Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker John Cobb (Cobb), currently associated with LPL Financial LLC, has at least one disclosable event. These events include one customer complaint, alleging that Cobb 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 $32,267.44 on April 18, 2024.
Client alleges that she gave advisor a firm order at a review meeting in July 2023 to purchase $50,000 worth of Eli Lilly shares (LLY). This purchase did not occur. Client reached out to advisor in March 2024 asking about the status of the purchase and why is had not been completed. He advised that he didn’t feel this was a good purchase for her at that time and they were set to discuss further. They met April 18, 2024 and the client says she made notes that she gave him an order and he was supposed to sell other mutual funds in the account and it seems possibly purchase another stock (NVO).
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 standard applies when brokers make recommendations to retail customer for any securities transaction or investment strategy involving securities, including recommendations of types of accounts. 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. 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.
Cobb entered the securities industry in 1971. Cobb has been registered as a Broker with LPL Financial LLC since 2009.
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.