Securities Lawyers Blog
Broker Paul A. Thomas (Thomas) formerly with Lincoln Financial Advisors Corp. (Lincoln Financial) was suspended by The Financial Industry Regulatory Authority (FINRA) over allegations that Thomas engaged in unauthorized and/or improper discretionary penny stock trading, engaged in unsuitable penny stock trading, and mismarked the trade tickets for penny stock transactions as unsolicited, when they were solicited trades.
Thomas has been in the securities industry since 2000 and was employed by Lincoln Financial as a registered representative through his termination on October 14, 2011. Thomas has approximately 15 customer disputes filed against him. The vast majority of these disputes involve allegations concerning improper penny stock trading.
A “penny stock” is a security issued by a small or micro-cap company having less than $100 million in market capitalization. Penny stocks typically trade at less than $5 per share and are generally quoted on over-the-counter exchanges such as on the OTC Bulletin Board. The risks of penny stocks include the fact that they may trade infrequently. Thus, it is often difficult to liquidate a penny stock holding once acquired and at the time the investor wants to. Second, it is often difficult to find accurate quotes for penny stocks. Consequently, penny stocks often fluctuate wildly day-to-day and investors may lose their whole investment.
FINRA alleged that Thomas engaged in unauthorized trading in penny stocks for two customers. In one customer’s case, FINRA found that Thomas invested approximately $115,000 of the customer’s rollover funds from her husband’s account in penny stocks without the customer’s authorization. FINRA also alleged that during various times from March 2010, through September 2011, Thomas engaged in improper discretionary trading in penny stocks for three customers. The three customers authorized an initial purchase of a particular penny stock but Thomas made subsequent purchases without the prior written authorization.
FINRA also found that Thomas’ recommendations in penny stocks were unsuitable for four customers. With respect to one customer, FINRA found that the penny stock transactions were unsuitable because he was unemployed and had very little liquid net worth and needed liquid assets for daily living. With respect to three other customers FINRA determined that the penny stock transactions were unsuitable in light of their age, investment objectives, and because of the large concentrations of penny stocks in their portfolios.
In addition, FINRA found that Thomas entered into an agreement with a customer where Thomas promised to return investment losses if the account value was not made whole by a certain date. FINRA found that Thomas’ conduct violated FINRA Rules 2150(b) and 2010. Finally, in connection with eight customers Thomas improperly marked their penny stock trade tickets as unsolicited when they were actually solicited causing Lincoln Financial’s books and records to be incorrect.
The attorneys at Gana Weinstein LLP are experienced in investigating claims concerning the unsuitable sales of penny stocks. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.