As a former financial advisor and legal expert with over a decade of experience, I’ve seen my fair share of investor complaints and the devastating impact they can have on individuals’ financial well-being. The recent allegation against East Northport, New York financial advisor Michael Buonanno (CRD# 2823332) is a serious matter that warrants close examination.
Filed in July 2024, the complaint alleges that as a representative of Cetera Advisor Networks, Mr. Buonanno recommended unsuitable investments in a variable annuity and a real estate investment trust (REIT), resulting in damages of $1 million. This is a significant sum and highlights the importance of thoroughly vetting your financial advisor and understanding the risks associated with complex investment products.
The Seriousness of the Allegation
Unsuitable investment recommendations are a grave violation of a financial advisor’s fiduciary duty to their clients. FINRA Rule 2111, known as the “suitability rule,” requires brokers to have a reasonable basis for believing that an investment recommendation is suitable for a particular customer based on their investment profile. This profile includes factors such as the investor’s:
- Age
- Financial situation
- Risk tolerance
- Investment objectives
When a broker recommends an unsuitable investment, they put their own interests ahead of their client’s, often in pursuit of higher commissions or other incentives. The consequences for investors can be dire, including substantial financial losses that can derail retirement plans or jeopardize critical financial goals.
As the famous investor Warren Buffett once said, “Risk comes from not knowing what you’re doing.” This underscores the importance of financial literacy and working with a trusted, reputable advisor who prioritizes your best interests.
The Financial Advisor’s Background
According to FINRA records, Michael Buonanno holds 27 years of securities industry experience and has been registered as a broker with Cetera Advisors Networks since 2019. Prior to that, he was registered with North Ridge Securities Corporation from 2007-2019 and AXA Advisors from 1996-2007.
While a lengthy career in the industry can be a positive sign, it’s crucial to investigate an advisor’s disciplinary history thoroughly. A startling fact: 7% of financial advisors have been disciplined for misconduct, according to a 2019 study by the National Bureau of Economic Research.
Understanding FINRA Rules and Consequences
FINRA, the self-regulatory organization overseeing the broker-dealer industry, maintains strict rules to protect investors from unscrupulous practices. In addition to the suitability rule, other key regulations include:
- FINRA Rule 2010: Standards of Commercial Honor and Principles of Trade
- FINRA Rule 3110: Supervision
- FINRA Rule 3270: Outside Business Activities of Registered Persons
When a broker violates these rules, they may face serious consequences, including:
- Fines
- Suspension or bar from the securities industry
- Mandatory arbitration to resolve investor disputes
Lessons Learned
The complaint against Michael Buonanno serves as a sobering reminder of the importance of due diligence when selecting a financial advisor. Before entrusting your hard-earned money to anyone, be sure to:
- Check their background and disciplinary history using FINRA’s BrokerCheck
- Ask about their experience, qualifications, and investment philosophy
- Understand all fees and costs associated with their services and investments
- Ensure they prioritize your best interests and provide transparent, unbiased advice
By staying informed and vigilant, investors can better protect themselves from financial misconduct and work towards achieving their long-term financial goals with confidence.
