Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Charles Malico (Malico), previously associated with Network 1 Financial Securities INC., has been subject to at least 3 disclosable events. These events include 2 customer complaints, one regulatory event. Several of those complaints against Malico concern allegations of high frequency trading activity also referred to as churning or excessive trading among other securities laws violations.
FINRA BrokerCheck shows a final customer complaint on October 11, 2022.
Without admitting or denying the findings, Malico consented to the sanctions and to the entry of findings that he willfully violated the Best Interest Obligation under Rule 15l-1 of the Securities Exchange Act of 1934 (Regulation Best Interest or Reg BI) by recommending a series of transactions in a retail customer’s account that was excessive in light of the customer’s investment profile. The findings stated that the trades that Malico recommended in the customer’s account resulted in an annualized cost-to-equity ratio exceeding 158 percent – meaning that the customer’s account would have had to grow by more than 158 percent annually just to break even. Malico’s recommendations caused the customer to pay more than $54,000 in commissions and other trading costs, and made it virtually impossible for the customer to realize a profit. In fact, the customer lost more than $17,500 as a result of Malico’s recommendations.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $130,000.00 on June 23, 2022.
Suitability; Churning; Unauthorized Trading
FINRA BrokerCheck shows a settled customer complaint with a damage request of $65,000.00 on December 06, 2021.
Negligence, Breach of Fiduciary Duty, Negligent Supervision,
When brokers engage in churning, or excessive trading, they often rapidly buy and sell securities, sometimes even the same stock repeatedly, within a short span of time. Every month, the account often completely “turns over” with different securities. The sole purpose of this kind of investment trading activity in a client’s account is to generate commissions that benefit the broker, not the investor. Churning is regarded as a specific category 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 shown 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.
Malico has been in the securities industry for more than 34 years. Malico has been registered as a Broker with Network 1 Financial Securities INC. since 2016.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.