The Financial Industry Regulatory Authority (FINRA) recently sanctioned broker Tory Duggins (Duggins) concerning allegations that between November 2011 through May 2012, Duggins exercised discretionary power in two customer accounts by making 17 transactions without obtaining prior written authorization from the customers. Under NASD Conduct Rule 2510(b) Duggins was required to provide written authorization to his firm in order to engage in discretionary trading activity. In addition, FINRA alleged that Duggins made false statements on a member firm semi-annual compliance questionnaire concerning his exercise of time and price discretion in customer accounts.
Duggins entered the securities industry in July 2002. Since that time Duggins has been associated with a total of nine different brokerage firms. Most recently from October 2008 through December 2012 Duggins was associated with vFinance Investments, Inc. (vFinane). Thereafter, Duggins was associated with National Securities Corporation (National Securities) until January 2014. Currently, Duggins is associated with Avenir Financial Group.
In addition to FINRA’s claims, Duggins public disclosures reveal that Duggins has been subject to multiple tax liens totaling over $300,000. Often times such extensive debts influence brokers to engage in excessive trading and churning in order to generate commissions to pay down personal debts. Often times, authorized trading goes hand and hand with churning. In Duggins’ case, three customers have brought complaints against the broker alleging excessive trading designed to generate commissions for the broker.
One of the elements of a churning claim is that the broker exercised control over the account. Control can be shown through various factors including whether the transactions are made at the broker’s recommendation or through unauthorized trades where the broker fails to contact the client prior to executing the trade.
Investment churning is trading activity characterized by purchasing and selling activity that is excessive and serves no practical purpose for the investor. Brokers engage in churning solely to generate commissions without regard for the client’s interests. Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana LLP are experienced in representing investors in cases of excessive trading, churning, and unsuitable investments in high risk securities. Our consultations are free of charge and the firm is only compensated if you recover.