Articles Tagged with Unit Investment Trusts

shutterstock_170709014The securities fraud attorneys of Gana LLP are investigating potential recovery options for investors with broker Glenn King (King). Recently The Financial Industry Regulatory Authority (FINRA) brought an enforcement action (FINRA No. 2015044444801). In addition, to the FINRA complaint, King’s BrokerCheck disclosures reveal an astonishing number of reported incidents including 1 investigation, 19 customer complaints, 1 firm termination, 2 financial disclosures – which includes a bankruptcy filing, and 1 judgement or lien.

The FINRA complaint alleges that from April 2008 through March 2011, while King was associated with brokerage firm Royal Alliance Associates, Inc. (Royal Alliance), King made fraudulent misrepresentations and omissions to seven Royal Alliance customers in connection with the sale of Unit Investment Trusts (UITs). FINRA found that King misrepresented to the customers that he would use their investment funds to purchase safe, no-risk bonds, and that King would not charge fees or commissions for the transactions. ln reality, King was alleged to have purchased 44 UITs that resulted in approximately $17,000 in realized losses to the customers, approximately $43,000 in unrealized losses, and approximately $38,000 in commissions to King.

FINRA also alleged that from January 2013 through December 2014, while King was associated with Buckman, Buckman & Reid (BBR), King engaged in a pattern of short-term trading in long-term investment products in the accounts of four customers. FINRA alleged that the pattern of trading was excessive and unsuitable, and resulted in approximately $163,000 in losses to the customers while profiting King by generating commissions of approximately $210,000.

Finally, FINRA alleged that from January 2013 through December 2014, King exercised discretion in the accounts of four BBR customers without their written authority or the approval of his brokerage firm to conduct the trading.

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shutterstock_189006551The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker Kenneth Hornyak (Hornyak) (Case No. 2013038511901) alleging that the broker failed to respond the regulator’s requests for documents and information. FINRA’s investigation appeared to focus on claims that Hornyak engaged in potential discretionary trading, unauthorized trading, and unsuitable short-term trading in Unit Investment Trusts (UITs). On May 11, 2015, Hornyak informed FINRA that he would not appear for questioning and the regulator subsequently barred the broker.

According to the BrokerCheck records kept by FINRA Hornyak has been the subject of at least four customer complaints, one regulatory action, and two employment terminations for cause. Customers have filed complaints against Hornyak alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, churning, and excessive sales charges among other claims.

Hornyak entered the securities industry in 1998 with Morgan Stanley. From March 2006, until January 2014, Hornyak was associated with Stifel, Nicolaus & Company, Incorporated. In January 2014, Stifel, Nicolaus terminated Hornyak for cause alleging that Hornyak was terminated because of violation of firm policies regarding exercising discretion without written authorization.

Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. The broker must first discuss all trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b).   These rules explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature.

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