Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Gregory Hersch (Hersch), previously associated with Old City Securities LLC, has at least 2 disclosable events. These events include one customer complaint, one regulatory event, alleging that Hersch 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 $75,000.00 on May 07, 2024.
In response to Florence Capital Advisors, LLC’s (‘FCA’) claim for fees of approximately $6.9 million filed by FCA against the Linden West Trust (‘Client’), the Client asserted a counter claim against FCA and a third-party claim against FCA’s principal, Gregory Hersch. These claims, which had not been asserted prior to FCA’s filing suit, were for alleged breach of fiduciary duty, fraud, and breach of contract, among other allegations, stemming from the client’s investment in FF Fund I during the period from February 2016 to December 2020.
FINRA BrokerCheck shows a final customer complaint on September 29, 2023.
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, instituted pursuant to Sections 203(e), 203(f) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against Florence Capital Advisors, LLC (“FCA”) and Gregory A. Hersch (“Hersch”) (collectively, “Respondents”). The Commission finds that these proceedings arise out of a failure by Florence Capital Advisors, LLC (“FCA”), and its principal, Gregory Hersch (“Hersch”), to adequately disclose conflicts of interest in connection with client investments in a third-party private fund (the “Fund”) from which FCA was also receiving substantial advisory fees. FCA received fees from the Fund pursuant to advisory agreements, while at the same time recommending investments in the Fund to FCA clients and advising FCA clients on their existing investments in the Fund. Between at least May 2017 and April 2019 (the “Relevant Period”), FCA failed to disclose to clients that it was receiving substantial fees from the Fund and the attendant conflicts of interest.
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. Finally, the financial advisor must use their knowledge of both their reasonable diligence into investment options as well as their knowledge of the investor’s client specific needs to consider reasonably available investment options. Those investment options must allow the broker to determine that there is a reasonable basis that the recommendation 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.
Hersch has been in the securities industry for more than 21 years. Hersch has been registered as a Broker with Old City Securities LLC since 2017.
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.