- July 18, 2022
- Investment Planners
James Parrelly (CRD#: 728368) was a previously registered Broker and Investment Advisor.
He entered the securities industry in 1981 and previously worked for Investment Planners, Inc.; First Midwest Securities, Inc.; Girard Securities, Inc.; Spelman & Co., Inc.; American Investment Services, Inc.; North American Financial Group, Inc.; North American Financial Group, Inc.; Hamilton Investments, Inc.; Painewebber Incorporated; and Kidder, Peabody & Co., Inc.
Current And Past Allegations Of Conduct Leading To Investment Loss
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in June 2022, FINRA sanctioned James Parrelly, permanently barring him from all capacities indefinitely, beginning June 28, 2022. The FINRA sanction states, “Without admitting or denying the findings, Parrelly consented to the sanction and to the entry of findings that he refused to appear for on-the-record testimony requested by FINRA during the course of an investigation regarding his potential use of his personal email address to conduct securities business, in violation of his member firm’s WSPs.”
For a copy of the FINRA sanction, click here.
In addition, James Parrelly has been the subject of nine customer complaints and other regulatory disclosures, including the following:
- September 2021 — A disclosure cited bankruptcy.
- April 2021 — “Allegations of negligence, unsuitable trading activity in account over course of the relationship.” The customer dispute was settled for $25,000.
- June 2020 — “At time of his resignation, the Representative, who was on heightened supervision, apparently was engaging or had engaged in activities in violation of firm policies and/or FINRA rules, including: (1) use of personal email and texts to communicate with firm clients regarding their accounts; (2) failing to abide by terms of his heightened supervision plan (by continuing to use his personal email and texts and by not providing copies of his personal emails and texts to the firm); and (3) unauthorized trading. Representative resigned in response to the anticipated commencement of an internal review into his activities.” James Parrelly voluntarily resigned from Investment Planners, Inc.
- May 2020 — “Without admitting or denying the findings, Parrelly consented to the sanctions and to the entry of findings that he executed discretionary transactions in the securities account of a customer pursuant to the customer’s prior verbal authorization, but without written authorization from the customer or written approval from his member firm.” James Parrelly was sanctioned by FINRA with a civil and administrative penalty and fine of $5,000, and a suspension from all capacities for 15 business days from June 1, 2020 to June 19, 2020. For a copy of the FINRA sanction, click here.
- April 2019 — “Statement of claim alleges churning, negligence of duty and unsuitable investments.” The customer dispute was settled for $375,000.
- September 2010 — “CLIENT ALLEGED UNAUTHORIZED, UNSUITABLE AND DISCRETIONARY TRADING,CHURNING AND EXCESSIVE COMMISSIONS. 10/06 – 12/09.” The customer dispute was settled for $90,000.
- October 2007 — “RESPONDENT WILL WITHDRAW HIS SALESPERSON REGISTRATION IN THE STATE OF ILLINOIS AND WILL NOT RE-APPLY FOR REGISTRATION FOR ONE YEAR. RESPONDENT HAS PAID COST OF INVESTIGATION.” The state of Illinois issued a consent resolution and sanctioned James Parrelly with an order of withdrawal consent.
- October 2006 — “NASD RULES 2110, 2310, INTERPRETATIVE MATERIAL-2310-2 – JAMES A. PARRELLY RECOMMENDED AND EFFECTED TRANSACTIONS IN CLASS B SHARES OF MUTUAL FUNDS FOR A PUBLIC CUSTOMER WITHOUT HAVING REASONABLE GROUNDS FOR BELIEVING THAT THE RESULTANT TRANSACTIONS WERE SUITABLE FOR THE CUSTOMER IN THAT THE CUSTOMER WOULD HAVE FINANCIALLY BENEFITED FROM OWNING CLASS A SHARES IN THE IDENTICAL FUNDS; RECOMMENDED THAT THE CUSTOMER SELL CLASS B SHARES ONLY TO THEREAFTER RECOMMEND SHE PURCHASE ADDITIONAL CLASS B SHARES OF THE SAME FUND AND WAS SUBJECTED TO CONTINGENCY DEFERRED SALES CHARGES AS A RESULT; ENGAGED IN SHORT-TERM TRADING OF CLASS B SHARES IN ANOTHER ACCOUNT OF THE CUSTOMER; AND RECOMMENDED THE CUSTOMER USE CASH DISTRIBUTIONS FROM MUTUAL FUND POSITIONS TO PURCHASE ADDITIONAL SHARES OF THE SAME FUND, GENERATING NEW COMMISSIONABLE SALES INSTEAD OF REINVESTING THE SHARES WITH THE FUND GROUP.” James Parrelly was subject to a decision and order of offer of settlement from the National Association of Securities Dealers (NASD), sanctioned with a civil and administrative penalty/fine, and a suspension from December 18, 2006 through January 6, 2006. For a copy of the NASD sanction, click here.
- April 2003 — “UNSUITABLE, HIGH RISK, SPECULATIVE TRADING, BREACH OF CONTRACT, FRAUD, PROMISSORY ESTOPPEL, NEGLIGENCE, MALPRACTICE, BREACH OF FIDUCIARY DUTY, BREACH OF MICHIGAN SECURITIES LAW.” The customer dispute was settled for $150,000.
- June 1995 — “BREACH OF FIDUCIARY DUTY, MISREPRESENTATION. RELIFE ASKED: RESTITUTION OF THE ORIGINAL PURCHASE AMOUNT OF $100,000.00, COMPENSATORY DAMAGES $10,000.00 EXEMPLARY DAMAGES OF $10,000.” The customer dispute was settled for $100,000.
- May 1995 — “BREACH OF FIDUCIARY DUTY, ACCT RELATED; FAILURE TO SUPERVISE, CHURNING, MISREPRESENTATION. RELIEF ASKED: ACTUAL/COMPENSATORY $83,754.00 PLUS ACT/COMP $30,000.00 PLUS. PUNITIVE/EXEMPLARY $200,000.00, PLUS ACT/COMP $4,441.00 PLUS PUNITIVE/EXEMPLARY $10,000.00 EACH ASKED JOINTLY/SEVERALLY.” The customer dispute was settled for $58,000.
- April 1995 — “SUITABILITY, MISREPRESENTATION, UNAUTHORIZED TRADING, CHURNING. RELIEF ASKED: ACTUAL AND COMPENSATORY $120,000.00 JOINTLY AND SEVERALLY, PUNITIVE/EXEMPLARY $20,000 JOINTLY/SEVERALLY.” The customer dispute was settled for $27,000.
- June 1993 — “BREACH OF FIDUCIARY DT; ACCOUNT RELATED-BREACH OF CONTRACT; MISREPRESENTATION. TOTAL ACTUAL/COMPENSATORY DAMAGES, ASKED AMOUNT $1,185,154.00 JOINTLY AND SEVERALLY; TREBLE DAMAGES, ASKED AMOUNT $3,555,465.00 JOINTLY AND’ SEVERALLY.” The customer dispute was settled for $290,000.
- January 1986 — “PURCHASE OF SECURITIES WERE UNSUITABLE, RELIEF REQUEST $86,800.” The customer dispute was resolved with an award of $86,800 to the client.
For a copy of James Parrelly’s FINRA BrokerCheck, click here.
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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.
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