churning investment attorney Tag Archives

Alan Appelbaum Accused of Churning and Unsuitable Trading

December 12, 2019 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Alan Appelbaum (Appelbaum), currently associated with Aegis Capital Corp. (Aegis), has been subject three regulatory actions and at least thirteen customer complaints. The customer complaints against Appelbaum concern various allegations of misconduct including churning, unauthorized trading, and unsuitable investments among other claims being made against the broker.

In September 2019 a customer complained that Appelbaum violated the securities laws by alleging violations of the securities laws including that from July 2015 through present Appelbaum engaged in unsuitable and unauthorized transactions. The claim does not have a specific damage figure and is currently pending.

In November 2018 a customer complained that Appelbaum violated the securities laws by alleging violations of the securities laws including that from July 2015 through August 2018 Appelbaum engaged in unsuitable recommendations to the client. The claim alleged $1.8 million in damages and is currently pending.

Broker Philip Sparacino Subject to Churning Complaint

April 16, 2019 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Philip Sparacino (Sparacino) has been subject to at least two customer complaints, three debt liens or judgements, and one criminal matter during his career. Sparacino is currently employed by First Standard Financial Company LLC (First Standard Financial) but has worked for a total of six firms during his 11 year career. One of the customer complaints against Sparacino concern allegations of high frequency trading activity also referred to as churning and unsuitable investments.

In December 2018 a customer filed a complaint alleging that Sparacino violated the securities laws including churning and unsuitable trading causing $90,198 in damages. The claim is currently pending.

In September 2016 a customer filed a complaint alleging that Sparacino violated the securities laws including unsuitable trading, breach of fiduciary duty, and unauthorized trading causing $38,084 in damages. The claim is currently pending.

Sparacino also has three debts including a $3,774 lien from March 2017. The fact that a broker cannot manage his own personal finances is material information for a client to consider. In addition, the types of products clients have alleged were unsuitable are high commission products that may be recommended to generate high profits for the advisor at the expense of the client.

Garden State Securities Advisor Christhian Palacios Subject to Churning Claims

January 9, 2019 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Christhian Palacios (Palacios) has been subject to two customer complaints and four tax liens during the course of his career. Palacios is currently employed by Garden State Securities, Inc. (Garden State Securities). One of the customer complaints against Palacios concern allegations of high frequency trading activity also referred to as churning and unsuitable investments.

In June 2018 a customer filed a complaint alleging their account was excessively traded and unsuitable from January 2009 until March 2016. The claim alleged $298,109 in damages and is currently pending.

In July 2016 Palacios disclosed a tax lien of $140,000. Tax liens can be sign that a broker may have a conflict of interest to recommend or engage in high risk trades and improper recommendations due to the need to obtain funds. FINRA discloses tax liens information because it is important for investors to know whether or not a broker can manage their own finances.

Advisor Stephen Murray Subject to Allegations of Excessive Trading

November 14, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Stephen Murray (Murray) has been subject to seven customer complaints, two financial disclosures or tax liens, and one regulatory action. Murray was formerly employed by Raymond James & Associates, Inc. (Raymond James) prior to his bar from the financial industry. Many of the customer complaints against Murray concern allegations of high frequency trading activity also referred to as churning, unauthorized trading, and unsuitable investments.

In May 2018 FINRA barred Murray after he failed to respond to FINRA’s requests for documents and information concerning his activities.

In May 2017 a customer filed a complaint alleging churning unauthorized trading, negligence, and breach of fiduciary duty. The claim alleged $100,000 in damages and settled.

In addition, Murray has two financial disclosures concerning debts and tax liens. This information has been found to be material for investors to have because an advisor who cannot manage his own finances is a relevant factor for investors to consider. In addition, a broker in financial distress may be influenced to recommend high commission products or strategies.

Woodstock Financial Group Advisor Joseph Derrico Subject to Complaint Over Excessive Trading

September 4, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) Woodstock Financial Group, Inc. (Woodstock Financial) broker Joseph Derrico (Derrico) has been subject to two disclosed customer complaints, one regulatory complaint, and one criminal matter. The regulatory action filed by the State of Montana alleges that a customer filled out an online complaint with the state making allegations concerning Derrico. Montana filed a complaint against the broker concerning unauthorized trading; excessive trading; using discretion without written discretionary authority; fraud – these allegations are associated with claims of churning or excessive trading. The regulatory complaint is still pending.

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.

Broker Robert Hoffmann Sanctioned Over Failure to Disclose Financial Difficulties

December 7, 2017 | by Staff Attorney

According to BrokerCheck records financial advisor Robert Hoffmann (Hoffmann), formerly associated with Thurston, Springer, Miller, Herd & Titak, Inc. (Thurston, Springer), has been subject to two customer complaints, one regulatory action, and one tax lien. According to records kept by The Financial Industry Regulatory Authority (FINRA), in January 2017 a customer filed a complaint alleging that Hoffmann made unsuitable investments, unauthorized trading, and churning among other claims. The claim seeks $3,200,000 in damages and is currently pending.

In September 2017, FINRA sanctioned Hoffmann stated that Hoffmann consented to the sanctions and to the entry of findings that he willfully failed to amend his Form U4 to timely disclose an unsatisfied Internal Revenue Service (IRS) tax lien filed against him. In addition, there is one tax lien disclosed on Hoffmann’s report for $106,991 filed in December 2014. Tax liens and judgements are material information for an investor to consider for several reasons. A broker with large unpaid debts may be tempted to recommend high commission products and services to satisfy their personal debts. In addition, a broker’s inability to manage their own finances is material in a customer’s decision to retain the advisor’s services.

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.