Securities Lawyers Blog
Adviser, Ezri Shechter, was previously employed at Spencer-Winston Securities Corporation. (Spencer-Winston), has been subject to at least five customer complaints over the course of his career with these claims alleging violations such as suitability, churning, and unauthorized trading. Most notably, Ezri has been suspended and fined by the Financial Industry Regulatory Authority (FINRA) for unauthorized trading activity.
Since May 2000 through December 2010, there have been three customer complaints against Shechter which cumulatively settled for over $170,000. Additionally, there have also been allegations of unauthorized trading against Shechter. The most recent unauthorized trading allegation occurred in June 2020 and sought damages of $25,000. Shechter’s unauthorized trading activity resulted in a three-month suspension and $12,500 fine by FINRA.
According to a BrokerCheck report, Shechter consented to “[causing] multiple customers of his member firm to sign blank or incomplete discretionary trading forms that he then copied and used to complete discretionary trading forms. The findings stated that Shechter submitted the forms with the photocopied signatures to his firm as originals, causing the firm to make and keep inaccurate books and records regarding the granting of discretionary authority.”
When brokers engage in churning, the broker will typically 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.
Furthermore, 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). Under the NASD Conduct Rule 2510(b), a broker is prohibited from trading in a non-discretionary customer account without prior written authorization from the customer. Unauthorized trading is a type of investment fraud because the Securities Exchange Commission (SEC) has found that disclosures of trades being made are essential and material to an investor. Unauthorized trading is often a gateway violation to other securities violations including churning, unsuitable investments, and excessive use of margin.
Shechter entered the securities industry in 1997 and has worked in 10 firms over the course of his career. From 2004 through 2020, Schechter was registered with Spencer-Winston. From 1998 through 2004, Schechter constantly changed firms. He was registered at Paragon Capital Markets, Coleman & Company Securities, Inc., Drake & Company, Inc., Kirlin Securities, Inc., Valley Forge Securities, Inc., and Bishop, Rosen & Co., Inc.
At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to churning and unauthorized trading violations. Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.