U.S. Capital Wealth Advisors, LLC / USCA Securities LLC Advisor Patrick Mendenhall Has Customer Complaint

 

According to records kept by The Financial Industry Regulatory Authority (FINRA) financial advisor Patrick Mendenhall (Mendenhall), currently associated with U.S. Capital Wealth Advisors, LLC and USCA Securities LLC, has at least four disclosable events. These events include four customer complaints alleging that Mendenhall recommended unsuitable investments in different investment products.

FINRA BrokerCheck shows a pending customer complaint with a damage request of $5,000,000 on January 12, 2024.

Client is a sophisticated investor with decades of experience recruiting for the financial services industry, experience investing in options, stocks, private placements, and hedge funds, and a thirty-year relationship with Mr. Mendenhall. In connection with the account in question, the client indicated a net worth of over $20 million, an aggressive risk tolerance, and a primary objective of capital appreciation. The Client complains of losses and missed opportunity related to a specific stock (and options on that stock) in a specific account. The stock was first purchased by the client over eight years ago. The Client maintained other accounts with the firm and overall had gains while at the firm. The client was actively involved in managing the stock and all transactions were discussed with the client.

FINRA BrokerCheck shows a pending customer complaint with a damage request of $3,000,000 on October 5, 2023

Client is an experienced investor with an estimated net worth of over $6.5 million who actively monitored and participated in investment decisions in his accounts. Client complains of losses and missed opportunity related to specific investments that go back five years, but overall his accounts were profitable while at USCA. One security the client complains about was initially recommended by USCA, but the client continued to make unsolicited purchases when the security’s price had already started to decline. The client also makes claims related to missed opportunity in another stock that was sold as part of an agreed upon covered call strategy but later increased in price.

Under the securities laws brokers are obligated to act in their clients’ best interests and provide only suitable recommendations for investments to the client. In addition, the SEC has promulgated “Regulation Best Interest (Reg BI)” which according to the SEC enhanced the broker-dealer standard of conduct beyond existing suitability obligations and requires broker-dealers to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities. Regulation Best Interest and the fiduciary standard for investment advisers are drawn from key fiduciary principles that include an obligation to act in the retail investor’s best interest and not to place their own interests ahead of the investor’s interest.

Brokers have an obligation to first obtain and evaluate sufficient information about a retail investor to form a reasonable basis to believe the account recommendations are in the retail investor’s best interest. Recommendations cannot be based on materially inaccurate or incomplete information. Material information always includes information concerning the investor as well as the cost of the recommendation. Types of costs that must be considered including account fees, commissions and transaction costs, tax considerations, as well as indirect costs.

In addition to obligation to understand the customer the broker must also investigate the product being sold. FINRA firms have an obligation to conduct a reasonable investigation of the issuer and the securities they recommend in offerings. A brokerage firm has a special relationship with a customer from the fact that in recommending the security, the broker represents to the customer that a reasonable investigation has been made. Accordingly, a brokerage firm may not rely blindly upon the issuer for information concerning a company in lieu of conducting its own reasonable investigation.

Additional investor safeguards include broker disclosure requirements. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and even criminal matters. FINRA has acknowledged that recent studies provide evidence of the predictability of future regulatory and customer complaint issues for brokers with a history of such events. FINRA’s Office of the Chief Economist (OCE) published a study showing the predictability of disciplinary and disclosure events based on past similar events. The OCE study showed that past disclosure events, including regulatory actions, customer arbitrations and litigations of brokers, have significant power to predict future investor harm. The data shows that where a member firm on-boards brokers with a significant history of misconduct there is a high likelihood that the broker will continue to engage in similar behavior.

Mendenhall entered the securities industry in 1982. Mendenhall has been registered as a broker with USCA Securities LLC since 2010, and a investment broker with U.S. Capital Wealth Advisors, LLC since 2021.

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.

 

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