CLIFFORD RONALD REID Investment Fraud Investigation

March, 2025 | Based in New York, NY

Take action now to safeguard your investments and financial security. If you’ve experienced losses while working with Clifford Ronald Reid, don’t delay in seeking professional advice. Call 800-950-6553 or complete our online form to schedule your no-obligation case evaluation with our expert securities fraud attorneys.

Critical Information About Clifford Ronald Reid

• Full Name: Clifford Ronald Reid
• CRD Number: 1905920
• Current Location: New York, NY
• Current Employer: Reid & Rudiger LLC
• Office Address: 55 Broad Street, 28th Floor, New York, NY 10004
• Registration Status: Currently registered with 1 Self-Regulatory Organization and licensed in 47 U.S. states and territories
• Experience: In the industry since 1989 (over 35 years)
• FINRA BrokerCheck: 5 Customer Disputes and 1 Ongoing Investigation
• Previous Employers: Nichols, Safina, Lerner & Co. Inc. (1994-1998), Gruntal & Co. Incorporated (1991-1994), First Investors Corporation (1989-1991)
• Ability to Recover Losses: Investors may be eligible for FINRA arbitration to recover losses

A Concerning Pattern of Customer Complaints

Clifford Ronald Reid, a financial advisor with over three decades in the industry, is currently under investigation for serious allegations of investment fraud and misconduct. As a broker with Reid & Rudiger LLC in New York, Reid has accumulated a troubling history of customer complaints and regulatory issues that raise significant red flags for investors.

The Financial Industry Regulatory Authority (FINRA) has recently issued a Wells Notice to Reid, making a preliminary determination to recommend disciplinary action for alleged violations of FINRA Rules 2111 and 2010 for excessive trading, also known as “churning.” This investigation (examination #20190606476) remains pending and represents a serious regulatory concern regarding Reid’s trading practices.

Beyond this current investigation, Reid’s FINRA BrokerCheck report reveals a pattern of customer complaints that allege various forms of misconduct. These complaints consistently highlight several troubling practices that investors should be aware of, particularly when entrusting their hard-earned money to financial professionals.

The Nature of the Allegations

According to FINRA records, Reid has been the subject of multiple customer disputes over the years, with allegations including:

1. Excessive Trading (Churning): Multiple customers have alleged that Reid engaged in excessive trading in their accounts, generating substantial commissions for himself at the expense of his clients. This practice involves making numerous transactions that primarily benefit the broker through commission generation rather than serving the client’s investment objectives.
2. Unsuitability: Several complaints indicate that Reid recommended investments that were not suitable for his clients’ financial situations, objectives, or risk tolerances. Suitability is a fundamental obligation of brokers, requiring them to recommend only investments and strategies that align with their clients’ specific circumstances.
3. Breach of Fiduciary Duty: As a financial advisor, Reid had a legal obligation to put his clients’ interests ahead of his own. Multiple customers have alleged that he failed to uphold this duty, instead prioritizing his own financial gain through excessive commissions and unsuitable recommendations.
4. Failure to Supervise: Complaints have noted inadequate supervision of accounts, allowing problematic trading patterns to continue unchecked. Brokerage firms have an obligation to monitor their representatives’ activities and intervene when inappropriate practices are detected.
5. Failure to Follow Instructions: At least one complaint alleged that Reid failed to place stop-loss orders as instructed by the client, potentially exposing them to greater losses. This type of allegation suggests a disregard for client directives and potentially unauthorized trading activities.

A History of Settlements

Reid’s BrokerCheck report reveals that several of these customer complaints have resulted in settlements, suggesting that there may have been merit to the allegations:

• In August 2021, a complaint alleging unsuitability, excessive trading, failure to supervise, and breach of fiduciary duty was settled for $21,000. According to FINRA records, this complaint involved allegations related to both over-the-counter (OTC) equities and listed stocks.
• In August 2019, another complaint was settled for $120,000. This substantial settlement amount suggests serious concerns about the trading practices in question.
• In August 1999, a complaint alleging breach of fiduciary duty was settled for $7,500, with Reid personally contributing the entire amount. When a broker personally contributes to a settlement, it can indicate acknowledgment of problematic conduct.
• In December 1998, a complaint alleging unsuitable recommendations, breach of fiduciary duty, and failure to follow instructions regarding investments was settled for $20,000, with Reid personally contributing the entire amount. The complaint specifically referenced OTC equity investments.

