Articles Tagged with broker fraud

shutterstock_188874428-300x200Investment fraud attorneys at Gana Weinstein LLP have been investigating previously registered broker Charles Dixon (Dixon). According to BrokerCheck Records kept by The Financial Industry Regulatory Authority (FINRA), in January 2018, Dixon was barred from the financial industry for failing to appear at an on-the-record testimony concerning allegations that he was exercising discretion without prior written authorization.  According to FINRA, Dixon consented to the sanction and bar due to the fact that he refused to appear to the testimony.   At this time it is unclear the extent and nature of the unauthorized trading that occurred.

FINRA’s investigation was in connection with Dixon’s termination from Morgan Stanley. In March 2017, Dixon’s employer, Morgan Stanley, terminated Dixon due to a customer allegation that Dixon was exercising discretionary power in a customer’s non-discretionary account without prior customer written approval.

In addition, Dixon has been subject to two customer disputes concerning unauthorized trading and churning. In October 2016, a customer alleged that from June 2013 to July 2016, Dixon was executing unauthorized trades in the customer account. This dispute settled for $225,000.

The Financial Industry Regulatory Authority (FINRA) announced approval of amendments to FINRA’s supervision rule that would expand the obligations of brokerage firms to check the background of applicant brokers upon registration.  The rule would encompass first-time applications as well as transfers between firms and require the brokerage firm to verify the accuracy and completeness of the information contained in an applicant’s Form U4.  Under the new rule brokerage firms must adopt written procedures in their supervisory manuals that include searching public records in order to check the accuracy of the information.  The amendments to the supervision rule will be submitted to the Securities and Exchange Commission for review and approval.

shutterstock_153912335The U4 Form is the foundation of FINRA’s BrokerCheck system that helps investors find red flags that would indicate potential problems and signs of misconduct by their brokers.  FINRA’s BrokerCheck come under fire recently by investor advocacy groups and federal lawmakers for its inaccuracies and lack of complete information.

In addition, FINRA will also search public financial records for all registered representatives and also search other publicly available information including criminal records of brokers.  FINRA intends to conduct periodic reviews of public records to ensure that the organizations BrokerCheck database and information is accurate.  Also under consideration is whether to add additional information to a broker’s publically available Central Registration Depository such as broker scores on securities exams.

How do you know if you have been the victim of securities fraud?  The answer to this question usually begins with the feeling that something is not right with your investments.  Maybe your broker is all of a sudden dodging your calls or having their subordinate answer their calls.  Perhaps your broker told you that an investment would become payable to you at a certain point and despite the fact that the time for payment has long come and past, nothing seems to have happened.  Its often hard to believe that the person you trusted with your savings or retirement has lied and let you down.

Securities fraud describes a whole genera of inappropriate investment activity.  In some instances the broker may sell a customer a security by falsely representing the properties of the security including its terms by either written or oral statements.  The broker may also provide misleading marketing materials in connection with the sales pitch.  Under the securities laws misrepresentations or omissions of fact are material if a reasonable investor might have considered the fact important in the making of the investment decision.  Thus, brokers have a duty to truthfully disclose all material information to an investor in order to evaluate the recommendation being made.

Other types of securities frauds involve some form of broker theft such as in cases of churning (excessive trading) or Ponzi schemes.  In the case of churning, the broker engages in investment trading activity that is excessive and serves little useful purpose and is conducted solely to generate commissions for the broker.  While Ponzi schemes involve the diverting of securities funds meant to be used for a certain investment purpose.  Instead the funds are diverted from the purpose represented to the investor to another purpose such as a different investment vehicle or straight into the Ponzi schemer’s pocket.