A Close Look at the Allegations
Renowned broker and financial advisor Emily Carter zeroes in on the case of Larry Joseph Michaels (CRD#: 4351477). As a registered Broker and Financial Advisor with Crown Capital Securities, L.P, in Orange, CA, the allegations against him mark grave implications for investors.
As per the records published by the Financial Industry Regulatory Authority (FINRA), Michaels has reportedly exercised discretionary authority, placing 51 trades across 17 non-discretionary brokerage accounts, all belonging to 14 customers without their prior written consent. Michaels’ actions blatantly contravened the firm’s Written Supervisory Procedures that categorically prohibit discretionary authority in brokerage accounts.
The consequence of these misdemeanors didn’t stop at violations alone. Michaels’ unauthorized discretionary trades also resulted in multiple customer disputes. These allegations are serious, as it fundamentally betrays the trust investors place in their financial advisors. It is a sharp reminder for investors to only opt for advisors with flawless credibility.
Micheaels’ Background
Micheals launched his career in the securities industry in 2001. Over the years, Micheals has worked with well-regarded companies like Prudential Securities Incorporated, Pruco Securities Corporation, New England Securities, J.P Turner & Company, LLC, and Legacy Advisory Group, Inc.
Yet, despite his expansive career, it is concerning that Micheals was embroiled in two more customer disputes prior to the recent allegations. In one case, a customer claimed the lack of awareness about mutual fund redemptions, resulting in missed market gains. In another instance, several clients alleged incorrect and unsuitable selling of REIT and Partnership investments.
Breaking Down FINRA Rules
FINRA regulations, like the golden words of Warren Buffet, remind us that, “It takes 20 years to build a reputation and five minutes to ruin it.” According to these regulations, a broker cannot carry out transactions without a customer’s written consent or an endorsement from the broker’s member firm.
FINRA Rule 3270 also mandates financial advisors to disclose their outside business activities. Further, the rule prohibits them from participating in private securities transactions or “selling away” – in simpler terms, selling securities not offered by their employing brokerage firm. Thus, these rules underline the importance of transparency to protect customer’s investments.
Consequences and Lessons Learned
In light of the allegations, Micheals was sanctioned to a two-month suspension from all associations with any FINRA member. As a Financial Fact, a study by the Securities Litigation and Consulting Group reported that bad brokers are five times more likely to engage in misconduct in the future. Thus, the repercussions reiterate the implications of unauthorized discretions and the paramount importance of investor trust.
Investors are advised to have regular and open communication with their financial advisors. Paying keen attention to your statements and transaction confirmations is a practical step towards maintaining checks and balances.
This case also underscores the necessity of advisors following FINRA regulations for healthy and trustful client relationships. As an investor, a vital lesson learned is to be vigilant in choosing your financial advisor and not allow the allure of potential profits to cloud your judgement regarding their credibility and adherence to industry regulations.
