According to BrokerCheck records financial advisor Roshan Loungani (Loungani), currently employed by Arete Wealth Management, LLC (Arete Wealth) has been subject to at least five customer complaints and one regulatory action. According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Loungani’s customer complaints allege that Loungani made unsuitable recommendations in a variety of investments including options trading.
In June 2016 FINRA sanctioned Loungani and determined that Loungani consented to the sanctions and to the entry of findings that he recommended unsuitable investments for customers to invest $658,000 in limited partnership interests in two hedge funds that Loungani created and managed, which employed a high-risk trading strategy and use of aggressive options trading. FINRA found that these investments were not suitable for the customers based on their investment objectives and risk tolerances and resulted in an unsuitable concentration of the customers’ net worth in these investments.
In August 2018 a customer complained that Loungani violated the securities laws by engaging in unsuitable investments. The customer alleges $26,488 in damages and the claim is currently pending.
Brokers are required under the securities laws to treat their clients fairly. This obligation includes the duties to disclose material risks of the investments they recommend and to present products, particularly complex or confusing products, in a fair and balanced manner that allows the client to evaluate the recommendation. Another important obligation advisors have is to make only suitable recommendations for investments to the client. There are many investments that are not appropriate for the majority of investors or for certain investors given their risk tolerance, age, and other factors. Advisors should not present these investment options to clients. There are two screens that advisors must employ to determine whether an investment is suitable for a client. First, there must be a reasonable basis for the recommendation – meaning that the product has been investigated and due diligence conducted into the investment’s features, benefits, risks, and other relevant factors. The advisor must conclude that the investment is suitable for at least some investors and some securities may be suitable for no one. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases. In addition, research has show a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints. These lower quality firms may average brokers with five times as many complaints as the industry average.
Loungani entered the securities industry in 2000. Since January 2008 Loungani has been registered with Arete Wealth out of the firm’s Vienna, Virginia office location.
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.