Churning (Excessive Trading)

Broker Jonathan Ebel Accused of Excessive Trading and Subject to Tax Liens

April 13, 2021 | by Staff Attorney

Jonathan Ebel, a financial advisor currently employed at Network 1 Financial Securities, Inc. (Network 1 Financial), has been subject to at least one customer complaint during the course of his career. Additionally, Ebel has also been subject to a tax lien. His most recent customer complaint alleges excessive trading and unsuitable trading. According to a BrokerCheck report, in May 2018, Ebel was accused of excessively trading his client’s account and purchasing unsuitable investments. This matter settled for $30,000.00. Additionally, in December 2016, Ebel disclosed a tax lien in the amount of $31,962.00.

When brokers engage in excessive trading, sometimes referred to as 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.

Adviser Ezri Shechter Alleged of Churning and Sanctioned by Regulator

April 13, 2021 | by Staff Attorney

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.”

Broker Devin McCabe Accused of Churning and Subject to Tax Liens

April 7, 2021 | by Staff Attorney

Broker Devin McCabe (McCabe), currently employed at Laidlaw & Company (UK), LTD. (Laidlaw), has been subject to at least one customer complaint during the course of his career. Additionally, McCabe has also been subject to a tax lien. His most recent customer complaint alleges churning, excessive trading, and unsuitable trading. According to a BrokerCheck report, in May 2018, a client alleged that McCabe was engaging in churning, unauthorized trading, and making unsuitable investment recommendations from 2015 through 2017. This matter settled for approximately $10,000.00. Additionally, in June 2017, McCabe disclosed a tax lien in the amount of $16,453.20.

When brokers engage in excessive trading, sometimes referred to as 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.

Mack Miller Sanctioned by Regulator Over Excessive Trading Claim

March 7, 2021 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Mack Miller (Miller), associated with Spartan Capital Securities, LLC (Spartan Capital) has been subject to at least three customer complaint, one regulatory action, and three judgement or liens during his career. The complaint against Miller concern allegations of high frequency trading activity also referred to as churning or excessive trading among other securities laws violations.

In April 2020, FINRA found that Miller consented to sanctions and findings that he engaged in quantitatively unsuitable trading in the account of a customer who was over 79 years old and retired. FINRA determined that Miller actively traded the customer’s account resulting in a high turnover rate, cost-to-equity ratio, and significant losses. FINRA found that the trading was unsuitable given the customer’s investment profile. Further, the costs of the trading strategy, in the form of commissions and fees, made it difficult for the customer to profit from the trading. The trading FINRA describes included instances of Miller purchasing and selling securities within a few days resulting in thousands of dollars of losses after subtracting the associated sales charges. The customer was found to have lost $69,633 from the trading.

In April 2017, brokerage firm Dawson James Securities terminated Miller when he called a prospective customer in a state where he was not registered to conduct business in.

Advisor Martin Noonan Barred by Regulator Over Trading Claims

December 1, 2020 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Martin Noonan Jr. (Noonan), formerly associated with BMA Securities, LLC (BMA Securities), has been subject to at least one customer complaint, one regulatory action, and eight judgement or liens during his career. The complaint against Noonan concern allegations of high frequency trading activity also referred to as churning or excessive trading among other securities laws violations.

In November 2018 a customer complained that Noonan violated the securities laws by alleging that Noonan engaged in sales practice violations related to account mismanagement or that the account representative engaged in unsuitable or excessive trading. The claim is currently pending and seeks $250,000 in damages.

In May 2020 FINRA barred Noonan after the broker consented to sanctions and to findings that he refused to produce information or documents requested by FINRA during an investigation that it began after reviewing a Dispute Resolution Statement of Claim filed alleging unsuitable and excessive trading in a client account. Accordingly, Noonan was automatically barred from the securities industry.

Advisor James Parrelly Accused of Churning and Sanctioned By Financial Regulator

August 10, 2020 | by Staff Attorney

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.

Advisor David Weisberg Suspended Over Excessive Trading Charges

June 25, 2020 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker David Weisberg (Weisberg), formerly associated with Worden Capital Management LLC (Worden Capital), has been subject to at least four customer complaints and one regulatory action during his career. Several of those complaints against Weisberg concern allegations of unauthorized trading activity and the regulatory action includes allegations of excessive trading also referred to as churning among other securities laws violations.

