FINRA Alleges Caldwell International Securities Engaged In Systematic Churning

shutterstock_155271245The investment attorneys of Gana LLP are investigating a regulatory complaint filed (Disciplinary Proceedings No. 2014039091903) by The Financial Industry Regulatory Authority’s (FINRA) against brokerage firm Caldwell International Securities Corp. [CRD No. 104323], and its employees Greg Caldwell [CRD No. 2816295], Lennie Freiman [CRD No. 1007506], Paul Jacobs [CRD No. 4658235], Alain Florestan [CRD No. 2818942], Alex Etter [CRD No. 2981742], Lucas Lichtman [CRD No. 5542092], Richard Lim [CRD No. 4949289], and Richard Lee [CRD No. 2768039]. FINRA’s allegations are that For more than three and a half years, Respondent Caldwell International Securities Corp. (Caldwell) “put profits before customers, growth before compliance, and subterfuge before transparency.” FINRA alleged Caldwell has a “culture of non-compliance” causing there to be serious sales practice, supervisory, and reporting violations.

Our firm has written several articles on brokers associated with or previously employed by Caldwell concerning similar allegations by customers and regulators. See FINRA Bars Broker Ricardo Fancois During Investigation Into Sales Practices; FINRA Bars Broker Honetta Kao During Investigation Into Sales Practices; FINRA Bars Broker James Starks During Investigation Into Sales Practices; FINRA Bars Broker Marat (a/k/a Matt) Zeltser; FINRA Bars Richard Adams Over Churning Customer Accounts; FINRA Files Complaint Against Chris Fulco Over US Coal Corporation Transactions

FINRA alleged that from December 2010 through July 2014 Caldwell through Greg Caldwell, Lennie Freiman, and Paul Jacobs, failed to enforce a supervisory system reasonably tailored to its business model that allowed many of its brokers to recommend an unsuitable active trading investment strategy that the representatives did not understand and which caused significant financial losses to customers while generating substantial profits for the firm. FINRA also alleged that other brokers at Caldwell were allowed to engage in trading with discretion without authorization, and trading which exceeded the benchmarks for excessive trading and churning without any meaningful supervision of this activity. FINRA found that Caldwell and its principals were aware of virtually all of this misconduct but took no meaningful steps to stop the activity or supervise it because doing so would reduce the commissions and fees being generated from their customers.

This activity caused Caldwell and its brokers to receive numerous customer complaints that FINRA alleges went unreported to FINRA. Specifically, FINRA alleged that Rasheed (Richard) Adams, James Starks (a/k/a Jim Star), Ricardo Francois, Alain Florestan, Alex Etter, Richard Lee, Lucas Lichtman, and Richard Lim, recommended that their customers engage in an unsuitable active trading investment strategy. FINRA stated that these representatives had no reasonable basis to recommend such a strategy to their customers and cited 15 customer accounts that suffered over $1.1 million in realized trading losses while paying over $1 million in commissions and fees.

The investment fraud attorneys 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