Broker Devin McCabe (McCabe), currently employed at Laidlaw & Company (UK), LTD. (Laidlaw), has been subject to at least one customer complaint during the course of his career. Additionally, McCabe has also been subject to a tax lien. His most recent customer complaint alleges churning, excessive trading, and unsuitable trading. According to a BrokerCheck report, in May 2018, a client alleged that McCabe was engaging in churning, unauthorized trading, and making unsuitable investment recommendations from 2015 through 2017. This matter settled for approximately $10,000.00. Additionally, in June 2017, McCabe disclosed a tax lien in the amount of $16,453.20.
When brokers engage in excessive trading, sometimes referred to as churning, the broker will typically 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.