According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Paul DiPietro (DiPietro) has been subject to eight customer complaints during the course of his career. DiPietro is currently employed by Dawson James Securities, Inc. (Dawson James). Many of the customer complaints against DiPietro concern allegations of high frequency trading activity also referred to as churning, unauthorized trading, and unsuitable investments.
In April 2018 a customer filed a complaint alleging his account was churned and placed in unsuitable securities by the representatives at Dawson James and Spartan form January 2015 through September 2015. The claim alleged $100,000 in damages and is currently pending.
In December 2015 a customer filed a complaint alleging that DiPietro failed to follow instructions and failed to execute orders causing losses of $126,105. The claim was withdrawn.
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.
An examination of DiPietro’s employment history reveals that DiPietro moves from troubled firm to troubled firm. The pattern of brokers moving in this way is sometimes called “cockroaching” within the industry. See More Than 5,000 Stockbrokers From Expelled Firms Still Selling Securities, The Wall Street Journal, (Oct. 4, 2013). In DiPietro’s 17 year career he has worked at least 9 different firms. What’s more astonishing is that none of these firm’s are still in business and and at least five have been expelled from the industry by FINRA – in many instances for securities laws violations for mistreating their customers. DiPietro entered the securities industry in 2000. Since January 2012 DiPietro has been registered with Dawson James out of the firm’s Boca Raton, Florida 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.