Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Ronald Hannes (Hannes), previously associated with Woodbury Financial Services, Inc., has at least one disclosable event. These events include one tax lien, alleging that Hannes recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on September 09, 2024.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Ronald Walter Hannes (Respondent). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement, which the Commission has determined to accept. The commission finds that on September 16, 2020, the State of Washington Department of Financial Institutions Securities Division entered a Consent Order (‘Washington Order’) in an administrative action entitled In the Matter of Determining Whether there has been a violation of the Securities Act of Washington by: Ronald Walter Hannes; Hannes Financial Services, Inc., Order No. S-20-2873-20-CO01. The Washington Order incorporated by reference the Findings of Fact and Conclusions of Law in the Statement of Charges and Notice of Intent to Enter Order to Cease and Desist, Deny Future Registrations, Impose Fines, and Charge Costs, Order Number S-20-2873-20-SC01 (‘Statement of Charges’). The Statement of Charges found that, among other things, Hannes violated RCW 21.20.010, the anti-fraud section of the Securities Act of Washington, and engaged in dishonest and unethical business practices in violation of WAC 460-22B-090. Without admitting or denying the Findings of Fact and Conclusions of Law in the Statement of Charges, Hannes consented to the entry of the Washington Order, which ordered, inter alia, Hannes to cease and desist from violating RCW 21.20.010, and further ordered that any application for registration as an investment adviser, investment adviser representative, broker-dealer, or securities salesperson by Hannes shall be denied. The Statement of Charges incorporated by reference into the Washington Order found that ‘[f]rom approximately 2003 to 2019, Hannes engaged in an extensive, long-term fraud against his . . . Clients by convincing them to write checks to [Hannes Financial Services, Inc.] for off-the-books investments, then using the money for unknown purposes.’ The Statement of Charges also found that Hannes ‘defrauded at least nineteen clients, with total losses exceeding $2.9 million’ and appears to have falsified checks during an internal investigation conducted by the dually-registered broker-dealer and investment adviser with which Hannes was associated at the time. On July 18, 2023, Hannes pled guilty to one count of ‘Investment Advisor Fraud’ in violation of Title 15 United States Code, Sections 80b-6, 80b-17 before the United States District Court for the Eastern District of Washington, in United States v. Ronald Walter Hannes, Case No. 2:22-CR-0085-TOR. On February 22, 2024, a judgment in the criminal case was entered against Hannes. He was sentenced to probation for a term of five years and ordered to pay $3,187,545.15 in restitution and a $100 assessment. In his signed Plea Agreement, Hannes stipulated and agreed that the facts set forth in the ‘Factual Basis and Statement of Facts’ are accurate. These facts include, inter alia, that Hannes persuaded victims ‘to invest in separate ‘high rate, tax-free’ bond investments,’ and convinced victims to write checks to Hannes Financial Services, Inc., and other entities at Hannes’s request, to invest in the bonds, but ‘there were no bonds or securities attached to these investments.’
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. Reg BI applies when brokers recommend a retail investor engage in securities transaction or an investment strategy involving one or more securities. Reg BI also applies to financial advice concerning the transfer of funds and opening of accounts. 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. The associated person must then apply both their reasonable diligence into various investment options as well as the information gathered as to the investor’s specific needs when considering the investment recommendation. The broker must explore various alternative investment options available to address these needs and determine that there is a reasonable basis to believe that the recommendation or service being recommended is in the retail investor’s best interest.
In addition to specific investments being recommended, under Reg BI, a broker must also understand the type of account that their client would need in order to meet their care obligations. The SEC has stated that the type of securities account an investor has can greatly affect a customers’ costs and overall investment returns. Further, different account types can offer and support different features, products, securities, or services, and account type would not be appropriately applied in a one size fits all manner.
Hannes has been in the securities industry for more than 32 years. Hannes has been registered as a Broker with Woodbury Financial Services, Inc. since 1994.
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.