Additionally, there is a pending arbitration case filed in February 2023 alleging similar misconduct, including unsuitability, excessive trading and commissions, failure to supervise, and breach of fiduciary duty. This ongoing case suggests that concerns about Reid’s practices may extend to recent activities.

Understanding Excessive Trading (Churning)

Excessive trading, or “churning,” is a serious form of broker misconduct that occurs when a financial advisor engages in excessive buying and selling of securities in a customer’s account primarily to generate commissions for the broker rather than to benefit the customer. This practice is explicitly prohibited by FINRA Rule 2111, which requires that brokers recommend only suitable transactions and investment strategies.

Churning typically involves:

1. High Turnover Rates: Frequent buying and selling of securities within an account, measured by the turnover ratio (the ratio of total purchases to average account equity). A turnover ratio of 6 or higher in a year is often considered evidence of possible churning.
2. Excessive Transaction Costs: Commission costs and fees that are disproportionate to the account value and that substantially reduce or eliminate any chance of profitability. When costs exceed 4% of the account value annually, this may indicate excessive trading.
3. Broker Control: The broker exercising de facto or actual control over trading decisions in the account, even in non-discretionary accounts where the client technically approves each trade.
4. In-and-Out Trading: A pattern of purchasing securities and then selling them after a short period, only to use the proceeds to buy different securities that are also sold quickly.
5. Cost-to-Equity Ratio: Also known as the “break-even ratio,” this measures how much an account needs to appreciate just to cover the costs of trading. A ratio exceeding 20% is generally considered excessive.

The current FINRA investigation into Reid specifically cites potential violations of Rule 2111 (Suitability) and Rule 2010 (Standards of Commercial Honor and Principles of Trade) related to excessive trading, which suggests that regulatory authorities have found evidence supporting these concerns.

The Impact on Investors

The consequences of investment fraud and misconduct can be devastating for investors, particularly those approaching or in retirement. Victims of churning and unsuitable recommendations often experience:

1. Erosion of Principal: Excessive trading typically results in substantial transaction costs that steadily deplete the investor’s principal, making it difficult or impossible to recover losses even in favorable market conditions.
2. Tax Consequences: Frequent trading can generate short-term capital gains, which are typically taxed at higher rates than long-term gains, further reducing the investor’s effective returns.
3. Opportunity Costs: Money lost to excessive fees and unsuitable investments could have been growing in appropriate investments aligned with the investor’s goals and risk tolerance.
4. Emotional Distress: The discovery of broker misconduct often leads to significant emotional and psychological distress for victims, including anxiety, depression, and loss of trust in financial professionals.
5. Retirement Insecurity: For retirees or those nearing retirement, investment losses can force difficult lifestyle adjustments, delayed retirement, or returning to work.

Red Flags for Investors

Investors working with any financial advisor, including Clifford Ronald Reid, should be vigilant for these warning signs of potential misconduct:

1. Frequent Trading: Receiving trade confirmations much more frequently than expected or noticing a high volume of transactions in your account statements.
2. Declining Account Value Despite Market Gains: If your portfolio consistently loses value during periods when the broader market is performing well, this could indicate unsuitable recommendations or excessive trading.
3. High Commission Costs: If a significant portion of your investment returns is being eaten up by fees and commissions, this may indicate churning.
4. Unauthorized Transactions: Any trades made without your explicit approval or knowledge (if you have a non-discretionary account).
5. Pressure to Approve Trades: If your broker frequently contacts you urging quick decisions on trades or investments without adequate explanation.
6. Complexity Without Clarity: Investments that are too complex to understand or that the broker cannot or will not explain clearly.
7. Concentration in Risky Investments: Portfolios heavily concentrated in high-risk, speculative, or illiquid investments that don’t align with your stated investment objectives or risk tolerance.
8. Resistance to Questions: A broker who becomes defensive or evasive when asked about investment performance, strategy, or transaction costs.
9. Promises of Guaranteed Returns: Any guarantee of specific investment returns should be treated with extreme skepticism, as legitimate investments carry risk.
10. Account Statement Irregularities: Delayed statements, discrepancies between verbal representations and written statements, or confusing documentation.

