Understanding the Seriousness of the Allegation
When it comes to dealing with financial matters, trust plays a crucial role. One of the fundamental aspects of a client-advisor relationship is the advisor honoring the client’s instructions. Unfortunately, this was not the case with Michael Halperin, who is registered with Morgan Stanley. According to Halperin’s BrokerCheck record, he allegedly failed to follow a client’s specific investment instructions regarding the investment of IRA funds.
The investor entrusted Halperin to invest the IRA funds into two index fund exchange-traded funds (ETFs). However, instead, he overlooked these instructions. Furthermore, the broker failed to make any alternative recommendations regarding the investment of the IRA funds, putting the investor’s portfolio under significant risk. These allegations are currently under investigation.
Warren Buffet once said, “If you don’t find a way to make money while you sleep, you will work until you die.” Sound advice indeed, but the bitter fact remains that if the entrusted advisor doesn’t follow your investment instructions, this dream may remain unfulfilled.
Background of the Financial Advisor
Michael Halperin is a seasoned financial advisor with a track record spanning various states and territories. He is currently registered as a broker in 41 states, including the District of Columbia and Puerto Rico. Moreover, Halperin also holds the position of a registered investment advisor in Florida and Texas. His investment prowess is underpinned by his successful completion of the Series 66, SIE, and Series 7 examinations.
Before working with Morgan Stanley, Halperin served Merril Lynch, Pierce, Fenner & Smith. Despite these impressive credentials, this recent allegation raises questions about his integrity and indicates potential harm to his clients.
Interpreting the FINRA Rule and ETFs
To ensure the financial market operates fairly, FINRA Rule 2010 maintains high standards for brokers, emphasizing commercial honor and equitable principles of trade. Simply put, this rule means that brokers should put their clients’ interests first, offering sound advice and following their investment directives. Breach of this duty, as allegedly done by Halperin, is a serious violation.
ETFs, the instrument where the investor wished to put the IRA funds, are bundled investments. Standard ETFs allow you to generate earnings from rising prices, unlike Inverse ETFs. On the other hand, leveraged ETFs use borrowed funds. Despite their potential for high returns, ETFs can present a risk, especially the inverse and leveraged varieties.
Consequences and Lessons Learned
The violation of the cardinal rule of following client instructions, especially involving their retirement funds, can lead to significant harm to the investors and severe repercussions for advisors, including loss of license, fines, or a tarnished reputation.
The situation with Halperin serves a cautionary tale to all investors, emphasizing the importance of due diligence. A recent study revealed that 7% of advisors have been involved in a dispute with their clients, indicating the prevalence of this problem.1
Keeping a keen eye on your investment, maintaining open communication with your advisor, and verifying their credibility on platforms like BrokerCheck could help prevent such instances. It ultimately underscores the significance of transparency, communication, and the necessity of honoring trust in financial sectors.
1. Egan, M., Matvos, G., & Seru, A. (2019). The Market for Financial Adviser Misconduct.
