As a seasoned financial analyst and legal expert with over a decade of experience, I’ve seen my fair share of investor complaints and allegations against financial advisors. The recent complaint against Paul Raehpour, a McKinney, Texas-based advisor with Merrill Lynch, is a serious one that warrants attention from investors and regulators alike.
According to the complaint filed in June 2024, Mr. Raehpour allegedly made unauthorized trades involving exchange-traded fund (ETF) products while representing Merrill Lynch. The complaint is currently pending and alleges unspecified damages. This isn’t the first time Mr. Raehpour has faced investor complaints. His BrokerCheck report reveals two earlier complaints:
- In 2008, a complaint alleged he made unauthorized bond purchases while at Morgan Stanley. It settled for $6,392.40.
- Also in 2008, another complaint alleged he sold unsuitable auction rate securities at Morgan Stanley & Company. It settled with the firm repurchasing the securities at par value of $200,000.
Unauthorized trading is a serious violation of FINRA rules and a breach of the fiduciary duty advisors owe their clients. FINRA Rule 2010 requires brokers to observe high standards of commercial honor and just and equitable principles of trade. Unauthorized trades are a clear violation of this rule.
Understanding Mr. Raehpour’s Background
Paul Raehpour has 22 years of experience in the securities industry. He’s been registered as a broker and investment advisor with Merrill Lynch in McKinney, Texas since 2014. Previously, he was registered with:
- UBS Financial Services
- Morgan Stanley & Company
- Morgan Stanley
- Morgan Stanley DW
He has passed four securities exams: the Series 7, 31, SIE, and 66. He also holds 31 state licenses. Merrill Lynch’s website profile of him mentions his entertainment industry background and states his commitment to prioritizing clients’ needs and goals.
Despite his decades of experience, the multiple complaints are concerning. As famed investor Warren Buffett once cautioned, “Beware of geeks bearing formulas.” Just because an advisor has an impressive background doesn’t mean they’re immune to mistakes or misconduct.
The Consequences of Advisor Misconduct
Unauthorized trading can have severe consequences for investors. It can lead to unexpected losses, disrupt carefully planned investment strategies, and erode the trust that’s essential to a productive client-advisor relationship. A 2019 study found that 7% of financial advisors have been disciplined for misconduct that cost investors a collective $34 billion per year.
For advisors, unauthorized trading complaints can result in fines, suspensions, or even a permanent bar from the securities industry. They may also face civil lawsuits from investors seeking to recoup losses. The reputational damage can be hard to overcome.
Lessons for Investors
The allegations against Mr. Raehpour offer a few key lessons for investors:
- Always monitor your accounts. Regularly review statements and trade confirmations to ensure all activity aligns with your goals and instructions.
- Ask questions. If you see unfamiliar or unauthorized trades, follow up with your advisor immediately for an explanation.
- Know your rights. Unauthorized trading violates FINRA rules. You can file complaints with the firm, FINRA, the SEC, or state regulators.
- Consider your options. If unauthorized trading has led to losses, consult an experienced securities attorney to explore potential legal remedies.
As someone who’s built a career on dissecting complex financial and legal matters, my aim is always to educate and empower investors. While the vast majority of financial advisors are ethical professionals who put their clients first, it’s crucial to stay informed and vigilant. Your investments and financial well-being are too important to leave to chance.
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