According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker James Schwartz (Schwartz) has been subject to nine customer complaints, one tax lien, and one bankruptcy during his career. Schwartz is currently not registered but was previously employed by Joseph Gannar & Co. LLC (Joseph Gunnar). Many of the the customer complaints against Schwartz concern allegations of high frequency trading activity also referred to as churning and unsuitable investments.
In October 2018 a customer filed a complaint alleging that Schwartz violated the securities laws by engaging in breach of fiduciary duty, unsuitable investments, and negligence causing $32,871.30 in damages. The claim is currently pending.
In May 2018 a customer filed a complaint alleging that Schwartz violated the securities laws by engaging in churning, unsuitable investments, unauthorized trading, and breach of fiduciary duty causing $150,000 in damages. The claim is currently pending.
In February 2018 a customer filed a complaint alleging that Schwartz violated the securities laws by engaging in unsuitable investments and unauthorized trading causing $1,694,099 in damages. The claim is currently pending.
In addition, Schwartz has one financial disclosure concerning a tax lien for $15,667 and declared bankruptcy in June 2017. This information has been found to be material for investors to have because an advisor who cannot manage his own finances is a relevant factor for investors to consider. In addition, a broker in financial distress may be influenced to recommend high commission products or strategies.
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.
Schwartz entered the securities industry in 1998 and changed his registration an astonishing 14 times through 2017. Several of Schwartz’s prior employers are no longer in business due their violations of the securities laws. From June 2013 until June 2016 Schwartz was registered with Aegis Capital Corp. From June 2016 until December 2016 Schwartz was associated with First Standard Financial Company. Finally, from December 2016 until February 2017 Schwartz was registered with Joseph Gunnar out of the firm’s New York, New York 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.