Churning (Excessive Trading)

Felipe Arrieta Subject to Customer Complaints Alleging Unauthorized Trades

July 13, 2018 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are investigating claims against Dakota Securities International, Inc. (Dakota Securities) broker Felipe Arrieta (Arrieta). According to BrokerCheck records, Arrieta has been subject to four customer complaints, one of which is still pending. The majority of these disputes concern unauthorized trading and misuse of margin.

In April 2017, a customer alleged that from 2015 to 2016, Arrieta engaged in a misuse of margin and committed negligence. The customer is requesting $210,000 in damages. This dispute is currently still pending.

In November 2011, a customer alleged that Arrieta was engaging in unauthorized trading without the knowledge or approval of the customer. The customer requested $15,000 for damages.

FINRA Suspends Derrick Watts for Providing Misleading Information on Documents

July 6, 2018 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are investigating claims against Wunderlich Securities, Inc. (Wunderlich Securities) broker Derrick Watts (Watts). According to BrokerCheck records, Watts has been subject to a regulatory matter in which the Financial Industry Regulatory Authority (FINRA) sanctioned Watts for various violations of the securities laws including churning, otherwise known as excessive trading. In March 2016, FINRA found that Watts failed to report his involvement in four unsatisfied civil judgments from 2009 to 2013 on his U4 registration form. Without admitting or denying the findings, Watts consented to the sanctions and the entry of findings. In April 2016, Watts was suspended for three months.

In addition to the FINRA sanctions, Watts has been subject to three customer complaints and two financial disclosures – including filing for bankruptcy and a tax lien.

In February 2016, Watts was discharged for bankruptcy due to failure in a real estate development that he was involved in. Bankruptcies and large tax liens are a potential sign that the advisor has difficulty managing their own finances. FINRA provides this information to the public because it is material for consumers to know whether or not their advisor’s financial situation influences the advisor’s recommendations.

The SEC Bars Daniel Fischer for Unsuitable Churning In Customer Accounts

July 2, 2018 | by Staff Attorney

The investment fraud attorneys at Gana Weinstein LLP are currently investigating previously registered broker Daniel Fischer (Fischer). According to BrokerCheck, in January 2018, the Securities Exchange Commission (SEC) barred Fischer from the financial industry claiming that from December 2012 to May 2015, Fischer recommended an unsuitable investment strategy in penny stocks to 5 customers and falsely represented and omitted material facts about the strategy. In addition, the SEC alleged that Fischer was engaging in churning of accounts and in unauthorized trading. The SEC found that as a result of recommending unsuitable investments, Fischer had violated federal laws including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5.

In addition, Fischer has also been subject to one regulatory action and one civil action in which the SEC and the Federal Industry Regulative Authority (FINRA) sanctioned Fischer for various violations of the securities laws.

In July 2016, FINRA suspended Fischer on the grounds that he was exercising discretion in customer accounts without prior customer approval. As a result of violating NASD Conduct Rule 2510(b) and FINRA Rule 2010, Fischer incurred a fine of $5,000 and a suspension of 20 days.

Jorey Bernstein Subject to a Pending Customer Complaint Alleging $3,000,000 in Damages

June 25, 2018 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are investigating claims against Western International Securities, Inc. (Western International) broker Jorey Bernstein (Bernstein). According to BrokerCheck records, Bernstein has been subject to one pending customer complaint regarding excessive trading.

In August 2018, a customer alleged that from 2009 to 2014, Bernstein excessively traded their account. The customer requested damaged of $3,000,000. This dispute is currently still pending.

In addition, Bernstein has been subject to resignation from Morgan Stanley in 2015 due to customer allegations regarding Bernstein’s illegal interactions and outside business activities with a third-party. A broker’s outside business activities with a third-party can create a conflict of interest with the firm. Therefore, firms are required to monitor such activities through supervision that is in compliance with securities laws and regulations.

Anthony Sica Subject to Multiple Regulatory Sanctions and Customer Complaints

June 9, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Anthony Sica (Sica) has been subject to three regulatory actions and nine customer complaints. Sica is currently registered with Joseph Gunnar & Co. LLC (Joseph Gunnar). The most recent regulatory action filed against Sica was in January 2018 by the Maryland Securities Commissioner who alleged that when it inquired about information provided to the state Scia agreed to withdraw his registration request. Many of the customer complaints against Sica concerning high frequency trading activity also referred to as churning.

