Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Dana Davis (Davis), previously associated with Alexander Capital, L.p., has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Davis recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on March 31, 2023.
Without admitting or denying the findings, Davis consented to the sanctions and to the entry of findings that he recommended unsuitable use of margin in customer accounts. The findings stated that Davis recommended the extensive use of margin in his customers’ accounts to leverage additional buying power while charging commissions on both buy and sell transactions. Davis’ recommendations to engage in unsuitable trading on margin exposed his customers to significant risk, increased costs, and sizeable losses in their accounts. Davis lacked a reasonable basis to believe that using margin in this way was suitable given the customers’ investment objectives, financial situation, and needs. In total, Davis’ customers realized trading losses of $108,016.82 and paid $150,067.15 in costs, commissions, and margin interest for trades executed on margin in their accounts.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $50,000.00 on August 18, 2021.
Claimant alleges: overconcentration, misrepresentation, omissions, unsuitable recommendations
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 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. 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.
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 core obligations that brokers must comply with. There is the duty of care obligation requiring financial advisors to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest among other duties. In order to do that the broker must evaluate the potential risks, rewards, and costs associated with a product, account type, or series of transactions being recommended.
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. 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.
Davis has been in the securities industry for more than 33 years. Davis has been registered as a Broker with Alexander Capital, L.p. since 2022.
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.