Fidelity Brokerage Services LLC and its representative, Kelly Johnston, are currently facing a serious customer dispute alleging a failure to disclose the potential for principal loss in fixed income mutual funds and the unsuitability of these investments for the institutional customer, an SEC-registered public company. The pending dispute, filed on August 21, 2023, involves a staggering $25 million in alleged damages, raising significant concerns for investors who have entrusted their assets to Fidelity Brokerage Services LLC and Kelly Johnston.
The gravity of this allegation cannot be understated, as it strikes at the core of an investment advisor’s fiduciary duty to act in the best interests of their clients. If proven true, the failure to disclose the risk of principal loss in fixed income mutual funds and the alleged unsuitability of these investments for the institutional customer could constitute a severe breach of trust and a violation of industry regulations.
For investors, this pending dispute serves as a stark reminder of the importance of thoroughly vetting their financial advisors and the investment products they recommend. It is crucial for investors to understand the risks associated with their investments and to ensure that their advisors are providing them with complete and accurate information.
Understanding the Allegation and FINRA Rule Violations
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In simple terms, the institutional customer alleges that Kelly Johnston failed to disclose that fixed income mutual funds, which are typically considered less risky than equity investments, could still lose principal. Additionally, the customer contends that these investments were unsuitable for their specific financial situation and goals.
FINRA, the Financial Industry Regulatory Authority, has established rules and regulations to protect investors from such misconduct. FINRA Rule 2111, known as the “Suitability Rule,” requires that financial advisors have a reasonable basis to believe that their investment recommendations are suitable for their clients based on factors such as the client’s financial situation, risk tolerance, and investment objectives.
Furthermore, FINRA Rule 2020 prohibits financial advisors from engaging in any manipulative, deceptive, or fraudulent conduct, which includes the failure to disclose material information about an investment’s risks.
The Importance for Investors
This case highlights the critical role that transparency and suitability play in the financial advisory relationship. Investors rely on their advisors to provide them with accurate and complete information about the risks and potential rewards of their investments. When advisors fail to do so, they not only jeopardize their clients’ financial well-being but also undermine the trust that is essential to a successful advisory relationship.
Moreover, the suitability of investments is a key factor in determining whether an advisor has acted in their client’s best interests. By recommending unsuitable investments, advisors expose their clients to unnecessary risk and potential losses.
As an investor, it is essential to remain vigilant and to thoroughly research any investment opportunity before committing your hard-earned money. If you suspect that your financial advisor has engaged in misconduct or has recommended unsuitable investments, it is crucial to seek legal guidance from experienced professionals.
Red Flags and Recovering Losses
Investors should be aware of several red flags that may indicate financial advisor malpractice, including:
- Failure to disclose material information about an investment’s risks
- Recommending investments that are inconsistent with the client’s risk tolerance or investment objectives
- Excessive trading or churning of client accounts to generate commissions
- Unauthorized trading or misappropriation of client funds
If you believe that you have suffered losses due to your financial advisor’s misconduct, you may be able to recover your losses through FINRA arbitration. This process allows investors to seek compensation for damages caused by their advisor’s wrongdoing.
Haselkorn & Thibaut, a national investment fraud law firm with offices in Florida, New York, North Carolina, Arizona, and Texas, is currently investigating Fidelity Brokerage Services LLC and Kelly Johnston in connection with this pending customer dispute. With over 50 years of combined experience and a 98% success rate, Haselkorn & Thibaut has a proven track record of helping investors recover their losses.
If you have invested with Fidelity Brokerage Services LLC or Kelly Johnston and believe you may have been affected by the alleged misconduct, contact Haselkorn & Thibaut for a free consultation at 1-800-856-3352. They operate on a “No Recovery, No Fee” basis, meaning you pay nothing unless they successfully recover your losses.
To learn more about Kelly Johnston‘s background and regulatory history, visit their FINRA BrokerCheck page.
