Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Arthur Hoffman (Hoffman), previously associated with Ameriprise Financial Services, LLC, has at least one disclosable event. These events include one regulatory event, alleging that Hoffman recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on September 15, 2022.
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) of the Securities Exchange Act of 1934 (‘Exchange Act’) and Section 203(f) of the Investment Advisers Act of 1940 (‘Advisers Act’) against Arthur S. Hoffman (‘Respondent’). On August 8, 2022, a final judgment was entered by consent against Hoffman, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 (‘Securities Act’), Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act, in the civil action entitled Securities and Exchange Commission v. Arthur S. Hoffman, Civil Action No. 2:22-cv-00296 in the United States District Court for the District of Arizona. The Commission’s complaint alleged that, while an associated person of a registered investment adviser and registered broker-dealer firm, Hoffman defrauded eight clients by failing to disclose compensation he received from a private issuer while recommending the issuer’s securities to those clients, and, in at least one instance, misrepresenting the extent of the compensation he received from the issuer. The complaint alleged that Hoffman also took steps to conceal his misconduct from his associated firm’s supervision, and to mislead his clients about that firm’s role in supervising his recommendations. The complaint further alleged that Hoffman’s deception led clients to invest a total of more than $650,000 with the private issuer, and that clients lost over $610,000 as a result of those investments.
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. 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. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.
There are several different aspects of the rule that brokers must comply with. One of which is the care obligations which requires brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations includes 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 advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided 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.
Hoffman has been in the securities industry for more than 21 years. Hoffman has been registered as a Broker with Ameriprise Financial Services, LLC since 2016.
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.