Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Brian Brown (Brown), previously associated with X-change Financial Access, LLC, has at least one disclosable event. These events include one tax lien, alleging that Brown recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on December 23, 2024.
Brian Brown violated Cboe Rule 5.91 – Floor Broker Responsibilities in that Brown, acting as a Floor Broker on behalf of XCHG, failed to use due diligence to ensure he was executing the portion of the orders for Firm A as contra at the best price or prices available and in accordance with the Rules. Additionally, Brown executed orders over which he had discretion as to the choice of the specific SPX options series to be bought or sold; the number of contracts to be bought or sold; and whether such transaction was a buy or sell transaction. Brown also violated Cboe Rules 5.80(b) – Admission to and Conduct on the Trading Floor and 8.1 – Just and Equitable Principles of Trade by Brown in that by and through the Arrangement and/or the creation and execution of orders pursuant to this Arrangement, Brown: 1) engaged in conduct inconsistent with the maintenance of a fair and orderly market, apt to impair public confidence in the operation of the Exchange, and inconsistent with the ordinary and efficient conduct of business; 2) May have prevented in-crowd market participants the opportunity to participate in and/or participate fully in the contra sides of orders to which they had priority over Firm A and enabled Firm A to receive fills as a contra party to orders to which Firm A had no priority; and 3) circumvented ordinary standards of care related to order handling, open outcry trading, and Floor Broker duties and responsibilities as set out in Exchange Rules.
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. Material information always includes information concerning the investor as well as the cost of the recommendation. 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. So, a brokerage firm should not depend solely on information from the issuer regarding a company, but must perform its own thorough investigation.
Another protective measure for investors is to mandate broker discloses. Brokers are required to report events to FINRA, such as customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters, as shown on their BrokerCheck reports. FINRA has recognized that recent studies indicate future regulatory and customer complaint issues can be predicted for brokers who have experienced them before. 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.
Brown has been in the securities industry for more than 13 years. Brown has been registered as a Broker with X-change Financial Access, LLC since 2011.
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.