There’s a saying in finance: “Caveat Emptor“, or “Buyer Beware”. This couldn’t ring truer for investors entangled in a recent case involving an alleged fraudulent investment scheme. The man in question is Keith Dagostino, a former financial advisor registered with Aegis Capital Corp. Dagostino has been accused of recommending the sale of Structured Notes associated with Citigroup Global Markets, Inc.—an action that could have far-reaching impacts for the investors he was trusted to guide.
Understanding Structured Notes and How They Impact Investors
Structured Notes are market-linked investments offering a coupon to investors. The income payment or coupon attaches itself to the performance of underlying securities, such as individual stocks or stock indices. In Dagostino’s case, the Structured Notes were tied to the share prices of various technology and consumer staples companies. If these stocks stayed above a certain price, known as the “Coupon Barrier”, investors would receive the promised income payment. If a stock price plunged below this barrier, investors would lose their steady income flow.
Moreover, these Structured Notes had a stipulation. If any of the underlying shares dropped to a certain level by the maturity date (the “Knock-in Barrier”), investors had to buy shares of the depreciated stock at market value. The pricing against the ‘Initial Level’ of the Structured Notes meant that investors stood to make significant losses since they were paying considerably more for the shares than their market worth.
About the Financial Advisor and His Broker Dealer
Keith Dagostino was a financial advisor with Aegis Capital Corp. from 2014 to 2023. He has had an extensive career in the finance industry, having been associated with prominent firms like EF Hutton, Stifel, Nicolas, Oppenheimer, and Ladenberg. Dagostino’s FINRA CRD number.
According to research, nearly 7% of financial advisors have a record of misconduct on their professional records. Allocating due diligence to a thorough background check on financial advisors can often save investors from falling into similar foul play.
Simplify and Clarify: The FINRA Rule
When it comes to the rules and regulations governing the finance sector, clarity is critical. According to FINRA Rule 2111, financial advisors are obligated to recommend suitable investments appropriate for their clients’ needs and objectives. If it is proven that Dagostino recommended inappropriate investments, there could be legal consequences awaiting him.
Consequences and Lessons Learned
The allegations against Dagostino are serious. Enticing retirees living on a fixed income, it appears that Dagostino’s trading strategy led to significant losses for these less-experienced investors, as they were not privy to the complexities of Structured Notes.
The real-world impact of these alleged actions serves as a stark reminder for investors to diversify their portfolios and exercise due diligence before investing. Investor education and media literacy are the best defenses against financial fraud.
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” The words of famed investor Philip Fisher serve as a timeless reminder that price and value are often misaligned—making the role of a trustworthy financial advisor even more critical.
