- July 21, 2020
- David A Noyes & Co.
Scott L Reed (CRD # 2213108) was previously a registered broker at FS Investment Solutions, LLC in Philadelphia, PA. Scott L Reed has been in the securities industry since 1994 and previously worked at David A. Noyes & Company.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), Scott L Reed has been the subject of nine (9) customer complaints, alleging sales practice misconduct:
• April 2018—”The claimants allege a failure to conduct due diligence in the sale of several private placements and non-traded real estate investment trusts, as well as fradulent and negligent misrepresentations and an omission of material information, which made these investments unsuitable and inappropriate for the claimants to participate in. They are also alleging that the respondent breached their fiduciary duty to the client and failed to supervise their advisors.” The matter settled for $395,000.
• April 2018—”The claimants allege that Mr. Reed failed to conduct proper due diligence on the Private Placement Investment and did not fully disclose the known risks of the investments, recommendation for investments were unsuitable and inappropriate.” The matter settled for $95,000.
• March 2018—”The allegations are the Scott Reed sold unsuitable investments in BRS Labs to the claimants and that he continuously misrepresented the actual value of the BRS shares after purchase.” The matter settled for $96,000.
• January 2018—”The allegations are that Scott Reed sold unsuitable investments in [third party], [third party] and [third party] and that the clients did not qualify as accredited investors, made false statements and [third party] failed to supervise Mr. Reed.” The matter settled for $300,000.
• December 2017—”The allegation is that Scott Reed Violated conduct rule 2111 by selling BRS and Digonex alternative investments that were unsuitable for his clients. They also believe that Mr. Reed made numerous misrepresentations and omissions regarding the investments.” The matter settled for $145,000.
• October 2017—”From 2009 through 2011 claimants allege that Reed sold them unsuitable private investments, false promises on investment performance and downplayed risk of the investment.” The claim was denied.
• October 2017—”Claimant alleges that the sale of investments in BRS (8/2011) and Digonex (1/2010 & 6/2010) were unsuitable and inappropriate for the claimant given her financial situation. In addition, the claimant alleges that David A. Noyes had inadequate supervision of Scott Reed’s activities in the sale of BRS and Digonex. Mr. Reed is not named as a party in the “Initial Statement of Claim.” The matter settled for $70,000.
• September 2017—”The claims relate to BRS stock purchased by the claimants in October 2011, October 2012 and December 2014. The claimants are alleging unsuitable investments and negligent account management. Mr. Reed is not named as a party in the “Initial Statement of Claim.” The matter settled for $50,000.
• May 2017—”Mr. Reed is party to a pending FINRA arbitration case alleging a variety of claims while employed at David A. Noyes & Co.” The matter settled for $400,000.
For a copy of Scott L Reed’s CRD, click https://brokercheck.finra.org/individual/summary/2213108#disclosuresSection
Private placements is a broad term that describes securities that are not offered for sale through a public exchange. These can include promissory notes, private equity offerings, small, start-up businesses, etc. Private Placements are issued under Regulation D under the Securities Act of 1933. Regulation D provides exemptions from the more rigorous Securities and Exchange Commission (SEC) registration requirements and allows companies to offer and sell securities without extensive disclosures. The absence of standard disclosure requirements often creates.
The Securities Exchange Commission, federal courts, and FINRA have all found that brokerage firms have a duty to conduct a reasonable investigation concerning the private placements issuer’s representations concerning the security. A brokerage’s firm’s due diligence obligation also stems from suitability obligations requiring the broker to have reasonable grounds to believe that a recommendation to purchase, sell or exchange a security is suitable for the customer. In order to meet the due diligence obligation, the brokerage firm and/or financial advisor must make reasonable efforts to gather and analyze information about the private placement, the issuer and its management, the business prospects of the issuer, the assets held by or to be acquired by the issuer, the claims being made by the issuer in the offering materials, and the intended use of proceeds of the offering. The failure to determine this and other material information would necessarily preclude a financial advisor from disclosing to a customer the material aspects of a transaction.
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:
• Other investments
• Financial situation and needs
• Tax status
• Investment objectives
• Time horizon
• Liquidity needs
• Risk tolerance
• Any other information disclosed by the customer
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 firstname.lastname@example.org.