The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Ronald Benevento (Benevento) (FINRA No. 20130353695) alleging that between September 2011 through April 2013 Benevento engaged in unsuitable mutual fund switching activity in three customer accounts in violation of the FINRA Rules. In addition, FINRA alleged that during this time Respondent mismarked 15 order tickets as “unsolicited” causing the books and records of his employer, American Portfolios Financial Services, Inc. (American Portfolios) to become inaccurate.
Benevento first became associated with a FINRA member in 1997. From 1997 until February 2010, Benevento was a registered representative of AXA Advisors, LLC. Thereafter, from March 2010, until March 2015, Benevento was associated with American Portfolios.
FINRA alleged that, Benevento recommended 29 mutual fund switch transactions in three customer accounts without having reasonable grounds for believing that the transactions were suitable for the those customers due to the frequency of the transactions and the costs incurred due to the switches. In these transactions, FINRA alleged that Benevento recommended that the customers sell Class A mutual fund shares within as little as two to three months after recommending the purchase of them. These purchases were made in different mutual fund families than the previous purchase.
The issue here is that Class A mutual funds have high up front costs and are typically only appropriate for investors who intend to hold the fund for long periods of time. In addition, mutual fund families often provide breakpoint discounts and allow customers to swap funds within the family of funds issued by the company without having to pay additional fees.
In addition to FINRA’s latest regulatory action, Benevento has been the subject of two customer disputes. The customer complaints allege that Benevento committed securities laws violations in a private limited partnership.
All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.
Investors who have suffered investment losses due to inappropriate investment activity may be able recover their losses through securities arbitration. The attorneys at Gana LLP are experienced in representing investors concerning securities violations. Our consultations are free of charge and the firm is only compensated if you recover.