According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Barry Garapedian (Garapedian), previously associated with Morgan Stanley, has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Garapedian recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on November 28, 2022.
Without admitting or denying the findings, Garapedian consented to the sanctions and to the entry of findings that he caused his member firm to maintain inaccurate books and records by falsifying the representative code for trades in the firm’s order entry system, causing the firm’s trade confirmations to show an inaccurate representative code. The findings stated that Garapedian and other registered representatives working from the same branch office entered into an agreement through which they agreed to service certain customer accounts, including executing trades for those accounts, under a joint representative code that they shared with the estate of a retired representative. The agreement set forth what percentages of the commissions the estate of the retired representative, Garapedian, and the other representatives earned on trades placed using the joint representative code. Although the firm’s system correctly prepopulated the trades with a joint representative code Garapedian shared with the estate of the retired representative, he directed a junior registered representative to enter transactions under different joint representative codes through which he received a higher percentage of commissions than what he was entitled to receive pursuant to the agreement. Garapedian also directed the junior registered representative to enter additional trades under different joint representative codes through which he received a lower percentage of commissions than what he was entitled to receive pursuant to the agreement. Garapedian mistakenly assumed that he had permission to change the representative codes in this manner to equalize commissions earned by him and the other registered representatives across accounts serviced by the branch office, including those covered by the joint production agreement. However, Garapedian had not verified that the estate of the retired representative agreed that he could change the representative code for the transactions at issue. As a result, Garapedian’s actions caused the firm’s trade confirmations to inaccurately reflect another joint representative code instead of the joint representative code that Garapedian shared with the estate of the retired representative. Garapedian’s actions resulted in his receiving higher commissions and the retired representative’s estate receiving less commissions from the trades than what each was entitled to receive pursuant to the agreement. The firm has since paid restitution of approximately $8,000 to the estate of the retired representative, which is the approximate amount of additional commissions Garapedian received as a result of changing the representative code on the trades.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $1,414,268.49 on August 04, 2021.
Claimant alleges, inter alia, that the securities purchased in her account were unsuitable for her – 2016-2017
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 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.
Another aspect of the care obligation is focusing on the client’s specific needs which brokers must reasonably understand through obtaining information for the client’s investment profile. In completing a customer’s investment profile the advisor should include information such as the investor’s investment time horizon; liquidity needs; risk tolerance; experience with various investment vehicles; investment objectives and financial goals; assets and debts including outside investment accounts; marital status; tax information; age; and other relevant information that may be individual to the investor that the advisor would need to know to properly render advice or provide services. 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.
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. Using the foregoing information, the associated person then must consider reasonably available investment option to accomplish the investor’s goals as well as alternative investment options that may be cheaper or other important qualities. Finally, the advisor must conclude that there is a reasonable basis to believe that the recommendation being provided is in the 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.
Garapedian has been in the securities industry for more than 38 years. Garapedian has been registered as a Broker with Morgan Stanley since 2009.
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.