Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Justin Pagel (Pagel), previously associated with Feltl & Company, has at least one disclosable event. These events include one tax lien, alleging that Pagel recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on January 17, 2025.
Without admitting or denying the findings, Pagel consented to the sanction and to the entry of findings that he made recommendations to three customers that that were not suitable, and he willfully violated Rule 15l-1(a)(1) of the Exchange Act (Reg BI) by making recommendations to another customer that was not in his best interest. The findings stated that when opening their accounts with Pagel, each of the three customers instructed him to invest the money conservatively and informed him that they planned to use the money for anticipated upcoming expenses, such as a home down payment or a child’s college tuition. At Pagel’s recommendation, the three customers invested all, or a significant portion of, their assets at Pagel’s member firm in low-priced stocks or other speculative securities. The trading activity in these accounts was inconsistent with the customers’ investment profiles and resulted in losses and customer complaints from all three customers. In connection with two of the complaints, Pagel and the firm made payments totaling $26,000. In addition, the other customer informed Pagel that he wanted to make only safe investments. However, Pagel recommended that the other customer purchase positions in low-priced stocks and other speculative securities inconsistent with his investment profile. The findings also stated that Pagel exercised discretion when effecting trades in customer accounts without obtaining written authorization from the customers and from his firm to treat the accounts as discretionary. The findings also included that Pagel mismarked solicited trades as unsolicited in customer accounts, including the accounts in which he exercised discretion without authorization.
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.
To protect investors, it should be required to mandate broker disclosures. 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.
Pagel has been in the securities industry for more than 28 years. Pagel has been registered as a Broker with Feltl & Company since 2011.
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.
