Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Stephen Schwarzman (Schwarzman), currently associated with Blackstone Securities Partners L.p., has at least 2 disclosable events. These events include 2 customer complaints, alleging that Schwarzman recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a pending customer complaint on July 29, 2020.
This is a lawsuit brought by the Kentucky Attorney General purportedly on behalf of the Kentucky Retirement Systems and the Commonwealth of Kentucky. The Kentucky Attorney General’s lawsuit incorporates the claims first raised in the lawsuit commenced on December 26, 2017, which is the subject of a DRP filed by the registrant on February 5, 2018. Specifically: On December 26, 2017, the registrant was named as a defendant in a purported derivative lawsuit brought by eight individual pension beneficiaries on behalf of the Kentucky Retirement Systems (‘KRS’), filed in Franklin County, Kentucky, Circuit Court (the ‘Circuit Court’). The defendants in the suit included the registrant, The Blackstone Group L.P. (now Blackstone Inc.), Blackstone Alternative Asset Management L.P. (‘BAAM’) and the then CEO of BAAM (the ‘Blackstone Defendants’), as well as other investment managers and their executive officers, current and former KRS trustees and officers, and several outside advisors. The lawsuit concerned, among other issues, KRS’s investment in a BAAM-managed fund, and alleged state law claims for breach of trust, fiduciary, and unspecified other duties; civil conspiracy; and aiding and abetting breach of statutory, fiduciary, and unspecified other duties. After numerous motions and appeals, in July 2020, the Kentucky Supreme Court unanimously ordered the dismissal of the complaint because plaintiffs lack standing. In July 2020, the Kentucky Attorney General filed a motion to intervene in the action and pursue the claims on behalf of the Commonwealth of Kentucky. Also in July 2020, the Kentucky Attorney General filed a separate action which is substantially the same as its intervening complaint. In December 2020, the Circuit Court granted the Attorney General’s motion to intervene over the defendants’ objections. In April 2023, the Court of Appeals vacated the Circuit Court’s order authorizing the Attorney General’s intervention. In January 2024, the Kentucky Supreme Court denied the Commonwealth’s motion for discretionary review of the Court of Appeals’ decision. After the Court of Appeals’ decision, the Attorney General pursued Civil Action No. 20-CI-00590. On May 1, 2024, the Circuit Court denied Blackstone Defendants’ (and most other defendants’) motions to dismiss. While that motion was pending, the court permitted the Attorney General to amend its complaint for the third time to add a claim for breach of contract. On April 8, 2024, the Kentucky Attorney General filed an action, Civil Action No. 24-CI-00354, that involves the same subject matter, names the same parties as defendants, and brings the same claims as the operative complaint in Civil Action No. 20-CI-00590. The Attorney General has stated its purpose in filing the new action was to satisfy a limitations statute. On May 1, 2024, the Circuit Court granted the Commonwealth’s motion to consolidate Civil Action No. 24-CI-00354 with Civil Action No.00590. On January 3, 2025, certain defendants, including the Blackstone Defendants, entered into a settlement agreement with KRS and the Commonwealth of Kentucky. The settlement, which is subject to court approval and to certain contingencies, would be funded entirely by insurance and would resolve all claims against the Blackstone Defendants in Civil Action No. 20-CI-00590 and Civil Action No. 24-CI-00354. On January 8, 2025, the settling parties moved for court approval of the settlement. That motion is pending.
FINRA BrokerCheck shows a pending customer complaint on July 29, 2020.
This is a lawsuit brought by the Kentucky Attorney General purportedly on behalf of the Kentucky Retirement Systems and the Commonwealth of Kentucky. The Kentucky Attorney General’s lawsuit incorporates the claims first raised in the lawsuit commenced on December 26, 2017, which is the subject of a DRP filed by the registrant on February 5, 2018. Specifically: On December 26, 2017, the registrant was named as a defendant in a purported derivative lawsuit brought by eight individual pension beneficiaries on behalf of the Kentucky Retirement Systems (‘KRS’), filed in Franklin County, Kentucky, Circuit Court (the ‘Circuit Court’). The defendants in the suit included the registrant, The Blackstone Group L.P. (now Blackstone Inc.), Blackstone Alternative Asset Management L.P. (‘BAAM’) and the then CEO of BAAM (the ‘Blackstone Defendants’), as well as other investment managers and their executive officers, current and former KRS trustees and officers, and several outside advisors. The lawsuit concerned, among other issues, KRS’s investment in a BAAM-managed fund, and alleged state law claims for breach of trust, fiduciary, and unspecified other duties; civil conspiracy; and aiding and abetting breach of statutory, fiduciary, and unspecified other duties. After numerous motions and appeals, in July 2020, the Kentucky Supreme Court unanimously ordered the dismissal of the complaint because plaintiffs lack standing. In July 2020, the Kentucky Attorney General filed a motion to intervene in the action and pursue the claims on behalf of the Commonwealth of Kentucky. Also in July 2020, the Kentucky Attorney General filed a separate action which is substantially the same as its intervening complaint. In December 2020, the Circuit Court granted the Attorney General’s motion to intervene over the defendants’ objections. In April 2023, the Court of Appeals vacated the Circuit Court’s order authorizing the Attorney General’s intervention. In January 2024, the Kentucky Supreme Court denied the Commonwealth’s motion for discretionary review of the Court of Appeals’ decision. After the Court of Appeals’ decision, the Attorney General pursued Civil Action No. 20-CI-00590. On May 1, 2024, the Circuit Court denied Blackstone Defendants’ (and most other defendants’) motions to dismiss. While that motion was pending, the court permitted the Attorney General to amend its complaint for the third time to add a claim for breach of contract. On April 8, 2024, the Kentucky Attorney General filed an action, Civil Action No. 24-CI-00354, that involves the same subject matter, names the same parties as defendants, and brings the same claims as the operative complaint in Civil Action No. 20-CI-00590. The Attorney General has stated its purpose in filing the new action was to satisfy a limitations statute. On May 1, 2024, the Circuit Court granted the Commonwealth’s motion to consolidate Civil Action No. 24-CI-00354 with Civil Action No.00590. On January 3, 2025, certain defendants, including the Blackstone Defendants, entered into a settlement agreement with KRS and the Commonwealth of Kentucky. The settlement, which is subject to court approval and to certain contingencies, would be funded entirely by insurance and would resolve all claims against the Blackstone Defendants in Civil Action No. 20-CI-00590 and Civil Action No. 24-CI-00354. On January 8, 2025, the settling parties moved for court approval of the settlement. That motion is pending.
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 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. 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.
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. 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 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. 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. An advisor must understand the type of account, securities, and their client in order to meet their care obligations. The type of securities account has the potential to greatly affect retail customers’ costs and investment returns. Different types of securities accounts can offer different features, products, or services, and not all types of accounts or services would be in every investor’s best interest.
Schwarzman entered the securities industry in 1979. Schwarzman has been registered as a Broker with Blackstone Securities Partners L.p. since 1986.
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.