Articles Posted in Churning (Excessive Trading)

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shutterstock_130706948-300x199According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Peter Monson (Monson), currently associated with Van Clemens & Co. Incorporated (Van Clemens), has been subject to a regulatory investigation by FINRA.  The focus of the regulatory investigation is for potential violations of NASD Conduct Rule 2510(b) – Authorization and Acceptance of Account, FINRA Rules 2111 – Suitability, and 2010 – Standards of Commercial Honor and Principles of Trade.  This investigation appears to be related to a regulator action FINRA took against his firm Van Clemens concerning allegations of high frequency trading activity also referred to as churning or excessive trading.

FINRA alleged that Van Clemens, from June 1, 2015, through June 30, 2016, failed to establish and maintain a supervisory system reasonably designed to ensure that the firm reviewed transactions in customer accounts for potentially unsuitable excessive trading in order to achieve compliance with FINRA’s suitability rule.  FINRA found that the firm’s procedures did not directly address quantitative suitability and, as such, did not set forth a process or identify personnel responsible for reviewing customer accounts for potentially excessive trading.

Accordingly, FINRA determined that Van Clemens did not instruct its supervisors to review account activity for potential excessive trading nor did it train its supervisors to do so.  In addition, FINRA found that the firm lacked the necessary tools to even make a determination that excessive trading occurred such as reports for turnover rates or cost-to-equity ratios.  FINRA found that a registered representative referred to by the initials “PM”, believed to be Monson, recommended transactions to a firm customer that resulted in the customer’s account having an annualized turnover rate above 9.0 and an annualized cost-equity ratio of 32.3%.  FINRA found this activity was excessive, given the customer’s investment objectives and financial situation, and coincided with losses in the account of more than $100,000 during the 13-month period

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shutterstock_93851422-300x240According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Trevor Rahn (Rahn), formerly associated with J.P. Morgan Securities LLC (JP Morgan), has been subject to at least four customer complaints, one employment termination for cause, and one judgement or lien during his career.  The majority of the customer complaints against Rahn concern allegations of high frequency trading activity also referred to as churning or excessive trading.

In June 2019 a customer complained that Rahn violated the securities laws by alleging that the trading activity increased dramatically and resulted in losses and significant tax obligations. Customer also alleges financial advisor engaged in a pattern of unauthorized trading and margin use in customer’s account in order to generate commissions, and resulting in losses to customer. The claim alleges $854,410 in damages and is currently pending.

In November 2018 a customer complained that Rahn violated the securities laws by alleging that the number of transactions in the account were unauthorized. The overall time period is 03/2014-09/2017. The claim alleges $1,137,915 in damages and settled for $114,000.

In September 2018 JP Morgan discharged Rahn after alleging unacceptable practices relating to the timing and size of orders entered resulting in charges in a client account as well as marking certain orders as unsolicited.

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shutterstock_113872627-300x300The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Michael Stanton (Stanton), currently employed by Worden Capital Management LLC (Worden Capital) has been subject to at least four customer complaints, two regulatory complaints, and nine financial disclosures and or tax and civil liens.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Stanton’s customer complaints allege that Stanton recommended unsuitable securities and engaged in excessive trading and churning among other allegations of misconduct in the handling of customer accounts.

In November 2016 Stanton was named a respondent in a FINRA complaint alleging that he and his member firm failed to establish, maintain, and enforce a reasonable supervisory system to prevent a registered representative from churning and excessively trading a customer’s brokerage accounts. FINRA alleged that Stanton and the firm failed to adequately investigate red flags demonstrating that the registered representative was churning the customer’s accounts.  FINRA found that Stanton and the firm also failed to adequately investigate that the registered representative engaged in aggressive, “in-and-out” trading for no apparent reason – the hallmark of excessive trading and churning.  Stanton was suspended for seven months and fined $5,000 as a result.

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shutterstock_61848763-300x203According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Andre Davis (Davis), currently associated with Paulson Investment Company LLC (Paulson Investment), has been subject to at least 15 customer complaints and two criminal matters during his career.  The majority of the customer complaints against Davis concern allegations of high frequency trading activity also referred to as churning.

In August 2019 a customer complained that Davis made unsuitable investment recommendations, excessive trading, and unauthorized trading. The claim alleges $350,000 in damages and is currently pending.

In June 2019 a customer complained that Davis churned their account and made unauthorized trades. The claim alleges $152,400 in damages and is currently pending.

In May 2019 a customer complained that Davis violated the securities laws by excessive trading, unauthorized trades, and unsuitable investments. The claim alleges $461,000 in damages and is currently pending.

In April 2019 a customer complained that Davis violated the securities laws by excessive trading and unauthorized trades. The claim alleges $300,000 in damages and is currently pending.

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.

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shutterstock_177792281-300x198The securities lawyers of Gana Weinstein LLP are investigating broker Stephen Sullivan (Sullivan), currently associated with SW Financial out of Melville, New York.  According to a BrokerCheck report, Sullivan has been subject to at least two customer disputes, one regulatory action, one financial disclosure, and three civil judgements during his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), the customer complaints against Sullivan concern allegations of excessive trading also referred to as churning.

