Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Kimberly Carson (Carson), previously associated with Principal Securities, INC., has at least 2 disclosable events. These events include 2 regulatory events, alleging that Carson recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on July 09, 2024.
Respondent Carson failed to pay fines of $5,000 in FINRA Case #2022074541501.
FINRA BrokerCheck shows a final customer complaint on January 24, 2024.
Without admitting or denying the findings, Carson consented to the sanctions and to the entry of findings that she obtained a loan of $250,000 from her customer without notifying her member firm of the lending arrangement and without obtaining prior approval for the loan. The findings stated that Carson had a personal relationship outside of their broker/client relationship with the customer. The loan was made pursuant to a promissory note, which was signed by Carson’s husband, and which required monthly interest-only payments at a fixed 10 percent annual rate for a 10-year term. The principal sum was due at the expiration of the 10-year term. The loan amount was deposited into a joint bank account owned by Carson and her husband. Carson made monthly payments to the customer, in accordance with the terms of the promissory note, for nearly two years, until failing to make a timely payment. The following month, Carson resumed making timely payments. After the customer commenced litigation against Carson, Carson’s husband and the firm, Carson repaid the loan in full.
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. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.
There are several different aspects of the rule that brokers must comply with. One of which is the care obligations which requires brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations includes three components. First, the advisor must have an understanding of the potential risks, rewards, and costs associated with a product, investment strategy, account type, or series of transactions. 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. Finally, the advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided 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.
Carson has been in the securities industry for more than 13 years. Carson has been registered as a Broker with Principal Securities, INC. since 2020.
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.