According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Manuel Melendez (Melendez), previously associated with Herbert J. Sims & Co, INC., has at least one disclosable event. These events include one regulatory event, alleging that Melendez recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on April 15, 2025.
Without admitting or denying the findings, Melendez consented to the sanction and to the entry of findings that he borrowed $738,000 from two customers of his member firm through four separate loans without providing prior written notice to or obtaining written approval from the firm. The findings stated that in October 2018 Melendez borrowed $300,000 from the first customer, a senior, by executing a written loan agreement that stated that the loan was for capital to invest in a billboard advertising business. The loan agreement required Melendez to repay the principal plus $130,000 in interest within five years. To date, Melendez has not paid the senior customer any interest or principal. In addition, between December 2019 and February 2021, Melendez borrowed $438,000 from another of his customers through three separate loans. Melendez and the second customer executed a written loan agreement for the first loan only. That agreement stated that the loan was for capital to complete the acquisition of an ice cream business and required Melendez to repay the loan within five years. Melendez and the customer orally agreed that the other two loans, along with the unused funds from the first loan, would be used to purchase a sign business. To date, Melendez has not repaid any of the loans from second customer. Furthermore, Melendez falsely attested on compliance questionnaires that he had not received a loan from any firm client. Melendez’ firm settled claims by the two customers arising from the conduct described in this AWC. The findings also stated that Melendez improperly used customer funds. Melendez used thousands of dollars from the senior customer’s loan to pay personal expenses, such as cruises, airline tickets, and retail purchases. The senior customer had not authorized Melendez to use her money for any purpose other than investing in a billboard advertising business. In addition, the second customer did not authorize Melendez to use her money for any purpose other than to purchase an ice cream business and sign business. Nonetheless, Melendez used thousands of dollars from the second customer’s loans to pay expenses related to his separate billboard advertising business. The findings also included that Melendez failed to timely disclose OBAs. Beginning in May 2019, Melendez took steps to purchase an ice cream business, from which he had a reasonable expectation of earning compensation. Subsequently, Melendez became an officer of a newly formed holding company, which he intended to use as a vehicle to purchase the ice cream business. Melendez never disclosed to the firm that he was an officer of this holding company, and he did not notify or seek approval from it before engaging in OBAs related to the ice cream business. Eventually, Melendez disclosed the ice cream business to the firm, but his disclosure falsely stated that no firm customer was involved in the business, despite having borrowed money from the second customer to purchase the business. Beginning in October 2020, Melendez took steps to purchase a sign company, from which he had a reasonable expectation of earning compensation. Melendez negotiated deal terms, submitted purchase agreements, and entered loan agreements, including with the second customer, to finance the purchase. Melendez did not notify or seek approval from the firm before engaging in OBAs related to the sign company. Eventually, Melendez disclosed the business to the firm, but his disclosure falsely stated that no firm customer was involved in the business, despite having borrowed money from the second customer to purchase the business.
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 standard applies when a registered representative is providing investment advice through making recommendations customers and covers securities transaction, investment strategies, and recommendations concerning advice on opening of an account or 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. Finally, the advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided is in the retail 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.
Melendez has been in the securities industry for more than 19 years. Melendez has been registered as a Broker with Herbert J. Sims & Co, INC. since 2023.
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.