The financial industry designates transactions in one of two ways: either a transaction is solicited or it is unsolicited. A solicited trade occurs where a registered representative contacts the client and initiates the buy or sell transaction. Conversely, where a client initiates the trade, the trade confirmation will indicate unsolicited denoting the registered representative did not contact the client to initiate the trade. The difference between a solicited and unsolicited trade is significant because registered representatives and broker-dealers may be held liable for unsuitable solicited trades, whereas they cannot be held liable, generally, for unsolicited trades.
FINRA’s Department of Enforcement investigated Gearhart and found he mismarked approximately 47 solicited transactions as unsolicited thereby causing Merrill Lynch’s books and records to be inaccurate in violation of federal securities laws. According to FINRA, Gearhart solicited each order by bringing the relevant security or transaction to the attention of the customer.
Based upon the foregoing misconduct, FINRA alleged Gearhart violated FINRA Rules 2010 and 4511. Specifically, FINRA Rule 4511 states: “Members shall make and preserve books and records as required under the FINRA rules, the Exchange Act and the applicable Exchange Act rules.” Accordingly, FINRA Gearhart Cox $7,500 and suspended him from the financial industry for 30 days.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment damage investing with Gearhart through Merrill Lynch, you may be eligible to bring a FINRA arbitration claim to recover your investment losses. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation or complete our free case evaluator.