Gary Arnold Suspended by FINRA for Alleged Reg BI Violations

Gary Arnold (CRD #: 852859), a broker registered with Investment Network Inc., has been suspended by FINRA, according to his BrokerCheck record, accessed on November 7, 2024. If you have questions about his alleged conduct as a broker, keep reading.

FINRA Suspension

On October 16, 2024, Gary Arnold consented to the entry of findings that he allegedly failed to establish a system of supervision reasonably designed to comply with Regulation Best Interest and FINRA Rules.

According to a Letter of Acceptance, Waiver & Consent (AWC), Gary Arnold allegedly served as Investment Network Inc.’s President, Chief Executive Officer, and Chief Compliance Officer starting in at least February 2019.

Investment Network Inc. (INI) allegedly engaged in the following misconduct with regard to recommendations of private placement offerings of pre-initial public offering (pre-IPO) funds that took place between October 2020 and May 2021:

• Misrepresented to investors that INI would receive only a 10% sales commission from its sale of these offerings when it actually had an agreement with the offerings’ issuer to receive an additional 5% in compensation plus half of any carried interest.
• Lacked a reasonable basis to believe that the offerings were in the best interests of at least some clients by failing to confirm that the issuer had access to the pre-IPO shares described in the offering documents or that issuer’s prices and markups were not excessive.
• Failed to implement a reasonable Customer Identification Program (CIP) for client accounts opened by brokers selling these offerings, and approved these accounts without sufficient information to verify client identities.
• Failed to make required filings with FINRA related to these offerings.

Additionally, the AWC alleged that INI and Gary Arnold failed to establish and enforce a supervisory system, including written supervisory procedures (WSPs), that would achieve compliance with Regulation Best Interest.

More specifically, the firm allegedly had no WSPs governing private placement offerings and did not designate a supervisor for these offerings. The firm’s WSPs allegedly also failed to comply with the REgulation Best Interest’s Care Obligation with regard to excessive trading.

The AWC further alleged that INI and Gary Arnold failed to conduct due diligence and supervise recommendations of private placement offerings to ensure that they were in investors’ best interests. The firm’s supervisory system allegedly also failed to achieve compliance with FINRA Rule 2111’s suitability requirements.

The AWC alleged that INI violated FINRA Rule 3310(b), 5123, and 2010; Section 17(a)(3) of the Securities Act of 1933; and Regulation Best Interest. The AWC also alleged that Gary Arnold violated FINRA Rules 3110 and 2010.

Regulation Best Interest

Regulation Best Interest expands on the requirements of FINRA Rule 2111, which defines suitable investment recommendations. Brokerage firms must uphold a Duty of Care, the Conflict of Interest Obligation, and the Disclosure Obligation. These obligations and duties require brokerage firms to disclose conflicts of interest.

Before recommending investments, firms must also research the market for investments that could offer similar benefits at a lower cost. 

FINRA Rule 3310

FINRA Rule 3310 requires firms to have anti-money laundering programs in place in order to comply with the Bank Secrecy Act. The Bank Secrecy Act requires financial institutions to report suspicious transactions. 

FINRA Rule 3110

FINRA Rule 3110 requires that firms establish systems of supervision to maintain their compliance with securities regulations. This includes appointing supervisors and providing them with Written Supervisory Procedures (WSPs).

FINRA Rule 5123

FINRA Rule 5123 defines the required FINRA filings concerning private placements of securities and the types of private placements exempt from these requirements.

FINRA Rule 2010

FINRA Rule 2010 holds brokers to high standards of commercial honor and just and equitable principles of trade.

Securities Act of 1933

Sections 17(a)(3) of the Securities Act of 1933 prohibit the use of deceptive schemes or practices to defraud customers participating in interstate securities transactions.

Sanctions

Investment Network, Inc. consented to the following sanctions:

• Censure
• 60-day suspension from conducting private placement activities
• $210,000 fine
• Disgorgement of $63,769.60 plus interest
• Undertaking requiring certification of the firm’s supervisory system to achieve compliance with Regulation Best Interest

Gary Arnold consented to the following sanctions:

• 3-month suspension from associating with FINRA member firms in all principal capacities
• $10,000 fine
• Requirement to pass the requisite exam to requalify as a general securities principal

His suspension began on November 4, 2024, and will end on February 3, 2025.

You can access the full AWC here.

Background Information

Gary Arnold has passed the following exams:

• Series 65 – Uniform Investment Adviser Law Examination
• Series 63 – Uniform Securities Agent State Law Examination
• Series 99TO – Operations Professional Examination
• SIE – Securities Industry Essentials Examination
• Series 7 – General Securities Representative Examination
• Series 14 – Compliance Officer Examination
• Series 4 – Registered Options Principal Examination
• Series 53 – Municipal Securities Principal Examination
• Series 27 – Financial and Operations Principal Examination
• Series 24 – General Securities Principal Examination

Gary Arnold is a registered broker in 11 states and a registered investment adviser in Ohio.

He has also worked for the following firms:

• Shepard & VRBanac Securities (CRD#:7854)
• Charter One Securities (CRD#:13373)
• Locust Street Securities (CRD#:1703)
• Vestax Securities Corporation (CRD#:10332)
• ManEquity (CRD#:5249)

Kurta Law Can Help

If you worked with Gary Arnold and you have concerns about your investments, please contact us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.

For over 20 years, Kurta Law has advocated on behalf of investors who want to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm that exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.