The Legal and Regulatory Framework

Financial advisors like Clifford Ronald Reid operate within a strict regulatory framework designed to protect investors. Key regulations relevant to the allegations against Reid include:

1. FINRA Rule 2111 (Suitability): Requires that brokers have a reasonable basis to believe that a recommended transaction or investment strategy is suitable for the customer based on factors including the customer’s investment profile, financial situation, and needs.
2. FINRA Rule 2010 (Standards of Commercial Honor): Requires brokers to observe high standards of commercial honor and just and equitable principles of trade.
3. FINRA Rule 3260 (Discretionary Accounts): Governs how brokers can exercise discretion in customer accounts and the approvals required.
4. FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices): Prohibits the use of manipulative, deceptive, or fraudulent practices.
5. FINRA Rule 3110 (Supervision): Requires brokerage firms to establish and maintain a system to supervise the activities of their registered representatives.
6. SEC Regulation Best Interest: Requires broker-dealers to act in the best interest of retail customers when making recommendations, going beyond the suitability standard.
7. Fiduciary Duty: In many circumstances, financial advisors have a fiduciary duty to their clients, requiring them to place the client’s interests above their own and to disclose all relevant facts and conflicts of interest.

Violations of these rules can result in disciplinary actions by FINRA, including fines, suspensions, or even permanent bars from the securities industry. Additionally, investors who have suffered losses due to such violations may be eligible to pursue recovery through FINRA’s arbitration process.

Steps for Affected Investors

If you believe you may have been a victim of misconduct by Clifford Ronald Reid or any other financial advisor, there are several important steps you should take:

1. Review Your Account Statements: Carefully examine your account statements to identify any unusual or unauthorized transactions, patterns of excessive trading, or unexpected losses.
2. Document Everything: Keep detailed records of all communications with your broker, including emails, letters, and notes from phone conversations or meetings.
3. Request a Written Explanation: Ask your broker or the brokerage firm to provide a written explanation for any concerning transactions or performance issues.
4. File a Complaint with the Firm: Submit a formal complaint to the compliance department of the brokerage firm (Reid & Rudiger LLC).
5. Consult with a Securities Attorney: Speak with an attorney who specializes in securities law and investment fraud to understand your legal options for recovering losses.
6. Understand Time Limitations: Be aware that there are strict deadlines for filing claims. FINRA arbitration claims generally must be filed within six years of the event giving rise to the claim.
7. Report to Regulators: Consider filing a complaint with FINRA and your state securities regulator to alert them to the potential misconduct.
8. Protect Your Credit: If unauthorized trading has occurred or your accounts show unexplained losses, monitor your credit reports for any unusual activity.

How Our Investment Fraud Attorneys Can Help

Our law firm specializes in representing investors who have suffered losses due to broker misconduct. When dealing with cases involving financial advisors like Clifford Ronald Reid, our experienced securities attorneys can provide crucial assistance by:

1. Conducting a Forensic Analysis: Our team performs a detailed forensic analysis of your account statements to identify patterns of churning, unsuitable recommendations, or other forms of misconduct. We employ specialized software and expertise to calculate turnover rates, cost-to-equity ratios, and other metrics that can establish excessive trading.
2. Calculating Damages: We precisely calculate the extent of your losses, including both direct losses and opportunity costs. Our damage models account for what your portfolio should have earned had it been properly managed according to your investment objectives.
3. Navigating FINRA Arbitration: We guide you through every step of the FINRA arbitration process, which is typically the required forum for resolving disputes with brokers. Our attorneys have extensive experience with this specialized forum and understand how to effectively present your case.
4. Building a Compelling Case: We gather evidence, interview witnesses, and develop a comprehensive legal strategy tailored to your specific situation. This includes obtaining expert testimony when necessary to strengthen your claim.
5. Negotiating Settlements: Many cases can be resolved through settlement negotiations, potentially avoiding the need for a full arbitration hearing. Our attorneys are skilled negotiators who know how to leverage the evidence to achieve favorable settlements.
6. Representing You at Hearings: If a settlement cannot be reached, our attorneys provide skilled representation at arbitration hearings. We present your case persuasively and counter the defense strategies typically employed by brokerage firms.
7. Contingency Fee Structure: Our firm typically works on a contingency fee basis, meaning you pay no fees unless we recover money for you. This aligns our interests with yours and provides access to quality legal representation regardless of your current financial situation.

The time to act is now. If you’ve experienced investment losses while working with Clifford Ronald Reid, don’t let another day pass without exploring your recovery options. Your financial security is too important to leave at risk. Call 800-950-6553 or submit our online form for a confidential consultation to determine if you may be entitled to compensation for your investment losses.

Chetan Patil

Chetan Patil is the founder and Managing Partner of the Patil Law. He brings over 15 years of extensive experience in diverse complex disputes and transactions, across the country. Mr. Patil specializes in litigations, trials, arbitrations, and appeals of complex securities, FINRA, financial and business disputes, with an emphasis in securities, financial services, and financial regulatory law.