Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Lilia Nia (Nia), previously associated with Purshe Kaplan Sterling Investments, has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Nia recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on August 02, 2023.
Without admitting or denying the findings, Nia consented to the sanctions and to the entry of findings that she effected unauthorized transactions in a community bank account, which was her member firm customer, without obtaining instructions from any person authorized to conduct trading for the bank. The findings stated that Nia accepted orders for the bank’s trading from a firm registered representative who was not authorized to place orders for the bank and permitted him to place orders for the bank. As an advisory board member for the bank, the other representative was not authorized to accept or place securities orders for the bank’s accounts due to the conflict of interest posed by his affiliation with the bank and the firm. The trading effected by Nia, based upon instructions from the other representative, caused the bank to take excessive risk. The trading for the bank generated approximately $1 million in commissions for Nia, more than $370,000 of which she transmitted to the other representative through a series of separate business and financial transactions. Because the firm lacked its own fixed-income trading desk, it was frequently required to use a ‘broker’s broker’ to acquire fixed income securities for the bank, which resulted in it paying approximately $1.25 million in markups to the broker’s broker, in addition to commissions to the firm. As a result of this trading, the bank also spent more than $600,000 to remediate the risk of its investment portfolio.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $12,000,000.00 on August 16, 2021.
Alleges breach of fiduciary duty, fraud and unsuitable transactions.
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. 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 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.
Another aspect of the care obligation is focusing on the client’s specific needs which brokers must reasonably understand through obtaining information for the client’s investment profile. In completing a customer’s investment profile the advisor should include information such as the investor’s investment time horizon; liquidity needs; risk tolerance; experience with various investment vehicles; investment objectives and financial goals; assets and debts including outside investment accounts; marital status; tax information; age; and other relevant information that may be individual to the investor that the advisor would need to know to properly render advice or provide services. The Reg BI rule applies a fiduciary principles and requires an associated person to act in the retail investor’s “best interests” while barring the broker from placing their own financial interests and compensation incentives ahead of the investor’s best interest. There are several different aspects of the rule that brokers must comply with. One of which is the care obligations which require brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations include 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 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. 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.
Nia has been in the securities industry for more than 8 years. Nia has been registered as a Broker with Purshe Kaplan Sterling Investments since 2013.
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.