In May 2018 a customer filed a complaint against Sullivan alleging unsuitable transactions, excessive trading, and failure to supervise.  The customer requested $540,618 in damages.  This dispute is still pending.

In February 2016 FINRA found that Sullivan violated NASD Rules 2510(b) and 2010 by exercising discretion in customers’ accounts without obtaining authorization from the customers or approval by his member firm.  Without admitting or denying the allegations, Sullivan consented to the described sanctions and to the entry of the findings.  Sullivan was fined $5,000 and suspended for 10 business days.

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shutterstock_175000886-300x225According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Craig Siegel (Siegel) has been subject to at least four customer complaints and one regulatory action during his career.  Siegel is formerly employed by Portfolio Advisors Alliance, LLC (Portfolio Advisors).  The majority of the customer complaints against Siegel concern allegations of high frequency trading activity also referred to as churning.

In April 2019 Siegel failed to respond to requests by FINRA to provide documents and information and was suspended indefinitely.

In October 2018 a customer complained that Siegel made unsuitable investment recommendations, breach of regulatory requirements, breach of fiduciary duty, breach of contract, negligence, and churning from July 2013 to August 2017. The claim is currently pending.

In April 2018 a customer complained that Siegel violated the securities laws by alleging that the financial advisor engaged in excessive trading, churning, unsuitable transactions, failure to supervise, and respondeat superior.  The claim seeks $99,300 in damages and is currently pending.

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shutterstock_94127350-300x205According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Debra Bourne (Bourne) has been subject to at least five customer complaints during her career.  Bourne is formerly employed by First Standard Financial Company LLC (First Standard Financial) and National Securities Corporation (National Securities).  The majority of the customer complaints against Bourne concern allegations of high frequency trading activity also referred to as churning.

In April 2019 a customer complained that Bourne violated the securities laws by alleging that the financial advisor engaged in unsuitable and excessive trading causing $2,000,000 in damages. The claim is currently pending.

In March 2019 a customer complained that Bourne violated the securities laws by alleging that the financial advisor engaged in unsuitable trading, excessive trading, breach of fiduciary duty, and negligence among other claims alleged. The claim seeks $300,000 in damages and is currently pending.

In February 2019 a customer complained that Bourne violated the securities laws by alleging that the financial advisor engaged in unsuitable and unauthorized trading causing $668,000 in damages. The claim is currently pending.

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shutterstock_135103109-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Steven Woods (Woods) has been subject to at least two customer complaints during his career.  Woods is currently employed by Worden Capital Management LLC (Worden Capital) and was formerly registered with Laidlaw & Company (UK) Ltd. (Laidlaw).  The majority of the customer complaints against Woods concern allegations of high frequency trading activity also referred to as churning.

In November 2018 a customer complained that Woods violated the securities laws by alleging that the financial advisor engaged in unauthorized trading, misrepresentation, and unsuitability in 2016 causing $41,607 in damages. The claim is currently pending.

In May 2018 a customer complained that Woods violated the securities laws by alleging that the financial advisor engaged in churning, unauthorized trading, and unsuitability from 2015 through 2017 causing $157,588 in damages. The claim is currently pending.

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shutterstock_175137287-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Michael Bastardi (Bastardi) has been subject to at least two customer complaints, one regulatory action, and one tax or lien judgment during his career.  Bastardi was formerly employed by Chelsea Financial Services (Chelsea Financial) and National Securities Corporation (National Securities).  The majority of the customer complaints against Bastardi concern allegations of high frequency trading activity also referred to as churning.

In May 2019 Bastardi consented sanctions and an industry bar from FINRA due to the findings that he refused to provide documents and information requested by FINRA in connection with an investigation into the allegations disclosed on a termination statement.  FINRA found that the termination disclosure stated that Bastardi was the subject of a customer complaint alleging that he had engaged in unsuitable margin trading, unauthorized trading, fraud and forgery when he was registered through two member firms, resulting in damages of approximately $250,000.

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shutterstock_20354398-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Gabriel Block (Block) has been subject to at least 12 customer complaints and five regulatory actions during his career.  Block is currently barred from the industry but was formerly employed by First Standard Financial Company LLC (First Standard Financial) and National Securities Corporation (National Securities).  The majority of the customer complaints against Block concern allegations of high frequency trading activity also referred to as churning.

In May 2019 the New Jersey Bureau of Securities revoked Block’s license in his home state of New Jersey finding that Block engaged in dishonest or unethical business practices in the securities business. The state went on to find that Block engaged in a device, scheme, or artifice to defraud.

In April 2019 a customer complained that Block violated the securities laws by alleging that the financial advisor engaged in unsuitable and excessive trading causing $2,000,000 in damages. The claim is currently pending.

In March 2019 a customer complained that Block violated the securities laws by alleging that the financial advisor engaged in unsuitable trading. The claim is currently pending.

In February 2019 a customer complained that Block violated the securities laws by alleging that the financial advisor engaged in unsuitable and unauthorized trading causing $668,000 in damages. The claim is currently pending.

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