Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Thomas Diamante (Diamante), previously associated with Sw Financial, has at least 3 disclosable events. These events include 2 customer complaints, one regulatory event, alleging that Diamante 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 $100,000.00 on June 22, 2023.
Diamante was named in a customer complaint that asserted the following causes of action: negligence, unsuitability, fraudulent misrepresentations and omissions, securities fraud, common law fraud, breach of fiduciary duty, and breach of contract.
FINRA BrokerCheck shows a pending customer complaint with a damage request of $135,000.00 on May 15, 2023.
Thomas Diamante was named in a customer complaint that asserted the following causes of action: negligence, breach of fiduciary duty, negligent supervision.
FINRA BrokerCheck shows a final customer complaint on May 12, 2023.
Without admitting or denying the findings, Diamante consented to the sanctions and to the entry of findings that engaged in a practice and course of business that deceived investors in connection with the sale of private placement offerings of pre-initial public offering (pre-IPO) funds (the Offerings). The findings stated that in the offering documents, Diamante’s member firm, for which he served as CEO and majority owner, stated it would receive a ten percent sales commission from its sale of the Offerings. Diamante, however, had entered into an agreement with the issuer whereby the firm would receive an additional five percent in selling compensation, as well as half of any carried interest. Diamante then failed to disclose to others at the firm that it would earn additional compensation. As a result, the firm negligently misrepresented and omitted material facts to investors about the amount of compensation the firm would receive in connection with the Offerings. Through this conduct, including negligent omissions, Diamante violated FINRA Rule 2010, both independently and by acting in contravention of Sections 17(a)(2) and (3) of the Securities Act of 1933. The total principal amount of investments from Offerings sold by the firm was approximately $21.3 million. The firm received approximately $3.06 million in total selling compensation, of which $936,000 was attributable to the undisclosed five percent in selling compensation. Although Diamante used some of the disclosed sales commission to compensate selling representatives, he directed the undisclosed compensation to the firm’s general fund, from which he drew his own compensation. In addition, the Issuer transferred shares valued at over $1.07 million to the firm and its owners, including Diamante, to cover the firm’s share of the carried interest. Therefore, as a result of Diamante’s conduct, including his negligent omissions, the firm received approximately $2 million in additional compensation, some of which Diamante personally retained. The findings also stated that Diamante failed to reasonably supervise the Offerings. Diamante failed to perform reasonable due diligence for the Offerings, failed to complete due diligence checklists, and failed to ensure that the offering documents contained accurate information.
Financial Advisors providing advice to retail investors are required to adhere to the SEC’s Regulation Best Interest (Reg BI). Reg BI applies a ‘best interest’ standard for broker-dealers and their associated people. Reg BI applies when brokers recommend a retail investor engage in securities transaction or an investment strategy involving one or more securities. Reg BI also applies to financial advice concerning the transfer of funds and opening of accounts. 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.
The care obligation also requires the broker to address the client’s specific needs through obtaining specific investment profile information on the client. The associated person typically will ask the customer for information such as the investor’s risk tolerance or ability to withstand account value declines or increases; experience with investments available; investment objectives and goals; investment time horizon; liquidity needs; assets such as investment accounts held at other financial institutions; tax information; their age and retirement plans; and other information that a customer may want to provide to the advisor to help them to properly address the services needed. 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. Reg BI comes with different core obligations that brokers must comply with. There is the duty of care obligation requiring financial advisors to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest among other duties. In order to do that the broker must evaluate the potential risks, rewards, and costs associated with a product, account type, or series of transactions being recommended.
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. 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. In addition to specific investments being recommended, under Reg BI, a broker must also understand the type of account that their client would need in order to meet their care obligations. The SEC has stated that the type of securities account an investor has can greatly affect a customers’ costs and overall investment returns. Further, different account types can offer and support different features, products, securities, or services, and account type would not be appropriately applied in a one size fits all manner.
Diamante has been in the securities industry for more than 31 years. Diamante has been registered as a Broker with Sw Financial since 2008.
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.