Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Kevin Herne (Herne), previously associated with LPL Financial LLC, has at least one disclosable event. These events include one tax lien, alleging that Herne recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a pending customer complaint on January 30, 2025.
Herne was named a respondent in a FINRA complaint alleging that he willfully failed to disclose on his Form U4 that he had been charged with a felony. The complaint alleges that the State of Texas issued a criminal complaint charging Herne with Continuous Violence Against the Family, a felony offense under the Texas Penal Code. Herne was aware that he was charged with this felony when he appeared in court and signed a bail bond stating that he had been charged with a felony offense. However, Herne failed to amend his Form U4 to disclose the felony charge within 30 days of becoming aware it. In addition, Herne failed to disclose the felony charge to his member firm for more than two years. Ultimately, FINRA advised the firm of the felony charge against Herne, and the firm filed a Form U4 amendment on Herne’s behalf to disclose the felony charge. The felony charge against Herne was a material fact that a reasonable employer, customer, prospective customer, or regulator would have viewed as relevant to Herne’s business and employment.
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. Every recommendation’s cost and investor details are essential parts 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.
To protect investors, it should be required to mandate broker disclosures. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters. FINRA has recognized that recent research shows past regulatory and customer complaint issues can indicate future problems for brokers. 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.
Herne has been in the securities industry for more than 15 years. Herne has been registered as a Broker with LPL Financial 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.
