Broker Gary Arnold Suspended by FINRA Over Alleged Rule Violations

A Deep Dive into the Alleged Misconduct

For any investor, trust is key. When it comes to putting your hard-earned money into someone else’s hands, you want to be confident that they’ll manage it with integrity and expertise. This is why the recent allegations against veteran broker Gary Arnold are so serious.

He consented to the entry of findings that he allegedly failed to establish a robust system of supervision reasonably designed to ensure compliance with Regulation Best Interest and FINRA Rules. In essence, Gary Arnold is accused of prioritizing his own interests and those of his firm, Investment Network Inc., over the interests of his clients.

According to FINRA’s BrokerCheck record, these allegations are related to his time as INI’s President, CEO, and Chief Compliance Officer, starting in February 2019. The heart of the issue lies with the firm’s recommendations of private placement offerings of pre-IPO funds.

Arnold and his team allegedly:

• Misrepresented to investors that INI would receive only a 10% sales commission when they would receive an additional 5% plus half of any carried interest.
• Failed to prove that the issuer had access to the pre-IPO shares or that their prices and markups weren’t excessive.
• Approved client accounts opened by brokers selling these offerings without sufficient information to verify client identities.
• Did not make required filings with FINRA related to these offerings.

Background Check: Who is Gary Arnold?

A seasoned broker, Gary Arnold has been in the industry for years. Registered in 11 states and an investment adviser in Ohio, Arnold’s experience spans various firms, from Shepard & VRBanac Securities to ManEquity.

However, affluence doesn’t always equate to trustworthiness. Despite his extensive history in finance, Arnold’s BrokerCheck record reveals a suspension by FINRA due to these allegations.

It’s always wise to remember the words of American business magnate Warren Buffet: “It takes 20 years to build a reputation and five minutes to ruin it.” It’s a bit of wisdom that should be a guide to both investors and financial advisors.

Understanding FINRA Rules

FINRA (Financial Industry Regulatory Authority) is a non-governmental organization that regulates member brokerage firms and exchange markets in the United States. Its primary role is to protect investors and ensure the integrity of the market.

For example, Regulation Best Interest requires brokerage firms to uphold certain duties, such as disclosing any conflicts of interest, while FINRA Rule 3310 requires firms to have anti-money laundering programs. FINRA Rule 3110, on the other hand, sets the standards for appointing supervisors and maintaining the firm’s compliance with securities regulations.

Breaking down FINRA’s complex regulations and legal jargon, the rules aim to ensure that investors are treated fairly and that their money is protected – something that allegedly did not happen in the case of Gary Arnold and INI.

Consequences and Lessons Learned

Financial fraud is a serious matter with potential devastating effects to investors. According to a 2016 study by the Stanford Center on Longevity, an estimated $50 billion is lost each year due to financial fraud and abuse.

In cases such as this, consequences can be severe. Investment Network Inc. faced a censure, a 60-day suspension from conducting private placement activities, a $210,000 in fines, and disgorgement of wrongly gained profit. Arnold himself consented to a 3-month suspension from working with FINRA member firms, a $10,000 fine, and the requalification as a general securities principal.

For investors, it serves as a reminder to tread carefully when investing and to inherently question the conduct of their brokers. After all, it’s not only about the best terms and conditions but also about honesty, trust, and a sound moral compass.