Investment fraud is a serious issue that can lead to significant financial loss for investors. Recently, allegations have been raised against Florence Capital Advisors, LLC (“FCA”) and Gregory A. Hersch (“Hersch”). The Securities and Exchange Commission (“Commission”) has instituted public administrative and cease-and-desist proceedings against the respondents, as they deem it appropriate and in the public interest.
Understanding the Allegation and FINRA Rule
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The allegation against FCA and Hersch arises from a failure to adequately disclose conflicts of interest related to client investments in a third-party private fund (the “Fund”). FCA was receiving substantial advisory fees from the Fund while simultaneously recommending investments in the Fund to FCA clients and advising them on their existing investments. This occurred between May 2017 and April 2019 (the “Relevant Period”).
The Financial Industry Regulatory Authority (FINRA) Rule 2111 requires that a firm or associated person have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer. This is based on the information obtained through reasonable diligence of the firm or associated person to ascertain the customer’s investment profile. The alleged failure to disclose substantial fees and the resultant conflicts of interest by FCA and Hersch can be considered a violation of this rule.
Importance for Investors
Such allegations are of paramount importance to investors as they highlight potential malpractices that can lead to financial losses. Investors rely on the transparency and integrity of financial advisors for making informed decisions. Any conflict of interest, if not adequately disclosed, can lead to biased advice, adversely affecting the investor’s portfolio.
Red Flags for Financial Advisor Malpractice
- Failure to disclose fees or conflicts of interest.
- Providing biased advice for personal gain.
- Non-compliance with FINRA rules and regulations.
Haselkorn & Thibaut, a national investment fraud law firm, is currently investigating the advisor and company. They offer free consultations to clients who may have been affected by this alleged malpractice.
How FINRA Arbitration Can Help
FINRA Arbitration is a streamlined process to resolve disputes between investors and brokers. It can help investors recover losses caused by investment fraud or malpractice. Haselkorn & Thibaut, with offices in Florida, New York, North Carolina, Arizona, and Texas, is experienced in representing clients in FINRA Arbitration. With over 50 years of experience and an impressive 98% success rate, they have successfully recovered financial losses for investors.
Feel free to contact them for a free consultation at their toll-free number 1-800-856-3352. They operate on a “No Recovery, No Fee” policy, ensuring that you do not have to pay unless they recover your losses.
