James Thomas Chapman, of Homewood, Alabama, a stockbroker formerly associated with Equitable Advisors LLC is the subject of a a customer initiated, investment related FINRA securities arbitration seeking damages based upon the allegations that Chapman recommended the purchase of certain alternative investments that were “unsuitable” for the customer. FINRA Arbitration No. 26-00140 (Jan. 20, 2026).
FINRA Rule 2111 with regard to suitability, specifically provides that:
(a) In recommending to a customer the purchase, sale or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.
(b) Prior to the execution of a transaction recommended to a non-institutional customer, other than transactions with customers where investments are limited to money market mutual funds, a member shall make reasonable efforts to obtain information concerning:
(1) the customer’s financial status;
(2) the customer’s tax status;
(3) the customer’s investment objectives; and
(4) such other information used or considered to be reasonable by such member or registered representative in making recommendations to the customer.
FINRA Manual Rule 2111.
In addition to particular investments which may be unsuitable, FINRA Manual Rule 2111 requires that a member or an associated person must have a reasonable basis to believe that a recommended investment strategy involving a security or securities is suitable for the customer, and specifically provides that:
(a) A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile.
A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.
FINRA Manual, FINRA Conduct Rule 2111 (CCH 2023).
Suitability determinations are a two-step process: the first step is reasonable diligence as to the risks associated with a particular security to determine if the product is suitable at all; the second step is to determine whether it is suitable for a specific client given their overall financial condition and expressed investment objectives.
Investors suffering losses as the result of the recommendation of unsuitable investments ought to consult with an attorney to determine their legal rights and obligations.
The Guiliano Law Group, P.C.
For more than thirty years, our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or a confidential evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
If you believe that you have been the victim of misconduct or fraud, contact us for a free consultation. We handle all cases on a contingency fee basis meaning that there is no cost or obligation, unless we are able to make a recovery for you.
