FINRA Sanctions Broker Denny Darmodihardjo Over Excessive Trading

shutterstock_143685652The Financial Industry Regulatory Authority (FINRA) brought and enforcement action (FINRA No. 2012034029401) against broker Denny Darmodihardjo (Darmodihardjo) resulting in a $25,000 fine and an 18 month suspension from the securities industry. FINRA alleged that Darmodihardjo, between September 2009, and July 2011, engaged in excessive trading of three accounts owned by customer a customer referred to by the initials “AG” in violation of the FINRA rules and recommended unsuitable short-selling and margin use in transactions for the same customer also.

In addition to the FINRA action, Darmodihardjo has a long history of complaints and disclosures including two other regulatory actions, at least 13 customer complaints, one financial disclosure, and 4 judgments or liens. In January 2014, FINRA suspended Darmodihardjo for one month and imposed a $2,500 fine after the regulator alleged that Darmodihardjo failed to timely disclose the fact that he an outstanding federal tax lien. Darmodihardjo’s BrokerCheck record now lists several tax liens including a $35,771 lien disclosed in January 2015, a $16,240 lien disclosed in October 2014, a $49,422 lien disclosed in November 2013, and a $74,197 tax lien disclosed in October 2011.

Excessive trading occurs when a broker exercises control over a customer’s account and the level of trading activity is inconsistent with the customer’s investment objectives, financial situation, experience, and other needs. Excessive trading is measured by the turnover rate or the number of times the value of the account is turned over a period of time. Another measure used is the cost-to-equity ratio or the percentage of return on the customer’s average net equity needs to return to cover commissions and other account expenses over a period of time.

FINRA alleged that Darmodihardjo made recommendations for three accounts of a customer who was a retiree in his late 70s living on a fixed income and caring for his adult child. FINRA alleged that Darmodihardjo used his control over the account to excessively trade securities in a manner that was inconsistent with the customer’s investment objectives, financial situation, and needs.

One account was Darmodihardjo traded was alleged to have resulted in a turnover rate of 38.71 and a cost-to-equity ratio of 108.91%, causing losses of approximately $60,000, while was charging close to $69,000 in commissions and over $8,000 in additional fees and margin fees. This means that the account had to double its return during the time period just to break even, an impossibly high hurdle.

Darmodihardjo entered the securities industry in 1995. From May 2007 onward Darmodihardjo has been associated with Rockwell Global Capital LLC out of the firm’s Fort Lauderdale, Florida branch office location.

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 selling away and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.