Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Leonard Goldberg (Goldberg) (FINRA No. 2011026098504) alleging during the seven year period from August 2007 through August 2014, while he was registered with FINRA through J.P. Turner & Company, LLP (JP Turner) and Newport Coast Securities Inc. (Newport Coast) Goldberg caused over $123,600 in losses to five customers while making over $77,900 for himself by using discretion without authorization in connection with 300 mutual fund and Exchange Trading Fund (ETF) transactions to his benefit and the customers’ loss. FINRA also alleged that from August 2007 through February 2012, Goldberg used discretion to facilitate a scheme of effecting fraudulent and unsuitable short term switching of Class A mutual funds – a/k/a excessive trading activity or churning – in the accounts of the five customers. Finally, FINRA alleges that Goldberg also falsified firm documents in furtherance of his scheme.
Goldberg first became associated with a FINRA member in 1972. From July 2007, until October 2010, Goldberg was associated with JP Turner. Thereafter, from October 2010, until December 2014, Goldberg was associated with Newport Coast. According to BrokerCheck records Goldberg has had at least six customer complaints filed against him during his career.
According to FINRA, Goldberg’s fraudulent and unsuitable short term mutual fund switching scheme involved replacing one Class A mutual fund position with another one more than 90 times in a five year period. FINRA determined that the accounts held those mutual funds for an average of only five to six months before Goldberg switched the funds. FINRA also found that the customers generally trusted Goldberg to trade on their behalf in their accounts and he did not inform them in advance of the trades. In sum, FINRA determined that Goldberg’s mutual fund switching had no business purpose other than to generate commissions for himself through repeated fees and charges.
In addition, FINRA alleged that when Goldberg exercised discretion in the accounts of the five customers in connection with 300 purchases and sales of mutual funds and ETFs he acted without the required written authorization from the customers and the firms. FINRA alleged that Goldberg’s exercising discretion in his customers’ accounts without written authorization from his customers or approval from his firms violated industry rules.
Finally, FINRA alleged that Goldberg regularly created false and inaccurate firm records. For instance, FINRA found that Goldberg submitted to his firms approximately 238 electronic orders and 20 mutual fund switch forms in which he falsely identified the vast majority of these transactions as “unsolicited” when all of those transactions were “solicited.” FINRA alludes that the purpose of the false records may have been to evade the scrutiny of his firms’ compliance departments. FINRA also alleged that Goldberg caused the customers’ signatures to be forged on new account forms and mutual fund switch letters. Finally, Goldberg is also alleged to have caused the falsification of information relating to each customer’s investment experiences, net worth, and risk tolerance on the new account forms. These records were falsified by Goldberg to further his unsuitable and fraudulent mutual fund switching scheme.
Investors who have suffered investment losses due to churning activity may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors concerning securities violations. Our consultations are free of charge and the firm is only compensated if you recover.