for approval to serve as the customer’s future co-power of attorney and provided his supervisor with a copy of the document that the customer had executed that appointed Best as future co-power of attorney under certain conditions. Best also informed his supervisor of the customer had been diagnosed with early-stage Alzheimer’s disease. However, Best failed to inform his supervisor that the customer was unable to care for herself, was living in a memory care facility, and was unable to discuss and understand investments. Best also never alerted his supervisor to the growing cash position in the customer’s account as a result of the customer’s inability to authorize transactions. Best’s supervisor rejected his OBA request and further instructed him to formally recuse himself from the appointment and provide documentation of the recusal. Best never provided such documentation. Between December 19, 2017 and December 3, 2019, Best effected the purchase of laddered brokered certificates of deposit (CDs) in the customer’s account with the cash proceeds from matured and called bonds. The principal value of the unauthorized trades in the customer’s account totaled $14,199,847. Best earned $10,760.88 in compensation by placing these trades. The complaint also alleges that Best submitted two false compliance attestations to his firm. Best falsely attested ‘no’ to the firm’s question asking if he had ‘any senior investors or other vulnerable adults for which [he was] concerned with their capacity to make sound decisions.’ Best’s attestations were false because he knew that the customer could not understand or authorize trades for her account due to her diminished capacity.
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. So, a brokerage firm should not depend solely on information from the issuer regarding a company, but must perform its own thorough investigation.
Another protective measure is to require broker discloses. Brokers are required by FINRA to reveal the events such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters on their public BrokerCheck reports. FINRA has recognized that recent studies indicate future regulatory and customer complaint issues can be predicted for brokers who have experienced them before. 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.
Best has been in the securities industry for more than 32 years. Best has been registered as a Broker with Raymond James Financial Services, Inc. since 2001.
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.
