According to BrokerCheck records, in August 2017, FINRA sanctioned Keith Michelfelder (Michelfelder) for allegedly effecting “at least 16 transactions in the accounts of a member firm customer without having obtained prior written authorization from the customer and written acceptance of the accounts as discretionary by his firm. The findings stated that the firm’s policies prohibited the use of non-firm email addresses to conduct firm business. In 2010 and 2011, Michelfelder signed annual certifications agreeing to use the firm’s domain email only for communications with customers and concerning firm business. Nevertheless, during July 2012, Michelfelder knowingly used a non-firm email address to communicate with the above customer.” Michelfelder was fined $10,000 and was suspended for 60 days. In November 2017, Keith’s FINRA registration was revoked for failure to pay fines.
In August 2012, a customer alleged he discovered numerous unauthorized trades in his account. The customer was granted an award of $702,037.
In March 2011, a customer alleged Michelfelder engaged in unauthorized trading. This dispute settled for $61,500.
Advisors are not allowed to engage in unauthorized trading. Unauthorized trading occurs when a broker sells securities without the prior consent from the investor. All brokers, who do not have discretionary authority to trade an account, are under an obligation to first discuss trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b). Further, subsequent disclosure of the trades does not cure the violation. Unauthorized trading is a type of investment fraud because the SEC has found that no disclosure could be more important and material to an investor than to be made aware that trading is taking place. Unauthorized trading is often a gateway violation to other securities violations including churning, unsuitable investments, and excessive use of margin.
Michelfelder was in the securities industry for 19 years before being barred by FINRA. He was registered with Joseph Gunnar & Co. LLC from 1998 to 2012, Aegis Capital Corp. from 2012 to 2016, and National Securities Corporation from 2016 to 2017.
Investors who have suffered losses may be able recover their losses through securities arbitration. The investment attorneys at Gana LLP are experienced in representing investors in cases of unauthorized trading and brokerage firms failure to supervise their representatives. Our consultations are free of charge and the firm is only compensated if you recover.