Reg BI Suitability Violations - Transcript

Regulation Best Interest (Reg BI) requires brokers to act in their clients’ best interests when making investment recommendations, ensuring that the products and strategies they suggest are suitable and aligned with the client’s financial goals. There are four pillars of Reg BI – (1) the disclosure obligation, (2) the care obligation, (3) the conflict of interest obligation, and (4) the compliance obligation.

The care obligation encapsulates some of the notions involved in the previous standard of care, known as suitability. This is because the care obligation requires brokers to consider the retail investor’s customer profile information, this would include factors like their age. Violations of Reg BI’s care obligation can cause significant financial harm to investors, and addressing these issues requires strategic legal representation. At Malecki Law, we help clients hold brokers and brokerage firms accountable for failing to meet their obligations under Reg BI.

Under Reg BI, brokers are required to recommend investments that are in the best interest of their clients. This standard includes ensuring that their recommendations are suitable based on the client’s:

• Financial Goals: Recommendations must align with the investor’s short- and long-term objectives.
• Risk Tolerance: The level of risk involved in the investment must be appropriate for the client’s comfort level and financial situation.
• Investment Profile: Factors such as age, income, investment experience, and liquidity needs must be considered.

Reg BI violations occur when brokers fail to consider these factors or prioritize their own financial incentives, such as commissions or bonuses, over their clients’ best interests. Examples include:

• Recommending high-risk investments to conservative investors.
• Advising clients to invest heavily in proprietary products or illiquid securities.
• Engaging in excessive trading to generate commissions (churning).

This type of conduct does not comply with the Reg BI, which brokers must follow for their clients. In turn, the aforemented misconduct may result in significant financial losses.

When investors suspect Reg BI care obligation violations, their initial interactions with the brokerage firm can significantly impact the outcome of their case. Many investors believe that expressing their concerns directly to the firm will result in assistance or restitution. However, brokerage firms often approach these complaints with their legal defenses in mind.

Key risks include:

• Obtaining Admissions: Firms may use your statements to create admissions or weaken your case before legal proceedings begin.
• Delaying Tactics: Firms may stall the resolution of your complaint, making it harder to recover damages or preserve evidence.
• Misdirection: Firms may attempt to downplay the violation or shift blame onto the investor.

To protect your rights and ensure your case is handled effectively, it’s essential to engage an experienced securities lawyer from the outset.

An experienced securities lawyer can guide you through the complexities of Reg BI claims, helping you avoid common pitfalls and maximize your chances of success. Key benefits of retaining legal counsel include:

1. Evaluating Your Case:
   A lawyer can assess whether a broker’s recommendation violated Reg BI’s care obligation requirements and quantify the financial harm caused.
2. Handling Communications with the Firm:
   Your lawyer can manage all interactions with the brokerage firm, ensuring that your rights are protected and that the firm cannot use your statements against you.
3. Building a Strong Claim:
   Legal counsel will gather evidence, such as account statements, communications with the broker, and relevant documentation, to establish liability and damages.
4. Pursuing Compensation:
   Whether through arbitration, litigation, or negotiation, a lawyer will advocate for the recovery of your losses and any other remedies available under the law.

At Malecki Law, we have extensive experience representing investors in Reg BI suitability cases. Our team works diligently to hold brokers and firms accountable for their violations.

If you believe you’ve been harmed by a broker’s failure to meet Reg BI’s care obligation standards, taking the following steps can help protect your rights:

1. Avoid Direct Complaints: Do not engage in back-and-forth communications with the brokerage firm without consulting an attorney.
2. Preserve Evidence: Keep all account statements, trade confirmations, and correspondence with your broker or the firm.
3. Consult a Securities Lawyer: Engage legal counsel as soon as possible to evaluate your case and guide you through the process.

At Malecki Law, we help clients navigate the complexities of Reg BI claims, ensuring their rights are protected from the earliest stages of the case.

Reg BI care obligation violations can lead to significant financial losses and undermine the trust investors place in their brokers. If you suspect a broker failed to act in your best interest and potentially put their interests ahead of your own, Malecki Law is here to help. Our experienced securities lawyers are dedicated to protecting investors and pursuing justice in these cases.

If you have questions for an experienced securities lawyer, reach out to Malecki Law to schedule a free consultation by calling 212-943-1233. We value your privacy and will ensure all communications remain confidential. Malecki Law is based in New York and represents clients across the world.

Transcript:

Regulation best interest is like many things in the law there is legalese to it there is the way lawyers speak and the way lay people speak and it is really important for you to go out and get experienced Securities counsel to assist you through the landmines around complaining to a brokerage firm when you complain to a brokerage firm many people think if I just tell them how terrible this is they’re going to help me but what they’re going to try to do in that pre-suit correspondence back and forth is to get admissions out of you that they think will be helpful in any case you may bring later they’re going to try to delay your case so it is really important from the very earliest point in time to retain experienced Securities Law Council in these cases.