Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Richard Diamond (Diamond), previously associated with Cambridge Investment Research, Inc., has at least one disclosable event. These events include one tax lien, alleging that Diamond recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on December 09, 2024.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant against Richard K. Diamond (“Diamond” or “Respondent”). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement which the Commission has determined to accept. The commission finds that this proceeding arises from an oil and gas offering fraud in which, between at least October 2018 and December 2021, The Heartland Group Ventures, LLC, Heartland Production and Recovery LLC, six other Heartland-affiliated entities, and four Heartland-affiliated individuals (collectively, “Heartland”), raised approximately $122 million from more than 700 investors nationwide through five fraudulent and unregistered securities offerings for which there was no applicable registration exemption (“Heartland Offerings”). Between June 2019 and December 2021 (the “relevant time period”), Diamond acted as an unregistered broker-dealer on behalf of Heartland in connection with three of its unregistered securities offerings. Diamond raised approximately $9,375,000.00 for the Heartland Offerings through the offer and sale of unregistered securities to eight individual investors, both directly and indirectly through a “feeder fund,” a company that Diamond wholly owned and controlled. Diamond, among other things, solicited investors directly and indirectly to invest in certain Heartland Offerings, provided advice to investors relating to the Heartland Offerings, assisted investors in completing investment documents, assisted investors in transferring their funds to Heartland, and received transaction-based compensation from Heartland for those sales. Diamond was not registered as a broker-dealer with the Commission or associated with a registered broker-dealer during the relevant time period. As a result of his conduct, Diamond willfully violated Sections 5(a) and 5(c) of the Securities Act and willfully violated Section 15(a)(1) of the Exchange Act.
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 always part 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. Accordingly, a brokerage firm may not rely blindly upon the issuer for information concerning a company in lieu of conducting its own reasonable investigation.
Another protective measure is to require broker discloses. Brokers are required to reveal important events, such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters, publicly on their BrokerCheck reports. FINRA has recognized that recent research shows past regulatory and customer complaint issues can indicate future problems for brokers. 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.
Diamond has been in the securities industry for more than 4 years. Diamond has been registered as a Broker with Cambridge Investment Research, Inc. since 2015.
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.