Customers Bring Suitability and Churning Claims Against Advisor Arthur “Mel” Coffey

shutterstock_175137287The securities and investment attorneys of Gana LLP are interested in speaking with clients of Arthur “Mel” Coffey (Coffey). According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) Coffey has been the subject of at least 13 customer complaints, 2 judgments or liens, and 1 criminal matter. The customer complaints against Coffey allege a number of securities law violations including that the broker made unsuitable investments, engaged in churning (excessive trading), misrepresentations, negligence, fraud, and unauthorized trading other claims.

Coffey entered the securities industry in 1994. From October 2008, through May 2013, Coffey was associated with John Thomas Financial (John Thomas). Thereafter in March 2015, Coffey was registered with Tryco Securities, Inc. Finally, Coffey became associated with Legend Securities, Inc. in March 2015 out of the firm’s Miller Place, New York office location. Coffey’s former employer John Thomas, was run by Anastasios “Tommy” Belesis who recently agreed to be banned from the securities industry when the SEC accused him of defrauding investors in two hedge funds. In addition, John Thomas faced allegations of penny-stock fraud by FINRA after the firm reaped more than $100 million in commissions over its six-year history before it closed in July. According to new sources trainees at the firm earned as little as $300 a week to pitch stocks with memorized scripts.

In addition, almost all of the complaints against Coffey involve claims of churning. When brokers engage in churning the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.

The elements to establish a churning claim, which is considered a species of securities fraud, are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

The number of customer complaints against Coffey is high relative to his peers. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints. In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters. However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck. More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.

The securities fraud lawyers at Gana LLP represent investors who have suffered securities losses due to the mishandling of their accounts. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.