According to FINRA, Keith Michael Dagostino was assessed a deferred fine of $25,000 and suspended from association with any FINRA member in all capacities for 24 months for willfully violating Regulation Best Interest's Care Obligation by recommending speculative low-priced securities to retired and senior investors.
Dagostino recommended that retired and senior customers purchase speculative low-priced securities from microcap issuers. These recommendations were not in the customers' best interests given their financial situations and investment profiles. Each customer had a low risk tolerance and investment objectives of preserving capital and generating income for retirement—profiles fundamentally inconsistent with speculative microcap stocks.
Low-priced securities, often called penny stocks, are securities that trade at low prices (typically under $5 per share) and usually involve small, relatively unknown companies. These securities typically trade in over-the-counter markets rather than on major exchanges. Penny stocks carry extremely high risks including: lack of liquidity, making it difficult to sell shares; limited public information about the companies; susceptibility to manipulation and fraud; high volatility; and substantial risk of total loss.
For retired and senior investors with low risk tolerance seeking to preserve capital and generate income, speculative penny stocks are almost never appropriate. These investors typically need to protect their capital because they have limited ability to recover from losses and may be relying on their investments for living expenses. Income generation and capital preservation objectives are fundamentally incompatible with the high-risk, speculative nature of penny stocks.
The findings specifically note that the violation was willful, meaning Dagostino knew or should have known that his recommendations were not in the customers' best interests. Regulation Best Interest, which took effect in June 2020, requires broker-dealers and their associated persons to act in the best interest of retail customers when making recommendations. The Care Obligation specifically requires exercising reasonable diligence, care, and skill to understand potential risks and rewards of recommendations and to have a reasonable basis to believe recommendations are in customers' best interests.
Dagostino's unsuitable recommendations caused over $1.8 million in losses to customers. The magnitude of these losses reflects both the unsuitability of the investments and the substantial amounts customers invested based on Dagostino's recommendations.
Dagostino's member firm repaid the customers for the losses they realized as a result of his recommendations, making the customers whole financially. However, this restitution does not excuse the underlying misconduct.
The 24-month suspension is in effect from January 5, 2026, through January 4, 2028. This extended suspension reflects the seriousness of the violations, the willful nature of the misconduct, and the substantial customer harm involved.
For senior investors, this case serves as a strong cautionary tale about unsuitable investment recommendations. Investors should be extremely skeptical of recommendations for penny stocks or other highly speculative investments, particularly if they have conservative investment objectives.
