Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Lester Burroughs (Burroughs), previously associated with Lincoln Investment, has at least 4 disclosable events. These events include 3 customer complaints, one regulatory event, alleging that Burroughs recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a settled customer complaint on October 19, 2021.
Statement of Claim alleges that this individual recommended a series of unsuitable annuity transactions to Claimants, misrepresented the characteristics of the annuities to Claimants, and added unnecessary rider benefits to the annuities. Statement of Claim also alleges that the firm negligently hired, retained and supervised this individual.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $500,000.00 on July 22, 2020.
Claimants allege that this individual, during his tenure with 3 different firms, sold them inappropriate and unnecessary life insurance, engaged in improper annuity transactions and sold claimant fraudulent ‘purported safe fixed-income investments.’ Statement of Claim also alleges respondent’s negligent supervision of this individual.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $150,000.00 on April 28, 2020.
Clients allege unsuitable investments recommended by advisor in 2006 & 2007 prior to advisor becoming affiliated with the firm in 2012, which caused clients to lose significant income. Clients also allege that the firm negligently hired, retained and supervised advisor.
FINRA BrokerCheck shows a final customer complaint on January 14, 2020.
SEC Admin Release 34-87967; IA Release 5432, January 14, 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)(6) of the Securities Exchange Act of 1934 (‘Exchange Act’) and Section 203(f) of the Investment Advisers Act of 1940 (‘Advisers Act’) against Lester W. Burroughs. On December 4, 2019, Burroughs pleaded guilty to one count of wire fraud in violation of Title 18, United States Code, Section 1343 before the United States District Court for the District of Connecticut, in United States v. Lester Burroughs,Crim. No. 3:19-cr-00292. The information to which Burroughs pled guilty alleged, inter alia, that Burroughs executed a scheme to defraud his investment clients that resulted in him misappropriating approximately $575,000 from three investors. Burroughs made false or misleading statements to investors, telling them their assets would be used to purchase legitimate investments on their behalf, when in fact Burroughs used his clients’ money for his own purposes and to pay returns to other clients.
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.
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. Reg BI was meant to enhance the duties that registered representatives have to their clients by applying fiduciary principles to transactions and investment strategies by prohibiting brokers from placing their own financial interests ahead of the best interests of their client – the investor. 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.
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. Finally, the financial advisor must use their knowledge of both their reasonable diligence into investment options as well as their knowledge of the investor’s client specific needs to consider reasonably available investment options. Those investment options must allow the broker to determine that there is a reasonable basis that the recommendation is in the retail investor’s best interest. Finally, an advisor must also analyze the specific account features offered and determine whether their client can benefit from them in order to meet their care obligations. While securities and investments come with costs that must be considered, the type of securities account also has changes the cost equation for the investor and can change the retail customers’ future investment returns. The associated person must consider the different types of securities accounts for their client and determine whether or not the cost or features are reasonably needed for the client or if the customer’s current account costs and features are superior to solutions available to the advisor. In any event, the type of account and services recommended must be in the investor’s best interest.
Burroughs has been in the securities industry for more than 33 years. Burroughs has been registered as a Broker with Lincoln Investment since 2012.
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.