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FINRA Fines and Suspends Herbert Kaye for Discretionary Trade Violations and Unsuitable Recommendations

Herbert Leonard Kaye, a Delray Beach, Florida based broker with First Allied Securities, Inc. (First Allied), submitted a letter of acceptance, waiver, and consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he entered discretionary trades in a customer’s account without the necessary prior written customer authorization.

FINRA found that although Herbert Kaye had the verbal consent of his customer, he neglected to obtain the necessary written consent when he entered over 2,000 trades in equities and exchange traded funds (ETFs) in the customer’s account and generated over $173,000 in commissions. FINRA’s findings state that Herbert Kaye also recommended that his customer invest $1.1 million in a gold and precious minerals mutual fund, for which he received $11,000 in gross commissions. This mutual fund recommendation was unsuitable in light of the customer’s age, investment objectives, and the fact that Herbert Kaye allegedly knew that his customer wanted to avoid investments with large market fluctuations.

Consequently, Herbert Kaye was assessed a deferred fine of $25,000, ordered to disgorge $11,000 in commissions he received, and was suspended from association with any FINRA member in any capacity for four months. The suspension is in effect from September 15, 2014 through January 14, 2015.

Stockbrokers, registered representatives, and other financial industry professionals have been known to engage in many types of misconduct which are in violation of industry rules and procedures. In order to protect customers from such misconduct, FINRA rules require brokerage firms to establish and implement a reasonable supervisory system. The implementation of the rules requires supervisors to monitor its employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker dealers and their supervisors fail to establish and implement these protective measures, they may be held liable to account holders for losses flowing from the employees’ misconduct. As a result, account holders who have suffered losses stemming from unauthorized transactions or an unsuitable recommendation by their broker or registered representative can bring forth claims to recover damages against broker-dealers like First Allied Securities, which have a duty to supervise its employees in order to prevent broker misconduct.

If you have lost money that could be connected to an unsuitable investment that did not fit with your investment objectives, contact Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation about whether you have a valid claim against the stockbroker to recover your losses.

The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over , Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at pearce@rwpearce.com, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.