Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Fabio La rosa (La rosa), currently associated with Morgan Stanley, has at least one disclosable event. These events include one tax lien, alleging that La rosa recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on January 17, 2025.
Without admitting or denying the findings, La Rosa consented to the sanctions and to the entry of findings that he made unauthorized transactions by processing transfers of funds totaling $90,700 from the trust accounts established for two customers, a retired married couple, to their joint brokerage account upon instructions given to him by one of the customers, who was not authorized to direct transactions in the trust accounts. The findings stated that on the firm’s verbal authorization forms completed for these transfers, La Rosa inaccurately represented that he had spoken with the trustee of the trusts-i.e., the authorized individual for the trust accounts-when he had actually communicated with one of the customers. La Rosa did not earn any compensation for the transfers. The firm learned of the transfers after the trustee complained and it compensated the trusts for certain costs and expenses associated with the transfers.
Under the securities laws brokers are obligated to act in their clients’ best interests and provide only suitable recommendations for investments to the client. In addition, the SEC has promulgated ‘Regulation Best Interest (Reg BI)‘ which according to the SEC enhanced the broker-dealer standard of conduct beyond existing suitability obligations and requires broker-dealers to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities. Regulation Best Interest and the fiduciary standard for investment advisers are drawn from key fiduciary principles that include an obligation to act in the retail investor’s best interest and not to place their own interests ahead of the investor’s interest.
Brokers have an obligation to first obtain and evaluate sufficient information about a retail investor to form a reasonable basis to believe the account recommendations are in the retail investor’s best interest. Recommendations cannot be based on materially inaccurate or incomplete information. Every recommendation’s cost and investor details are essential parts of material information. Types of costs that must be considered including account fees, commissions and transaction costs, tax considerations, as well as indirect costs.
In addition to obligation to understand the customer the broker must also investigate the product being sold. FINRA firms have an obligation to conduct a reasonable investigation of the issuer and the securities they recommend in offerings. A brokerage firm has a special relationship with a customer from the fact that in recommending the security, the broker represents to the customer that a reasonable investigation has been made. So, a brokerage firm should not depend solely on the issuer for data about a company instead of performing its own thorough review.
Another protective measure is to require broker discloses. FINRA requires the broker to disclosure events such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters on their public BrokerCheck reports. FINRA has recognized that recent research shows brokers with a past record of regulatory or customer complaint issues are more likely to have such problems again in the future. FINRA’s Office of the Chief Economist (OCE) published a study showing the predictability of disciplinary and disclosure events based on past similar events. The OCE study showed that past disclosure events, including regulatory actions, customer arbitrations and litigations of brokers, have significant power to predict future investor harm. The data shows that where a member firm on-boards brokers with a significant history of misconduct there is a high likelihood that the broker will continue to engage in similar behavior.
La rosa entered the securities industry in 2007. La rosa has been registered as a Broker with Morgan Stanley 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.