Securities brokers play a paramount role in helping individual and corporate clients make informed investment decisions. Through their skills and experience, they advise clients on the most suitable securities to buy or sell depending on various market factors. But what happens when these trustworthy professionals cross the line and engage in unethical practices? Lifemark Securities Corp., a brokerage firm based in Rochester, New York, is currently treading these perilous waters right now.
I’m Emily Carter, a financial analyst and legal expert with a solid background in financial markets and legal regulations. I’ve drawn on my vast experience to shed some light on this brewing storm about Lifemark Securities Corp. and their questionable practices. As Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Allegations, Case Information, and Impact on Investors
CRD #: 16204 Lifemark Securities Corp. is facing serious allegations that it recommended inappropriate GWG L Bonds to investors. These are bonds offered by GWG Holdings, which purchases life insurance policies. The company purported that investors would benefit from the payouts from the death benefits of these policies. However, for this to work, the policyholders had to pass away before GWG Holdings paid out too many premiums.
Now, this is a stern reminder that every financial decision we make has far-reaching implications. According to research by the Certified Financial Planner Board of Standards, approximately two-thirds of Americans have been victims of financial fraud. This statistic underscores the significance of due diligence before investing, especially in complex financial products like GWG L Bonds.
One of the firm’s reps, Geoffrey Wolterstorff, was recently suspended by the SEC following allegations that he failed to adhere to the Regulation Best Interest’s Duty of Care obligation when he recommended the GWG L Bonds. This rule requires brokers to thoroughly assess the risks associated with an investment product and take into consideration their customers’ risk tolerance levels. Consequently, Wolterstorff was fined $15,000, ordered to refund $24,991 to his customers, and slapped with a monetary penalty of $3,430.
The Financial Advisor’s Background, Broker Dealer and Past Complaints
Life Mark Securities Corporation is a duly registered firm offering both brokerage and investment advisory services. However, the serious allegations and complaints against it mar its otherwise clean reputation. Notably, the firm charges separate fees for its diverse services. Therefore, potential clients should gauge the holistic cost of engaging with the firm before signing on the dotted line.
Apart from the recent allegations, Lifemark Securities Corp. has had several complaints lodged against it. In the current allegation, a few brokers such as Richard Pascale and Garrett Moretz are facing disputes concerning the GWG L Bonds, along with several others who’ve allegedly recommended unsuitable investments. A few, like John Derbin, have been penalized and suspended by FINRA.
FINRA Rule, Explanation in Simple Terms
The Financial Industry Regulatory Authority (FINRA) is tasked with protecting investors and upholding the integrity of the securities industry. FINRA’s rules are paramount in safeguarding investors’ interests, with one of the most notable ones being the Rule 2111, or the Suitability Rule. In its most basic form, this rule stipulates that a broker must have reasonable grounds for believing that a recommended transaction or investment strategy is suitable for the customer.
In simple terms, it means that the broker must consider the customer’s financial situation, investment objectives, and risk tolerance level before suggesting any investment strategy. Therefore, brokers who make unsuitable recommendations that fall short of this rule are bound to face the consequences.
Consequences and Lessons Learned
The consequences for ignoring FINRA’s rules can be severe, as Geoffrey Wolterstorff found out. His negligence resulted in a significant fine and refund to his customers, not to mention the reputational damage he’s suffered.
As an investor, it’s pivotal to realize that any financial advice you receive should align with your financial goals and risk appetite. Seek a second opinion when necessary and don’t be afraid to ask questions. Remember, a properly diversified investment portfolio forms the bedrock of a sound financial future. Therefore, choose your investments wisely and align your strategies with your financial objectives.
As these allegations against Lifemark Securities Corp. unfold, let this be a learning experience to every investor. Use it as an opportunity to bolster your understanding of financial markets, legal regulations, and how to identify and avoid inappropriate investment recommendations.
Keep in mind that you are the chief caretaker of your financial journey. Apply due diligence in every investment decision you make and remember to always put your financial well-being first.
