Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker David Lagrange (Lagrange), currently associated with Moloney Securities Co., Inc., has at least 3 disclosable events. These events include 2 customer complaints, one tax lien, alleging that Lagrange recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a pending customer complaint with a damage request of $72,000.00 on December 31, 2024.
Suitability/negligence. 2020
FINRA BrokerCheck shows a pending customer complaint with a damage request of $38,000.00 on November 18, 2024.
Suitability/negligence. 2020
FINRA BrokerCheck shows a final customer complaint on September 27, 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 against Moloney Securities Co., Inc. (Moloney), Donald R. Hancock, David F. La Grange, and Laura B. Barnes (collectively, the Respondents). In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement which the Commission has determined to accept. The commission finds that These proceedings arise out of Respondents’ failures to comply with Regulation Best Interest (Regulation BI) in connection with recommendations of corporate bonds called L Bonds offered by GWG Holdings, Inc. (GWG) to retail customers between June 30, 2020, the compliance date for Regulation BI, and approximately January 15, 2022 (the Relevant Period). According to GWG’s disclosures during the Relevant Period: (a) L Bond investments involved a high degree of risk, including the risk of losing an investor’s entire investment; (b) L Bond investments May be considered speculative; (c) L Bond investments were only suitable for investors with substantial financial resources and no need for liquidity in the investment; and (d) GWG would use a portion of the L Bond proceeds to repay existing L Bond holders. In addition, in November 2021, among other things, GWG disclosed that several enumerated factors raised substantial doubt regarding its ability to continue as a going concern. Despite these disclosures, in recommending the purchase of L Bonds to certain retail customers, Moloney failed to exercise reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendations. Moloney also recommended the purchase of L Bonds to certain retail customers for whom it did not have a reasonable basis to believe that the recommendations were in the customers’ best interest based on the customers’ investment profiles and the potential risks, rewards, and costs associated with the L Bonds. Moloney also failed to establish written policies and procedures reasonably designed to identify and disclose, mitigate, or eliminate conflicts of interest associated with recommendations and enforce those policies and procedures that it did have and to disclose material conflicts of interest associated with its recommendations of L Bonds created by its Chief Executive Officer’s and other employees’ personal ownership of GWG securities. Moloney further failed to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Regulation BI. As a result, Moloney failed to comply with Regulation BI’s Care Obligation, Conflict of Interest Obligation, Disclosure Obligation, and Compliance Obligation. During the Relevant Period, Hancock, Moloney’s CEO, was responsible for the firm’s day-to-day operations and its sales of L Bonds to retail customers and caused Moloney’s failures to comply with the Care Obligation, Conflict of Interest Obligation, and Disclosure Obligation, in violation of the General Obligation of Regulation BI. In addition, Hancock, La Grange, and Barnes failed to exercise reasonable diligence, care, and skill to understand the potential risks, rewards, and costs associated with the recommendation of L Bonds to certain retail customers. La Grange and Barnes further recommended the purchase of L Bonds to certain retail customers for whom they did not have a reasonable basis to believe the recommendations were in the customers’ best interest based on the customers’ investment profiles and the potential risks, rewards, and costs associated with the L Bonds. As a result, Hancock, La Grange, and Barnes failed to comply with the Care Obligation and willfully violated the General Obligation of Regulation BI and Moloney willfully violated the General Obligation of Regulation BI found in Exchange Act Rule 15l-1(a)(1).
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. Thus, without conducting its own reasonable investigation, a brokerage firm cannot depend solely on the issuer for information about a company.
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 studies offer evidence showing that brokers with a past record of regulatory and customer complaint issues are more likely to have such issues in the future. 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.
Lagrange entered the securities industry in 2000. Lagrange has been registered as a Broker with Moloney Securities Co., Inc. since 2012.
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.