Gana LLP recently filed a claim against Legend Securities, Inc. (Legend) on behalf of a customer with the Financial Industry Regulatory Authority (“FINRA”) alleging that Legend and Legend broker, Michael Guilfoyle, recommended unsuitable investments while churning his account and executing unauthorized trades in violation of FINRA rules and other applicable law.
In 2013, the customer received a cold call from Guilfoyle soliciting his business. Guilfoyle assured the client that he would only invest according to his investment objectives. In reliance upon Guilfoyle’s assurances, the client transferred his money to Legend. In early 2014, Guilfoyle and Legend also coaxed the client into investing his wife’s money, which she inherited from her parents. Soon after the client transferred the funds to Legend, Guilfoyle allegedly leveraged over concentrated the portfolio and began to churning the account. “Churning” is the Wall St. vernacular when there is unnecessarily high or excessive trading activity in an investor’s account, simply for the purpose of generating commissions for the broker. This is a violation of Securities and Exchange Commission (“SEC”) and FINRA rules.
More egregiously, Guilfoyle failed to contact the client concerning the trades being made in his account and acted without any prior authorization. Guilfoyle allegedly day-traded different stock positions earning fees for himself while providing no benefit to the client. For example, Guilfoyle concentrated the client’s account in speculative small cap stocks, such as Voxeljet AG (Voxeljet) that had only recently gone public. At the time, analysts warned that Voxeljet was a highly volatile stock, not suited for investors looking for long-term growth. Guilfoyle’s misconduct ultimately cost client nearly his and wife’s entire account value.
According to its website, Legend claims to have “retained long term relationships with clients through trust, loyalty, and a commitment to service that is unique to the securities industry” while boasting “over 100 years combined securities industry experience [and an] an in-depth expertise in all securities markets and investments.” Despite such claims, Legend allegedly failed to supervise Guilfoyle, who was then able to take advantage of an innocent investor.
Unfortunately, this sort of activity is all too common. Many brokerage firms often lack supervisory procedures or simply fail to enforce the procedures they have in place. While the broker and the firm continue to generate revenue, innocent investors are often stripped of their savings.
Gana LLP specializes in representing investors in cases of broker misconduct. If you have suffered investment losses or financial irregularities, please contact Gana LLP for a free consultation.