Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker George Cairnes (Cairnes), previously associated with Chelsea Financial Services, has at least one disclosable event. These events include one regulatory event, alleging that Cairnes recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on April 18, 2024.
Between May 2015 and April 2023, Respondent personally benefitted from his relationship with a Client as a result of a real estate business arrangement Respondent entered into with the Client. Respondent’s role included identifying real estate investment opportunities, assisting with buying & selling the properties, repairs to properties, collecting rent from tenants of those properties, & handling disputes with neighbors to those properties. The Client provided financing for all the transactions. Notably, Respondent assisted the Client in establishing a line of credit collateralized by the Client’s brokerage accounts to finance certain real estate transactions. Respondent received at least $175,000 from the Client for his role in these activities. Wells Fargo’s written policies prohibited associates from receiving an improper benefit as a result of their position or relationship with a client & engaging in outside activities unless receiving prior approval from Wells Fargo. Respondent did not seek approval or disclose to Wells Fargo the work he was engaged in with the Client’s real estate transactions.
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. 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.
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.
Cairnes has been in the securities industry for more than 23 years. Cairnes has been registered as a Broker with Chelsea Financial Services since 2023.
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.