Michael Young, a financial advisor associated with Aurora Securities (CRD 46147) and Classic, LLC (CRD 159357) in North Dakota, is facing serious allegations of misconduct from a client. The customer dispute, filed on February 15, 2024, and currently pending resolution, claims that Young engaged in negligence, gross negligence, breach of fiduciary duty, breach of contract, fraud, negligent misrepresentations, and negligent supervision.
The client also alleges violations of state, SEC, and FINRA rules, including 10-04-15 of the North Dakota Securities Act of 1951, Section 206(4) of and Rule 206(4)-7 under the Investment Advisers Act of 1940, FINRA Rule 2010 (Standards of Commercial Honor and Principals of Trade), FINRA Rule 2111 (Suitability), FINRA Rule 3010 (Supervision), and FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices). The dispute involves leveraged ETFs, a complex financial product that can amplify both gains and losses.
Haselkorn & Thibaut, a national investment fraud law firm with offices in Florida, New York, North Carolina, Arizona, and Texas, is currently investigating Michael Young and his affiliated companies. With over 50 years of experience and a 98% success rate, the firm offers free consultations to clients and operates on a “No Recovery, No Fee” policy. Investors can reach out to them at their toll-free number: 1-888-885-7162 .
Understanding the Allegations and FINRA Rules
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The allegations against Michael Young are severe and encompass a wide range of misconduct. Negligence and gross negligence suggest that Young failed to exercise the level of care expected from a financial advisor, potentially causing harm to his client. Breach of fiduciary duty implies that he did not act in his client’s best interests, while breach of contract indicates a violation of the agreed-upon terms between the advisor and the client.
Fraud and negligent misrepresentations suggest that Young may have provided false or misleading information to his client, either intentionally or through carelessness. Negligent supervision implies that his affiliated companies, Aurora Securities and Classic, LLC, failed to adequately monitor and control his actions.
The alleged violations of FINRA rules are particularly concerning. FINRA Rule 2010 requires financial professionals to adhere to high standards of commercial honor and just and equitable principles of trade. FINRA Rule 2111 obliges advisors to recommend suitable investments based on their clients’ financial situation, risk tolerance, and investment objectives. FINRA Rule 3010 mandates that firms establish and maintain a system to supervise their associated persons’ activities. Lastly, FINRA Rule 2020 prohibits the use of manipulative, deceptive, or fraudulent devices in connection with the purchase or sale of securities.
The Significance for Investors
This case underscores the importance of working with trustworthy and ethical financial advisors. Investors rely on professionals like Michael Young to guide them through the complex world of investing and to make decisions that align with their financial goals. When an advisor breaches this trust, it can have devastating consequences for the investor’s financial well-being.
Leveraged ETFs, the product at the center of this dispute, are particularly risky and often misunderstood by investors. These instruments aim to amplify the daily returns of an underlying index, but their performance can deviate significantly from the index over longer periods due to the effects of compounding. Advisors must thoroughly explain the risks and characteristics of leveraged ETFs to their clients before recommending them. Investopedia provides a comprehensive overview of leveraged ETFs and their associated risks.
Investment fraud and bad advice from financial advisors can have severe consequences for investors. According to a study by the Stanford Center on Longevity and the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation, nearly one in five Americans aged 65 or older have been victims of financial fraud. The study also found that fraud victims tend to be more financially literate and more likely to take risks, highlighting the need for caution even among experienced investors.
This case also highlights the role of FINRA in protecting investors. By establishing and enforcing rules that promote transparency, fairness, and integrity in the financial industry, FINRA helps to maintain investor confidence and prevent misconduct. When advisors or firms violate these rules, they can face disciplinary action, including fines, suspensions, or even permanent barment from the industry.
Red Flags and Investor Recovery Options
Investors should be vigilant for red flags that may indicate financial advisor malpractice. These can include:
- Lack of transparency about investment strategies and risks
- Pressure to make quick decisions or invest in complex products
- Promises of guaranteed returns or unrealistic performance claims
- Unauthorized trades or inconsistencies in account statements
- Failure to return calls or provide timely information
If an investor suspects misconduct, they should promptly raise their concerns with the advisor and the firm’s compliance department. Documenting all communications and keeping detailed records of their investments can be crucial in building a case.
Investors who have suffered losses due to advisor misconduct may be able to recover their damages through FINRA arbitration. This process allows investors to seek compensation without going to court, often resulting in faster and more cost-effective resolutions. Experienced investment fraud attorneys, like those at Haselkorn & Thibaut, can guide investors through the arbitration process and help them build strong cases.
As the investigation into Michael Young and his affiliated companies unfolds, investors should closely monitor the situation and seek professional advice if they believe they have been impacted by the alleged misconduct. By working with reputable attorneys and staying informed about their rights and recovery options, investors can take steps to protect their financial futures in the face of advisor malpractice.
