Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Dain Stokes (Stokes), previously associated with LPL Financial LLC, has at least 3 disclosable events. These events include 2 customer complaints, one regulatory event, alleging that Stokes recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a settled customer complaint on February 01, 2021.
Customer alleges that between February 2015 and September 2019, representative recommended unsuitable variable annuities and also defrauded customer into investing in promissory notes.
FINRA BrokerCheck shows a final customer complaint on June 25, 2020.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(b) of the Securities Exchange Act of 1934 (‘Exchange Act’) and Section 203(f) of the Investment Advisers Act of 1940 (‘Advisers Act’) against Dain F. Stokes (‘Stokes’ or ‘Respondent’).\<char_lb_r>\, \<char_lb_r>\, The Commission finds that from June 2009 to August 2019, Stokes worked as an investment adviser and registered representative in the Bedford, New Hampshire office of LPL Financial, LLC (‘LPL’), a dually-registered investment adviser and broker-dealer headquartered in Boston, Massachusetts. From May 2000 through June 2009, Stokes was a registered representative associated with another dually-registered investment adviser and broker-dealer. Between March 1998 and May 2000, Stokes was associated with two other dually-registered investment advisers and broker-dealers.\<char_lb_r>\, \<char_lb_r>\, On November 14, 2019, the New Hampshire Bureau of Securities Regulation issued an Amended Order of Summary Suspension, Order to Cease and Desist (the ‘New Hampshire Order’) in In the Matter of Dain F. Stokes, No. I-201900029. The New Hampshire Order, which became final by operation of law, immediately and summarily suspended Stokes’s ‘investment adviser agent and broker-dealer representative’ license and permanently barred him from any securities licensure in New Hampshire. The New Hampshire Order also required Stokes to cease and desist from further violations of New Hampshire securities laws, pay restitution of $576,000, pay an administrative fine of $20,000, and pay the cost of the investigation.\<char_lb_r>\, \<char_lb_r>\, The New Hampshire Bureau of Securities Regulation’s Petition for Relief (‘Petition’) in the above-referenced action alleged, among other things, that between 2018 and 2019, Stokes solicited $576,000 in investor funds from three investors that were his long-term LPL clients, falsely stating to these investors that their funds would be invested in a lucrative investment project in Africa that earned a 20% return in 90 days. The Petition alleged that Stokes did not use the money for any investment, and instead misappropriated portions of the funds for personal expenses while sending the rest to various people and entities all over the United States.
FINRA BrokerCheck shows a settled customer complaint on March 18, 2020.
Customer misappropriation of funds.
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. 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.
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 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. 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. 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. 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.
Stokes has been in the securities industry for more than 21 years. Stokes has been registered as a Broker with LPL Financial LLC 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.