On March 18, 2020, former Kestra Investment Services, LLC (Kestra) stockbroker James Blake Daughtry (CRD# 3272282) was barred by FINRA. In connection with an investigation by FINRA Enforcement—and as set forth in a Letter of Acceptance, Waiver and Consent (AWC) under which Mr. Daughtry neither admitted nor denied FINRA’s findings of fact—he consented to an industry bar following an investigation into purported “fraudulent and unauthorized transactions in customers’ accounts.”

As alleged in the AWC, “On February 21, 2020 . . . FINRA staff sent a request to Daughtry for on-the-record [OTR] testimony pursuant to FINRA Rule 8210.” Subsequent to FINRA’s request, Mr. Daughtry, through his counsel, acknowledged receipt of FINRA’s request for OTR testimony, which is akin to a deposition. By refusing to appear for FINRA’s OTR interview, FINRA determined that Mr. Daughtry had violated FINRA Rules 8210 and 2010.

Mr. Daughtry’s career in the securities industry began in 1999, when he was affiliated with Liberty Securities Corporation. Most recently, from February 2015 until his separation from employment in March 2020, Mr. Daughtry was employed as a registered representative with Kestra, in the brokerage firm’s Dothan, Alabama branch office. As of the date of this writing, FINRA BrokerCheck discloses that Mr. Daughtry is the subject of two pending customer disputes. One pending dispute alleges “unauthorized transactions, misrepresentations, negligence and breach of fiduciary duties” and seeks $65,000 in damages. The other pending dispute alleges losses of “approximately $1.5 million in connection with Daughtry allegedly soliciting clients to open an account with a third party registered investment advisor who the SEC found to have been engaged in fraud.”

When a broker refuses or otherwise fails to comply with a request by FINRA for information and documents pursuant to Rule 8210, then the broker has violated Rule 8210, as well as Rule 2010, which requires FINRA members to “observe high standards of commercial honor and just and equitable principles of trade.” Further, when a financial advisor engages in unauthorized transactions in a customer’s account on a discretionary basis—without prior written authority and approval to use such discretion—then the broker is in violation of NASD Rule 2510(b) and FINRA Rule 2010. And in those instances where a broker deviates from Rule 2010, he or she can be held liable for losses suffered by a customer. Moreover, any broker-dealer employing that registered representative may also be held liable for failure to supervise any potential misconduct.

The attorneys at Giarrusso Law Group LLC have significant experience in working closely with investors to resolve all manner of issues concerning investment losses, including losses suffered due to securities fraud or negligence by a broker or financial advisor. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim are invited to contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation.