Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker George Jacobs (Jacobs), previously associated with Bankers Life Securities, INC., has at least one disclosable event. These events include one customer complaint, alleging that Jacobs recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $34,313.00 on January 20, 2021.
The Firm received a written complaint on January 20, 2021, addressed to Bankers Life and Casualty Company (BLC), an insurance company affiliate of the Firm, signed jointly by the clients and an investment adviser representative of an unaffiliated firm. The complaint alleges that a financial representative of the Firm made unsuitable recommendations to the clients to liquidate securities in the clients’ accounts to purchase fixed-index annuities, issued by BLC. Clients requested to be released from the BLC annuities without surrender fees or penalties. BLC entered into a Settlement and Release and allowed the clients to cancel their annuities without the assessment of surrender charges. While the BLC annuities sold to the clients were not securities and were issued by BLC, the Firm is reporting this complaint because the source of funding for the annuities came from the sale of securities recommended by a financial representative of the Firm.
When your financial advisor is providing advice they must adhere to the SEC’s Regulation Best Interest (Reg BI) rule and standard of care. Reg BI replaced the former “suitability” rule and created a ‘best interest’ standard for brokerage firms and registered representatives. 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. This standard applies when a registered representative is providing investment advice through making recommendations customers and covers securities transaction, investment strategies, and recommendations concerning advice on opening of an account or accounts.
Next, the broker must understand the investor’s investment background and profile. A customer’s profile includes information that describes the investor’s financial situation and needs. Information here will include their outside securities accounts and investments; relevant assets and debts; tax bracket; age; liquidity needs; risk tolerance; investment time horizon; experience with investing; investment objectives; and any other relevant information that the investor may choose to disclose pertinent to their situation. The Reg BI rule applies a fiduciary principles and requires an associated person to act in the retail investor’s “best interests” while barring the broker from placing their own financial interests and compensation incentives ahead of the investor’s best 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. The associated person must then apply both their reasonable diligence into various investment options as well as the information gathered as to the investor’s specific needs when considering the investment recommendation. The broker must explore various alternative investment options available to address these needs and determine that there is a reasonable basis to believe that the recommendation or service being recommended is in the retail investor’s best interest. Brokerage firms and advisors must also understand the features and limitations of various account types as part of meeting Reg BI’s care obligations. Firms typically offer a variety of account options and services with different trading costs, services, such as account and activity monitoring. An advisor’s recommendation as to what type of securities account to open can alter the customers’ overall costs and investment returns. The advisor must determine that the client can benefit from the type of account being recommended to be opened and in the investor’s best interest taking into account the costs, benefits, and needs of the client.
Jacobs has been in the securities industry for more than 9 years. Jacobs has been registered as a Broker with Bankers Life Securities, INC. 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.