Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that David John Melilli (Melilli), formerly employed by Capstone Financial LLC, has been subject to at least three customer complaints during his career. According to records kept by the Financial Industry Regulatory Authority (FINRA), Melilli’s customer complaints allege that Melilli engaged in unauthorized trading and recommended unsuitable investments.
In April 2021, FINRA made a preliminary determination to recommend that disciplinary action be brought against Melilli for various allegations. These include unsuitable and excessive trading in customer accounts, using discretion without written authorization in customer accounts, unauthorized trading in the account of a deceased customer, forging customer signatures on account documents and causing member firm to maintain inaccurate books and records, sending written communication entitled “Writing Covered Calls” to customer without obtaining prior approval from member firm and use of a misleading communication with a customer, using text messages to conduct securities related business in violation of applicable firm policies and causing firms to fail to maintain accurate books and records, and opening and maintaining multiple outside securities accounts without the prior consent of member firms. Investigation is pending concerning these allegations.
In September 2020, a customer complained that Melilli violated the securities laws by alleging that Melilli engaged in authorized trading. The claim alleges $5,000 in damages and is currently pending.
Also in September 2020, a customer complained that Melilli violated the securities laws by alleging that Melilli made risky investments that were not fully understood and that management fees may not have been assessed correctly. The claim was denied.
In February 2020, a customer complained that Melilli violated the securities laws by alleging that Melilli engaged in authorized trading, unsuitable investment practices, and churning. The claim alleges $140,000 in damages and is currently pending.
In January 2020, Melilli was discharged from his prior employer, Cambridge Investment Research Inc. The reason for termination was that Melilli placed discretionary trades without authority.
Brokers are required under the securities laws to treat their clients fairly. This obligation includes the duties to disclose material risks of the investments they recommend and to present products, particularly complex or confusing products, in a fair and balanced manner that allows the client to evaluate the recommendation. Another important obligation advisors have is to make only suitable recommendations for investments to the client. There are many investments that are not appropriate for most investors or for certain investors given their risk tolerance, age, and other factors. Advisors should not present these investment options to clients. There are two screens that advisors must employ to determine whether an investment is suitable for a client. First, there must be a reasonable basis for the recommendation – meaning that the product has been investigated and due diligence conducted into the investment’s features, benefits, risks, and other relevant factors. The advisor must conclude that the investment is suitable for at least some investors and some securities may be suitable for no one. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short-term goals, age, disability, income needs, or any other relevant factor.
Melilli entered the securities industry in 2006. From December 2006 through April 2007, Melilli was registered with Lincoln Financial Advisors Corporation. From June 2007 through December 2007 Melilli was registered with Morgan Stanely & Co. Incorporated. From March 2008 through December 2008, Melilli was registered with Janney Montgomery Scott LLC. From January 2010 through August 2019, Melilli was registered with Sagepoint Financial, Incorporated. Additionally, in July 2018, Melilli was registered with LPL Financial LLC. From September 2019 through February 2020, Melilli was registered with Cambridge Investment Research, Incorporated. Melilli is currently associated with Capstone Financial out of their Moorestown, New Jersey office location.
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.