Securities Lawyers Blog
According 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.