According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Phil Donahue (Donahue), currently associated with PFS Investments INC., has at least 4 disclosable events. These events include one customer complaint, 3 regulatory events, alleging that Donahue recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on June 12, 2023.
THE KENTUCKY DEPARTMENT OF INSURANCE TERMINATED MR. DONAHUE’S NON-RESIDENT INSURANCE LICENSE BASED ON VIOLATIONS OF KRS 304.9-140(7) WHICH REQUIRES INSURANCE LICESEES TO MAINTAIN THE APPLICABLE LICENSE IN HIS OR HER HOME STATE IN ORDER TO GOLD A KENTUCKY NON-RESIDENTIAL LICENSE.
FINRA BrokerCheck shows a final customer complaint on February 10, 2023.
REPRESENTATIVE’S LICENSES AND ELIGIBILITY FOR LICENSURE AND APPOINTMENTS WAS SUSPENDED FOR A PERIOD OF THREE (3) MONTHS PURSUANT TO SECTION 626.641(1), FLORIDA STATUTES BASED ON FINRA’s August 10. 2022 ACTION TAKEN AGAINST THE REPRESENTATIVE
FINRA BrokerCheck shows a final customer complaint on August 10, 2022.
Without admitting or denying the findings, Donahue consented to the sanctions and to the entry of findings that he recommended that two customers invest an unsuitably high percentage of their account into a single energy-sector security. The findings stated that Donahue recommended that the customers invest 90 percent of their investments at his member firm into a single, non-diversified mutual fund. That recommendation was not consistent with the customers’ investment profiles because the fund in question invested substantially all of its assets in companies in the energy sector and Donahue’s recommendation therefore subjected the customers to substantial risk of loss. Four years after Donahue’s initial recommendation, the mutual fund’s value decreased by more than 50 percent. After transferring their accounts to a different broker-dealer, the customers sold their investments in the fund in question and realized a substantial loss.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $131,884.20 on November 30, 2020.
THE STATEMENT OF CLAIM ALLEGES BREACH OF FIDUCIARY DUTY, GROSS NEGLIGENCE, AND OTHER VIOLATIONS IN CONNECTION WITH MY RECOMMENDATION TO TRANSFER CERTAIN MUTUAL FUND SHARES IN 2016.
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. 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.
The care obligation also requires the broker to address the client’s specific needs through obtaining specific investment profile information on the client. The associated person typically will ask the customer for information such as the investor’s risk tolerance or ability to withstand account value declines or increases; experience with investments available; investment objectives and goals; investment time horizon; liquidity needs; assets such as investment accounts held at other financial institutions; tax information; their age and retirement plans; and other information that a customer may want to provide to the advisor to help them to properly address the services needed. The Reg BI rule applies a fiduciary principles and requires an associated person to act in the retail investor’s “best interests” while barring the broker from placing their own financial interests and compensation incentives ahead of the investor’s best interest. There are different sub-parts of the Reg BI rule that financial professionals must comply with when providing advice. Among those is the duty of care obligation that mandates associated persons to evaluate investment options, review and be knowledgeable the risks and rewards of the investment or service, compare alternative investment products, and ensure that the overall investment strategy aligns with the client’s goals and is in their best interests.
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 financial advisor must use their knowledge of both their reasonable diligence into investment options as well as their knowledge of the investor’s client specific needs to consider reasonably available investment options. Those investment options must allow the broker to determine that there is a reasonable basis that the recommendation is in the retail investor’s best interest. Finally, an advisor must also analyze the specific account features offered and determine whether their client can benefit from them in order to meet their care obligations. While securities and investments come with costs that must be considered, the type of securities account also has changes the cost equation for the investor and can change the retail customers’ future investment returns. The associated person must consider the different types of securities accounts for their client and determine whether or not the cost or features are reasonably needed for the client or if the customer’s current account costs and features are superior to solutions available to the advisor. In any event, the type of account and services recommended must be in the investor’s best interest.
Donahue entered the securities industry in 1983. Donahue has been registered as a Broker with PFS Investments INC. since 1983.
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.