In Novemebr 2017, FINRA found that Sica unsuitable recommendations to an elderly customer living on a fixed income. FINRA alleged that Sica repeatedly recommended that the customer purchase high-risk securities that were inconsistent with her investment profile and resulted in an over concentration of the customer’s account in speculative securities. FINRA also found that Sica engaged in short-term in-and-out trading of the speculative investments in the customer’s accounts causing substantial losses. FINRA alleged that Sica also engaged in unauthorized trading by placing trades in the IRA accounts of a customer who Sica knew was deceased. FINRA suspended Sica for three months.

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.

Dave Nicolas Has Been Subject to a Customer Complaint

March 7, 2018 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP are investigating a customer complaint against Garden State Securities broker Dave Nicolas (Nicolas).

According to BrokerCheck records kept by the Financial Industry Regulatory Authority (FINRA), A customer alleged in June 2016 that Nicolas engaged in unsuitable investments and churning and alleged failure to supervise on the part of Garden State Securities, Inc.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation, the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

FINRA Suspends Broker Luigi Mancusi

January 17, 2018 | by Staff Attorney

The investment lawyers at Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Luigi Mancusi (Mancusi).

According to BrokerCheck records, Mancusi allegedly “exercised discretion in effecting 45 transactions in a customer’s accounts without prior written authorization from the customer to exercise discretion in these accounts and without the accounts having been approved for discretionary trading by his member firm.” Further, Mancusi allegedly executed three transactions in another customer’s account without prior authorization. Reportedly, “Mancusi sold the security and used the proceeds to purchase two other securities in the customer’s account to replace it. As a result, the customer incurred fees, commissions, and ultimately a loss in disposing of an unwanted purchase into a new position, totaling $2,966.97.” Mancusi has been suspended from the securities industry for two months and has been fined $10,000.

Mancusi has also received five customer complaints.

Donald Devito Subject to Numerous Complaints Over Excessive Trading

December 9, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Donald Devito (Devito) has been subject to 10 customer complaints. Devito was formerly registered with Wells Fargo Advisors (Wells Fargo). In December 2016 Wells Fargo terminated Devito claiming that the firm had concerns over the level of trading in client accounts. In 2016 through 2017 Devito has had six complaints filed against him concerning the level of trading and fees generated in his accounts. Customers have filed complaints alleging a number of securities law violations including that the broker engaged in churning (excessive trading), unauthorized trading, and unsuitable recommendations among other claims.

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.

The number of complaints against Devito are unusual compared to his peers. According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.

Patrick Maddren Subject to Customer Complaint For Excessive Trading

November 30, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Patrick Maddren (Maddren) has been subject to two customer complaints and two tax liens. Maddren is currently registered with WestPark Capital, Inc. (WestPark Capital). In March 2016 a customer filed a complaint alleging a number of securities law violations including that the broker engaged in churning (excessive trading), material misrepresentations and omissions, unauthorized trading, unsuitable recommendations, and breach of contract among other claims. The claim alleged $1,000,000 in damages and is now settled.

In 2012 several tax liens were filed against Maddren in amounts totaling over $300,000. Large tax liens on a broker’s CRD can be a red flag that the broker may be influenced to engage in high commission activity in order to satisfy personal debts. In addition, a broker’s inability to manage their own finances is relevant in a customer’s decision to use their services.

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.

Leon Rehak Subject to Customer Complaints For Excessive Trading

November 11, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Leon Rehak (Rehak) has been subject to two customer complaints. Rehak is currently registered with LPL Financial LLC (LPL Financial). In November 2016 a customer filed a complaint alleging a number of securities law violations including that the broker made engaged in churning (excessive trading), unauthorized trading, and breach of fiduciary duty among other claims. The claim alleged $600,000 in damages and is currently pending.

In October 2017, another customer filed a complaint alleging Common Law Fraud, Common Law Negligent Misrepresentation, Breach of Fiduciary Duty, Negligence, Suitability, and Excessive Trading from May 2011 through September 2017. The claim alleged $499,000 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.