Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Michael Delao (Delao), currently associated with St. Bernard Financial Services, Inc., has at least 3 disclosable events. These events include one customer complaint, 2 regulatory events, alleging that Delao 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 $8,613.87 on August 08, 2024.
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FINRA BrokerCheck shows a final customer complaint on September 05, 2023.
While registered as an agent of St. Bernard, Delao was arrested and charged with a felony offense on March 31, 2019. Delao did not report the felony offense on his Form U4 until September 27, 2022. Although the felony offense was reduced to a Class 1 Misdemeanor on April 14, 2021 and ultimately set aside on June 2, 2021, Delao marked ‘No’ in response to whether he had ‘been arrested or convicted of any crime that has not been reported to St. Bernard’ on the Firm’s annual compliance questionnaires completed between 2019-2022. Delao’s failure to report the felony offense within 30 days to the Securities Commissioner is a violation of Sec. 115.9(a)(2) of the Board Rules. Pursuant to Secs. 4007.105(a)(13)(B) & 4007.106(a)(3) of the TSA, the aforementioned violation constitute a basis for suspension and an administrative fine.
FINRA BrokerCheck shows a final customer complaint on August 08, 2023.
Without admitting or denying the findings, DeLao consented to the sanctions and to the entry of findings that he failed to timely amend his Form U4 to disclose that he had been charged with, and subsequently been found guilty of, a felony. The findings stated that DeLao was charged in an Arizona State court with an offense deemed a felony and the court found him guilty. At that time, the court-imposed conditions on DeLao that if successfully completed would lead the court to ultimately reclassify the offense a misdemeanor, which the court later did. Prior to that, the offense to which DeLao pleaded guilty was considered a felony offense for all purposes under Arizona law. As a result, DeLao was required to disclose that he was charged with a felony offense within 30 days of being charged and that he had been found guilty of that offense within no more than 10 days of the court’s entry of judgment against him. DeLao, however, failed to make any such disclosure until years later. In addition, DeLao falsely stated on annual compliance questionnaires that he had no arrests that had not been disclosed to the firm.
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. Finally, the advisor must use their knowledge of the first two elements to consider reasonably available investment option alternatives and come to the conclusion that there is a reasonable basis to believe that the recommendation or advice being provided is in the retail 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.
Delao entered the securities industry in 1993. Delao has been registered as a Broker with St. Bernard Financial Services, 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.