Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker James Parrelly (Parrelly), formerly associated with Investment Planners, Inc. (Investment Planners), has been subject to at least eight customer complaints, three regulatory complaints, and one employment termination for cause during his career. Several of those complaints against Parrelly concern allegations of high frequency trading activity also referred to as churning or excessive trading among other securities laws violations.
In June 2020, Parrelly was terminated by Investment Planners which alleged that at time of his resignation Parrelly was on heightened supervision and was engaging or had engaged in activities in violation of firm policies and/or FINRA rules, including: (1) use of personal email and texts to communicate with firm clients regarding their accounts; (2) failing to abide by terms of his heightened supervision plan (by continuing to use his personal email and texts and by not providing copies of his personal emails and texts to the firm); and (3) unauthorized trading. Parrelly then resigned in response to the anticipated commencement of an internal review into his activities.
In May 2020, FINRA suspended Parrelly finding that he consented to findings that he executed discretionary transactions in the securities account of a customer pursuant to the customer’s prior verbal authorization, but without written authorization from the customer or written approval from his member firm.
In April 2019 a customer complained that Parrelly violated the securities laws by alleging that Parrelly engaged in sales practice violations related to churning, negligence of duty and unsuitable investments. The claim is currently pending and seeks $500,000 in damages.
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.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases. In addition, research has show a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints. These lower quality firms may average brokers with five times as many complaints as the industry average.
Parrelly entered the securities industry in 1981. From May 2004 until March 2015 Parrelly was registered with First Midwest Securities, Inc. Finally, from March 2015 until July 2020 Parrelly was registered with Investment Planners out of the firm’s Dearborn, Michigan office location.
At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to excessive trading and churning 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.