Securities Lawyers Blog
The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Christopher Cowans (Cowans). According to BrokerCheck records Cowans has been the subject of at least nine customer complaints and one regulatory action. The customer complaints against Cowans allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.
In December 2014, the State of Massachusetts required Cowans brokerage firm, Arthur W. Wood Company, Inc. (Arthur W. Wood), to agree to a heightened supervision plan for Cowans in light of the fact that Cowans “has been the subject of twelve customer complaints…alleging…making excessive trades…”
The most recent complaint was filed in December 2015 alleging that Cowans engaged in excessive trading from March 2011 until December 2013 causing $600,000. The complaint is still pending.
When brokers engage in excessive trading, sometimes referred to as 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. Churning is considered a species of securities fraud. The elements of the claim 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 Cowans 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.
Cowans entered the securities industry in 1987. From June 2009 until October 2014 Cowans was registered with Morgan Stanley. Finally, from November 2014 through present Cowans has been associated with Arthur W. Wood out of the firm’s Boston, Massachusetts office location.
The investment fraud attorneys at Gana Weinstein 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.