Thomas Alan Braley (CRD# 1264896 / Saginaw, MI), a securities agent of Wells Fargo Clearing, and a former agent of Merrill Lynch, recently settled a customer dispute involving allegations that he recommended unsuitable investments to the customer and engaged in excessive trading. Mr. Braley has three other customer complaints on his record, which involve allegations of excessive trading and unauthorized trading.
Breach of Fiduciary Duty
Mr. Braley is a sworn fiduciary. This means that he is duty bound to act in a manner he reasonably believes to be in the best interest of his clients. A breach of fiduciary duty occurs when a financial advisor violates the trust and confidence that has been reposed in him or her by the client.
All financial advisors have a duty to recommend suitable investments and investment strategies to their clients. A recommendation is suitable if it comports with the client’s investment objectives, risk tolerance, investment experience, investment time horizon, liquidity needs, and income needs. The duty to recommend suitable investments cannot be disclaimed through risk disclosures or waivers.
To prevail on a churning claim, an investor generally has to prove three things: (1) that the broker has engaged in excessive trading in the investor’s account (turnover ratio of 6 is presumptively excessive); (2) that the broker had actual or de facto control over the account; and (3) that the trading was not reasonable or justifiable.
Unauthorized trading occurs when a broker who does not have discretionary trading authority over an account undertakes a trade without obtaining the client’s prior approval. Unauthorized trading is often a means to another end, such as churning or misappropriation of assets.