Financial advisors have a duty not only to manage the interests of their clients but also to adhere to the highest level of conduct. Change rattled the securities industry when former broker and investment advisor, Michael Patrick Raineri (CRD#: 4817558), faced serious allegations of customer fund conversion. As alleged, in five years from August 2018, Raineri dubiously shifted his client’s expenses onto himself, subsequently invoicing his client to $135,000, which reportedly far exceeded the actual fees.
The seriousness of these allegations lies in their potential to erode investor confidence. Investing is largely about trust—the belief that an advisor is competent, transparent, and puts the client’s interests first. Cases like this shake that trust, impacting investors’ behavior and likely deterring potential investors from participating in the market.
As the finance sage Benjamin Graham once said, “The investor’s chief problem- and even his worst enemy – is likely to be himself”. Indeed, dubious financial advisors like Raineri can become that enemy, exploiting their clients instead of enriching them.
The Background of the Financial Advisor
Michael Patrick Raineri’s Professional History
Entering the securities industry in 2006, Michael Patrick Raineri built a varied career before his fall from grace. He was associated with various reputable firms, including Pacific West Securities, Inc., Cetera Advisors, LLC, KMS Financial Services, Inc., and Securities America, Inc. The breadth of his experience arguably added credibility to his professional profile. However, prior to these allegations, Raineri was discharged from Securities America, Inc. following failures to comply with firm policies.
In January 2023, Raineri faced yet another grievance. A customer alleges that he transferred approximately $135,000 from their bank account without their consent. This dispute is still pending, further punctuating a troubling image of a financial advisor who played fast and loose with his client’s funds.
Breaking Down the FINRA Rule
At the heart of these allegations is the violation of FINRA Rule 2150. In its simplest terms, this rule condemns a member’s misuse of a customer’s funds or securities. It emphasizes the obligation of financial advisors to preserve the integrity of their client’s funds, and any perceived betrayal of this duty is a grave matter.
Added to this is the potential infraction of FINRA Rule 3240, which bars advisors from borrowing money from their clients for specific circumstances. For the ordinary person, this just means your financial advisor isn’t supposed to borrow money from you. If they do, it’s a severe breach, which could indicate potential theft or conversion of client assets.
The Aftermath, Consequences, and Lessons Learned
In light of these allegations, Raineri has faced stringent sanctions, including being barred from associating with any FINRA member in all capacities. Driven by the findings, he consented to this outcome without admitting or denying the allegations.
This case teaches investors an important lesson: Always be aware of your financial advisor’s actions. As remarkable as the scenario might seem, it’s financially difficult to blindly trust your advisor.
As an investor, conducting periodic reviews of your accounts is crucial, ensuring all activities align with your admitted goals and risk tolerance. This vigilance – complimented by understanding the rules governing your advisor’s conduct – can go a long way in protecting your financial future.
