According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Steven Netzel (Netzel), previously associated with Madison Avenue Securities, LLC, has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Netzel recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on April 14, 2023.
Without admitting or denying the findings, Netzel consented to the sanctions and to the entry of findings that he caused his member firm’s books and records to be inaccurate by submitting altered customer documents to the firm related to purchases of alternative investments. The findings stated that, in connection with at least six customers’ alternative investment purchases, Netzel submitted Investor Profiles that he knew reflected inaccurate information. There were indications on the face of the documents that information had been whited-out and written over, such as inflating customers’ net worth and liquid net worth. By increasing customers’ net worth, their percentage holdings in alternative investments were reduced, and Netzel was able to obtain the necessary approval for alternative investment purchases. The findings also stated that Netzel made unsuitable recommendations to customers. Netzel’s recommendations resulted in the customers being overconcentrated in alternative investments that were unsuitable for them based on their net worth, investment objectives and risk tolerance.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $200,000.00 on March 24, 2023.
Unsuitable recommendations, breach of contract, breach of fiduciary duty.
In the financial industry advisors must meet the requirements of the SEC’s Regulation Best Interest (Reg BI) in providing investment advice and services. Reg BI established a ‘best interest’ standard for brokerage firms and registered representatives. 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. 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.
Next, the broker must understand the investor’s investment background and profile. A customer’s profile includes information that describes the investor’s financial situation and needs. Information here will include their outside securities accounts and investments; relevant assets and debts; tax bracket; age; liquidity needs; risk tolerance; investment time horizon; experience with investing; investment objectives; and any other relevant information that the investor may choose to disclose pertinent to their situation. The SEC has stated that Reg BI is drawn from fiduciary principles that are common to both brokers and investment advisors including an obligation to act in the investor’s best interest and prohibiting an advisor from placing their own interests ahead of the investor’s. Reg BI comes with different key obligations that associated persons must meet in dispensing advice. The care obligation requires registered representatives to carefully evaluate investment options, review the risks and rewards of the investment or service, compare similar products, and ensure that the recommended investment is appropriate for the customer and in the retail investor’s best interest.
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 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.
Netzel has been in the securities industry for more than 10 years. Netzel has been registered as a Broker with Madison Avenue Securities, LLC since 2019.
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.