Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Franz Lambert (Lambert), previously associated with Spartan Capital Securities, LLC, has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Lambert recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on July 13, 2022.
Without admitting or denying the findings, Lambert consented to the sanctions and to the entry of findings that he engaged in excessive and quantitatively unsuitable trading in a senior customer’s account. The findings stated that Lambert recommended high frequency trading in the account, and the customer routinely followed his recommendations. As a result, Lambert exercised de facto control over the customer’s account. Lambert’s trading in the customer’s account generated total trading costs of $308,983, including $289,660 in commissions, and caused $320,906 in realized losses. The customer brought and settled an arbitration claim against Lambert and won an arbitration award against the firm relating to the account at issue here.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $21,228.61 on September 01, 2021.
Lambert was named in a customer complaint that asserted the following causes of action: qualitative and quantitative unsuitability (Rule 2111); negligent misrepresentation and omissions; churning for commissions and quantitative unsuitability (fraud) Rules 2111 and Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5; failure to supervise and negligent supervision (Rule 3010); breach of fiduciary contract and implied covenant of good faith and fair dealing; and standards of commercial honor and principles of trade (Rule 2010).
In the financial industry advisors must meet the requirements of the SEC’s Regulation Best Interest (Reg BI) in providing investment advice and services. Reg BI established a ‘best interest’ standard for brokerage firms and registered representatives. This standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts. This standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts.
The care obligation also requires the broker to address the client’s specific needs through obtaining specific investment profile information on the client. The associated person typically will ask the customer for information such as the investor’s risk tolerance or ability to withstand account value declines or increases; experience with investments available; investment objectives and goals; investment time horizon; liquidity needs; assets such as investment accounts held at other financial institutions; tax information; their age and retirement plans; and other information that a customer may want to provide to the advisor to help them to properly address the services needed. 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 require brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations include 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.
Another aspect of the care obligation is focusing on the client’s specific needs which brokers must reasonably understand through obtaining information for the client’s investment profile. In completing a customer’s investment profile the advisor should include information such as the investor’s investment time horizon; liquidity needs; risk tolerance; experience with various investment vehicles; investment objectives and financial goals; assets and debts including outside investment accounts; marital status; tax information; age; and other relevant information that may be individual to the investor that the advisor would need to know to properly render advice or provide services. Using the foregoing information, the associated person then must consider reasonably available investment option to accomplish the investor’s goals as well as alternative investment options that may be cheaper or other important qualities. Finally, the advisor must conclude that there is a reasonable basis to believe that the recommendation being provided is in the investor’s best interest. An advisor must understand the type of account, securities, and their client in order to meet their care obligations. The type of securities account has the potential to greatly affect retail customers’ costs and investment returns. Different types of securities accounts can offer different features, products, or services, and not all types of accounts or services would be in every investor’s best interest.
Lambert has been in the securities industry for more than 17 years. Lambert has been registered as a Broker with Spartan Capital Securities, LLC since 2019.
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.