As a former financial advisor and legal expert with over a decade of experience, I’ve seen my fair share of cases involving advisors who have crossed the line. The recent resignation of Brian Megibow from Ameriprise Financial Services while under review for his trading strategy and client contact is a serious matter that affects not only his clients but also the reputation of the financial industry as a whole.
When a financial advisor resigns while under review, it raises red flags for investors. It suggests that there may have been some wrongdoing or unethical behavior that prompted the advisor to leave before facing consequences. In Mr. Megibow’s case, the fact that he was being reviewed for his trading strategy and client contact is particularly concerning, as these are two areas where trust and transparency are essential.
According to his BrokerCheck report, Mr. Megibow has a history of complaints and disciplinary actions. In 2016, he faced an investor complaint alleging that he recommended unsuitable annuity purchases while working at SunTrust Investment Services. The complaint was settled for $25,000, although Mr. Megibow denied the allegations.
Additionally, in 2005, Mr. Megibow was fired from AmSouth Investment Services for allegedly violating firm policies and industry standards of conduct. The firm believed that he had placed trades in his personal account before making a stock purchase for a potential customer who may have had access to material non-public information.
These past incidents, combined with his recent resignation from Ameriprise, paint a troubling picture of Mr. Megibow’s conduct as a financial advisor. As Warren Buffett once said, “It takes 20 years to build a reputation and five minutes to ruin it.” Mr. Megibow’s actions have not only tarnished his own reputation but also eroded the trust that investors place in financial advisors as a whole.
Understanding FINRA Rules and Consequences
The Financial Industry Regulatory Authority (FINRA) has strict rules in place to protect investors and maintain the integrity of the financial markets. Some key rules that may apply in Mr. Megibow’s case include:
- FINRA Rule 2111: Requires brokers to have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer, based on the customer’s investment profile.
- FINRA Rule 2010: Requires brokers to observe high standards of commercial honor and just and equitable principles of trade.
When a financial advisor violates these rules, they can face serious consequences, including:
- Fines and penalties
- Suspension or revocation of their license
- Permanent ban from the securities industry
In addition to regulatory consequences, advisors who engage in misconduct may also face civil lawsuits from investors seeking to recover their losses. According to a study by the University of Chicago, 7% of financial advisors have misconduct records, and these advisors are five times more likely to engage in new misconduct than the average advisor.
Lessons for Investors
The case of Brian Megibow serves as a reminder for investors to thoroughly vet their financial advisors and stay vigilant for signs of misconduct. Before working with an advisor, investors should:
- Check the advisor’s background and disciplinary history using FINRA’s BrokerCheck tool
- Ask about the advisor’s investment philosophy, experience, and approach to risk management
- Ensure they understand all fees, commissions, and potential conflicts of interest
If an investor suspects that their advisor has engaged in misconduct, they should report it to the appropriate authorities and consider seeking legal counsel to protect their rights and recover any losses.
As a former financial advisor and legal expert, I believe that transparency, integrity, and a commitment to putting clients’ interests first are essential qualities for any advisor. By holding advisors accountable for their actions and empowering investors with the knowledge and tools to make informed decisions, we can work towards a more trustworthy and ethical financial industry.
