• June 14, 2023
• Stifel Nicolaus & Company

Gregory Sain (CRD#: 1629842) is a registered Broker and Investment Adviser at Morgan Stanley in Beverly Hills, CA.

Broker’s Background

He entered the securities industry in 1987 and previously worked for Stifel, Nicolaus & Company, Inc.; Stone & Youngberg, LLC; Prudential-Bache Securities, Inc.; and Municicorp of California.

Silicon Valley Bank, Signature Bank and First Republic Bank

The Wolper Law Firm has been contacted by clients of Gregory Sain, who were recommended to purchase concentrated fixed income positions in Silicon Valley Bank, Signature Bank and First Republic, along with other financial sector securities.

In March 2023, Silicon Valley Bank experienced a “run on the bank” after wealthy deposit holders withdrew large amounts of money from the bank.  It is customary for banks to invest customer deposits in securities, including treasury bonds.  However, typically, the banks hedge those investments in order to control downside risk.  Silicon Valley Bank’s investment portfolio consisted of treasury bonds and long-dated bonds.  When interest rates rose, those investments declined in value.  When deposit holders requested withdrawals from the bank, Silicon Valley Bank had to liquidate its bond positions at a loss position.  The cycle of large customer withdrawals and an improperly hedged collateral portfolio at the bank caused a rapid decline in assets at the bank.  Once the bond losses were publicly announced, panic ensued and more deposit holders withdrew their money.

Within 48 hours, Signature Bank experienced the same pressure of large customer withdrawals, prompting the FDIC to take control of the bank.  In early May 2023, First Republic became the next bank to fail due to a combination of factors, including a lack of liquidity of bank assets, uninsured customer deposit, which caused panic among deposit holders, credit rating downgrades and rising interest rates.

Customers who purchased equity or debt securities issued by Silicon Valley Bank, Signature Bank or First Republic Bank have now experienced devastating losses.  The Federal Reserve and FDIC have investigated the collapse of these banks and have determined that mismanagement was the primary cause of the bank failures.  These are things that brokerage firms and financial advisors are required to analyze and monitor when they recommend securities and on an ongoing basis.  Moreover, concentrating portfolios in any asset class or sector is speculative and can cause cascading losses as with the case of investors who held positions in financial sector securities Silicon Valley Bank, Signature Bank or First Republic Bank.

Current And Past Allegations Of Conduct Leading To Investment Loss

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), Gregory Sain has three customer complaints disclosed on his Form U4.

• March 2023, a customer dispute against Gregory Sain was resolved. The allegation states, “Customer alleges that registered representative recommended positions that were not in line with the customers’ risk profile or instructions. Timeframe February 2021 to April 2022.” The customer dispute was denied.
• April 2016 — “Client alleges that registered representative’s recommendation to purchase a preferred security on April 10, 2014 was out of the scope of client’s mandate to buy municipal bonds.” The customer dispute was denied.
• September 2005 — “SUITABILITY OF TRANSACTIONS TRADE PERIOD 1999 – 2003.” The customer dispute was settled for $58,500.

For a copy of Gregory Sain’s FINRA BrokerCheck, click here.

We Help Investors Recover Investment Losses

Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.

Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.

Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.