Investment Planners, Inc. Financial Advisor, James Parrelly, Suspended By FINRA For 15 Days For Allegedly Exercising Discretion In A Customer Account

• May 14, 2020
• Investment Planners

James Parrelly (CRD # 728368) is a Financial Advisor at Investment Planners, Inc. in Dearborn, Michigan. James Parrelly has been in the securities industry since 1981and previously worked at Girard Securities.

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on May 5, 2020, James Parrelly was sanctioned by FINRA for allegedly executing “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.” As a result of the sanction, James Parrelly was suspended 15 days and fined $5,000.

For a copy of the FINRA sanction, click https://www.finra.org/sites/default/files/fda_documents/2019062166301%20James%20A.%20Parrelly%20CRD%20728368%20AWC%20va.pdf

Discretionary accounts are those in which the Financial Advisor is able to place trades without first consulting with the customer. Prior to establishing a discretionary account, Financial Advisors are required to obtain written authority to handle the account on a discretionary basis. Absent written authority, the trades can be challenged as unauthorized.

In addition to the aforementioned FINRA sanction, James Parrelly has eight prior customer complaints reflected on his CRD and two other regulatory infractions. Among the customer complaints against James Parrelly are the following:
• April 2019—”Statement of Claim alleges churning, negligence of duty and unsuitable investments.” Alleged damages are $500,000 and the matter remains pending.
• September 2010—”CLIENT ALLEGED UNAUTHORIZED, UNSUITABLE AND DISCRETIONARY TRADING,CHURNING AND EXCESSIVE COMMISSIONS.” The matter was settled for $90,000.
• 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 matter was settled for $150,000.
• June 1995—”BREACH OF FIDUCIARY DUTY, MISREPRESENTATION. RELIEF ASKED: RESTITUTION OF THE ORIGINAL PURCHASE AMOUNT OF $100,000.00, COMPENSATORY DAMAGES $10,000.00 EXEMPLARY DAMAGES OF $10,000.00.” The matter 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 matter 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 matter was settled for $27,000.
• June 1993—”BREACH OF FIDUCIARY DT; ACCOUNT RELATED-BRCH 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 matter was settled for $290,000.

James Parrelly has two prior regulatory disclosures from 2005 and 2006. In 2005, his registration in the State of Illinois was withdrawn after an investigation. In 2006, the NASD fined him for selling Class B shares of mutual funds without having reasonable grounds for believing that the transactions were suitable for the customer.

A For a full copy of James Parrelly’s FINRA disclosure report, click https://brokercheck.finra.org/individual/summary/728368#disclosuresSection

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
• 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 mwolper@wolperlawfirm.com.