Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former Westpark Capital, Inc. (Westpark Capital) broker Lawrence Fawcett (Fawcett) has been subject to five customer complaints, two regulatory actions and one termination for cause. Fawcett was barred by FINRA from the securities industry in March 2018 after failing to appear for testimony in connection with an investigation regarding Fawcett’s outside business activities. At around the same time Fawcett was terminated by Westpark Capital on allegations that he conducted business from a non-disclosed location and made false representations to the firm.
In December 2017 Fawcett was sanctioned by FINRA on allegations that he recommended unsuitable mutual fund transactions to a customer by recommending 12 different mutual fund families instead of obtaining favorable breakpoint discounts for the customer.
In addition, many of the customer complaints against Fawcett concern high frequency trading activity also referred to as churning or excessive trading. In May 2018 a customer filed a complaint alleging excessive trading, churning, and unsuitable transactions seeking $33,271 in damages. The claim is currently 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 complaints against Fawcett are unusual compared to his peers. According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.
Fawcett entered the securities industry in 2012. Many of the other firms Fawcett worked for have been expelled by FINRA including John Thomas Financial which was run by Anastasios “Tommy” Belesis who 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. Despite this history brokerage firms Salomon Whitney Financial and Westpark Capital chose to hire Fawcett.
At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due excessive trading and other securities laws violations. Our consultations are free of charge and the firm is only compensated if you recover.