Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Kabir Gangahar (Gangahar), previously associated with Kms Financial Services, Inc., has at least 2 disclosable events. These events include 2 tax liens, alleging that Gangahar recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on October 16, 2024.
Gemini and Gangahar had willfully violated Section 202 of the Investment Advisers Act of 1940 by engaging in a cherry picking scheme. SEC Order 9-30-2024
FINRA BrokerCheck shows a final customer complaint on September 30, 2024.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Gemini Capital Partners LLC (‘Gemini’) and Kabir Gangahar (‘Gangahar’) (collectively, ‘Respondents’). In anticipation of the institution of these proceedings, Respondents have submitted an Offer of Settlement which the Commission has determined to accept. The commission finds that from January 2020 through December 2022 (the ‘Relevant Period’), Gemini, a stateregistered investment adviser, and Gangahar, the majority owner and control person of Gemini, disproportionately allocated certain profitable trades to themselves in a way that disadvantaged their advisory clients. While the clients achieved cumulative gains on relevant trades allocated to their accounts, and Gemini and Gangahar did not disproportionately allocate losing trades to their clients, disproportionate allocations of certain profitable trades breached Gemini’s and Gangahar’s fiduciary duties and failed to comply with Gemini’s disclosed policy of allocating trades to participating advisory clients on a pro rata basis. As a result, Gemini and Gangahar willfully violated Section 206(2) of the Advisers Act.
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 Reg BI standard of care applies to registered representatives making recommendations to customers in the purchase, sale, or exchange of securities or the implementation of investment strategies involving securities and non-securities. The rule also applies to the handling of opening accounts such as account transfers and types of accounts being recommended to be opened. 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 advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided is in the retail investor’s best interest.
Brokerage firms and advisors must also understand the features and limitations of various account types as part of meeting Reg BI’s care obligations. Firms typically offer a variety of account options and services with different trading costs, services, such as account and activity monitoring. An advisor’s recommendation as to what type of securities account to open can alter the customers’ overall costs and investment returns. The advisor must determine that the client can benefit from the type of account being recommended to be opened and in the investor’s best interest taking into account the costs, benefits, and needs of the client.
Gangahar has been in the securities industry for more than 18 years. Gangahar has been registered as a Broker with Kms Financial Services, Inc. since 2018.
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.
