- January 17, 2021
- Triad Advisors
Mark Just (CRD#: 1138738) has been a registered broker with Triad Investors, LLC since 2004; he is also an investment adviser with The Just Company since 1991.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on August 26, 2020, a customer dispute was filed against Mark Just for unsuitable alternative investments. The complainant requested damages of $150,000.
Summary Detail of Allegations
There have been several additional customer disputes filed against Mark Just since 1999. Three of them have been denied; customers alleged that Mark Just didn’t inform them of surrender charges and recapture charges.
On January 30, 2020, a customer complaint was filed against Mark Just alleging he violated the suitability rule; that complaint is pending and $100,000 is sought in damages.
On June 28, 2018, a customer complained that violations of suitability led to underperformance of his portfolio. The complainant in this open case seeks $997,269 in damages.
For a copy of Mark Just’s FINRA BrokerCheck in this case, click here.
Why Violations of Suitability Are a Problem for Investors
Clients expect that broker-dealers will assist them in choosing investment products that are aligned with their risk tolerance and financial goals. When a broker-dealer instead looks out for their own self-interest, it’s a violation of regulatory rules. For example, if a broker recommended private placements such as non-traded real estate investment trusts (non-traded REITs) and non-traded business development companies (BDCs), the broker is likely to make more in commissions but the investor faces a higher risk because of the illiquidity of the investment. Instead, brokers are obligated to make recommendations that are specific to the customer’s needs, investment goals, and risk tolerance.
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.
FINRA has defined the standards in which investment recommendations made by brokerage firms and registered financial advisors are evaluated. The FINRA suitability rule focuses on three fundamental concepts: (1) reasonable basis suitability, (2) quantitative suitability, and (3) customer-specific suitability.
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
Failure by a financial advisor to adhere to these requirements is evidence of negligence or, worse, investment fraud. If you as the investor can establish, at a minimum, negligent misconduct, you may be entitled to recover your investment losses.
The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, P.A., 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.