In April 2020 FINRA filed a regulatory action finding that Weisberg consented to sanctions and findings that he engaged in excessive and unsuitable trading in the account of an elderly customer. FINRA found that Weisberg began soliciting stock trades and some of Weisberg’s recommendations involved in-and-out trading and many of them used margin. FINRA determined that the customer relied on Weisberg’s advice and in virtually every case the customer purchased or sold exactly the quantity of shares that Weisberg suggested. FINRA found that the costs of Weisberg’s trading in the customer’s account were significant and Weisberg did not track the trading costs or take them into consideration when making recommendations. FINRA found that the trading generated commissions of approximately $75,638 while the customer lost approximately $55,627. Finally, FINRA also found that Weisberg used discretion to initiate stock trades in customers’ accounts without written authorization and his member firm who never accepted the accounts for discretionary trading.

In July 2019 a customer complained that Weisberg violated the securities laws by alleging that Weisberg engaged in sales practice violations related to negligence, unsuitability, breach of fiduciary duty, breach of contract, negligent misrepresentation and omissions. The claim is alleges $21,579 and is currently pending.

Network 1 Financial Advisor Carl Antaki Has Churning Complaints

March 23, 2020 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Carl Antaki (Antaki), currently associated with Network 1 Financial Securities Inc. (Network 1 Financial), has been subject to at least five customer complaints and one employment termination for cause during his career. Some of the investor complaints against Antaki concern allegations of high frequency trading activity also referred to as churning or excessive trading.

In March 2019 a customer complained that Antaki violated the securities laws by alleging that Antaki engaged in sales practice violations related to unsuitable investments. The claim is currently pending and seeks $100,000 in damages.

In October 2017 a customer complained that Antaki violated the securities laws by alleging that Antaki engaged in sales practice violations related to fraud, misrepresentations, churning and breach of fiduciary duty. The claim settled for $8,750.

Advisor Edward Rudiger Accused of Churning by Multiple Clients

February 25, 2020 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Edward Rudiger (Rudiger), currently associated with Reid & Rudiger LLC (Reid & Rudiger), has been subject to at least six customer complaints and one lien or judgement matters during his career. The two most recent complaints against Rudiger concern allegations of high frequency trading activity also referred to as churning or excessive trading.

In October 2019 a customer complained that Rudiger violated the securities laws by alleging that Rudiger engaged in sales practice violations related to false and misleading statements, excessive trading, breach of fiduciary duty and failure to supervise. The claim is currently pending and seeks $220,542 in damages.

In June 2019 a customer complained that Rudiger violated the securities laws by alleging that Rudiger engaged in sales practice violations related to excessive trading and misrepresentation. The claim is currently pending and seeks $279,577 in damages.

Philip Sparacino Barred By Regulator Over Excessive Trading

January 6, 2020 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Philip Sparacino (Sparacino), formerly associated with First Standard Financial Company LLC (First Standard), has been subject to at least three customer complaints, one employment termination for cause, two financial disclosures, and two regulatory matters during his career. The majority of the customer complaints against Sparacino concern allegations of high frequency trading activity also referred to as churning or excessive trading.

In November 2019 FINRA entered into a settlement with Sparacino where he consented to the sanction and to the entry of findings that he refused to produce information and documents requested by FINRA while investigating allegations that he engaged in unauthorized, excessive, and unsuitable trading while registered through his member firm. As a result Sparacino was barred from the financial industry.

In October 2019 First Standard terminated Sparacino due to a regulatory action brought by the state of New Jersey that resulted in revoking Sparacino’s license in that state. The state of New Jersey found that Sparacino made untrue statements and omitted information and engaged in practices and a course of business which operated as a fraud or deceit and was otherwise engaged in dishonest and unethical business practices in the sale of securities resulting in a $250,000 fine and a revocation of license. The state alleged that since at least June 2019, Sparacino has engaged in a pattern of unauthorized, excessive, unsuitable, and fraudulent trading activity on behalf of customers of First Standard following the departure of many of First Standard’s agents. Sparacino had access to dozens of newly inherited customer accounts which he used as a vehicle to generate exorbitant commissions at the customers’ expense.