The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against Brian Lawrence Stephan (Stephan) in connection with allegations Lawrence recommended unsuitable mutual fund transactions, and also mismarked the transactions as unsolicited instead of solicited. If FINRA’s allegations are true and proved, then Stephan may be liable to the investor for investment damages or disciplined by FINRA, or both.
Stephan (FINRA CRD No. 4222796) entered the securities industry in 2000. From 2003 to 2014, and during the relevant time period, Stephan worked for LPL Financial LLC (“LPL”). Subsequently, Stephan worked for Commonwealth Financial Network and currently is registered with American Wealth Management, Inc. Stephan’s FINRA BrokerCheck Report discloses one customer dispute, which was denied.
FINRA’s Department of Enforcement investigated Stephan and alleged he recommended unsuitable mutual fund transactions to an 88-year old customer from May 2012 to May 2014. Specifically, FINRA alleged Stephan recommended that the customer invest in mutual fund Class A shares in twenty different mutual fund families. The recommendations were unsuitable because by splitting the purchases amongst many mutual fund families the customer was not eligible to receive discounts on sales charges. Thus, the customer allegedly incurred excessive sales charges and Stephan received excessive commissions.
In addition, FINRA alleged Stephan mismarked the transactions as “unsolicited” when the transactions were allegedly solicited. FINRA also asserts Stephan provided false information on his firm’s mutual fund exchange forms when he represented the elderly customer wanted to exchange the mutual funds because she was unhappy with the performance when in fact Stephan solicited the exchanges on his own. Stephan’s potential misconduct in misclassifying the trades is significant because potentially liability for sales misconduct is often determined based upon whether a transaction is solicited or unsolicited. In addition, Stephan’s misconduct caused LPL’s books and records to be inaccurate in violation of FINRA Rule 4511.
Based upon the foregoing misconduct, FINRA alleges Stephen violated FINRA Rules 2111 and 2010. FINRA Rule 2111, for example, requires financial advisors to recommend suitable investments and investment strategies to their clients (known as the suitability rule) based upon the client’s unique financial situation, including investment objectives and risk tolerance. A financial advisor also must have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer.
Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.