Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Philip Simone (Simone), previously associated with Axa Advisors, LLC, has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Simone recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $100,001.00 on September 13, 2021.
The customer alleges that the Registered Representative concentrated their account(s) in unsuitable, high-commission, complex and risky investments. No dates of alleged activity were disclosed in the Statement of Claim.
FINRA BrokerCheck shows a final customer complaint on November 13, 2020.
Without admitting or denying the findings, Simone consented to the sanctions and to the entry of findings that he borrowed a total of $133,000 from two of his elderly member firm customers, without notifying or receiving prior approval from the firm. The findings stated that Simone received loans totaling $43,000 from the first customer, and loans totaling $90,000 from the second customer. The customers were not immediate members of Simone’s family, and were both approximately 71 years old as of the first loans. The loans Simone received from the first customer were not documented in a writing, but the customer understood that the funds would be returned in full, with 12% interest, within one year. The loans Simone received from the second customer were documented in two promissory notes and executed by the customer and Simone. Both promissory notes provided that the loan would be repaid in full, with 15% interest, within 120 days. Simone repaid the second customer in full, plus interest, and repaid the first customer approximately $8,000. Simone also falsely stated on two compliance questionnaires that he had not borrowed funds from a client, and made a false statement to the first customer in order to obtain additional time to repay the loans. The findings also stated that Simone created and submitted falsified firm account statements and supporting documents to a third-party bank in support of his mortgage application. Simone created and submitted three false documents: an account statement for his personal firm account, which he falsified using customer information to reflect that the value of the assets was approximately $30,000 instead of $10,000; a pay stub issued by the firm, which he falsified to reflect deferred compensation due and owing to him in the amount of $95,250; and an employment verification letter that Simone executed using the name of a sales assistant who he misrepresented was a member of the firm’s human resources department.
When your financial advisor is providing advice they must adhere to the SEC’s Regulation Best Interest (Reg BI) rule and standard of care. Reg BI replaced the former “suitability” rule and created 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 standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts.
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. 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. 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.
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. 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.
Simone has been in the securities industry for more than 15 years. Simone has been registered as a Broker with Axa Advisors, LLC since 2017.
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.