Financial advisor Joseph C. Farah (CRD# 2978633), who was most recently affiliated with Gold Coast Securities, Inc. (CRD# 110925) (hereinafter, Gold Coast), has voluntarily consented to a bar from the securities industry pursuant to an Order Accepting Offer of Settlement (hereinafter, the Settlement) entered into on or about January 25, 2018. Without admitting or denying any wrongdoing, Mr. Farah consented to the industry bar following FINRA Enforcement’s investigation into certain allegations including, inter alia, that Mr. Farah purportedly engaged in excessive trading in a customer’s account, and further, allegedly failed to inform his employer, Gold Coast, that the customer had opened a brokerage account at another broker-dealer at Mr. Farah’s behest.

Beginning in 1998, Mr. Farah began working as a registered representative for Financial Network Investment Corporation in El Segundo, CA. Subsequently, he worked at National Planning Corporation (CRD# 29604) from July 1998 – September 2002. From September 2002 until September 2015, Mr. Farah was affiliated with Gold Coast as a registered representative. In September 2015, Mr. Farah was discharged from his employment with Gold Coast. According to publicly available information, this termination was due, in part, to allegations raised by FINRA that “[t]he representative had discretionary authority over a customer’s account at another broker-dealer without notifying the firm of his affiliation….”

As alleged in the Settlement, in October 2012 Mr. Farah opened a Gold Coast brokerage account on behalf of a self-employed artist – identified by the initials ‘LN’. At around the same time, Mr. Farah allegedly suggested that LN also open a brokerage account with TD Ameritrade. According to FINRA, Mr. Farah allegedly “promised to reimburse LN for any losses in her TD Ameritrade account that exceeded five percent and, in exchange, would take 30 percent of the trading profits as compensation.”

By November 2012, Mr. Farah purportedly began engaging in an ongoing pattern of heavy day-trading in LN’s TD Ameritrade account. For example, in February 2013 alone, a total of 147 settled trades were effectuated in LN’s TD account (purchases and sales totaling more than $8.2 million). As alleged by FINRA, by the end of September 2013, LN’s TD account had declined by approximately 25% in value.

Excessive trading, or churning, occurs where: (i) a registered representative exercises control over a customer’s account; and (ii) the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading constitutes a violation of FINRA’s suitability standards set forth under FINRA Rule 2111. In this instance, FINRA Enforcement’s allegations would suggest that Mr. Farah engaged in an unsuitable trading program in the TD brokerage account, in light of the sheer number of trades, the exorbitant turnover rate, and the cost-to-equity ratio.

Brokerage firms like Gold Coast have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

Law Office of Christopher J. Gray, P.C has experience representing investors in cases against stockbrokers and financial advisors, including cases involving excessive trading or churning, and related broker misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

Financial advisor Mark Kaplan (CRD# 1978048), who was most recently affiliated with Vanderbilt Securities, LLC (CRD# 5953, hereinafter “Vanderbilt”), has voluntarily consented to a bar from the securities industry pursuant to a Letter of Acceptance, Waiver & Consent (“AWC”) signed off on by FINRA Enforcement on March 7, 2018. Without admitting or denying any wrongdoing, Mr. Kaplan consented to the industry bar following FINRA’s investigation and findings concerning allegations of unsuitable and excessive trading in an elderly retail investor’s brokerage account.

According to FINRA records, beginning in 1989, Mr. Kaplan began working as a registered representative for Lehman Brothers. Subsequently, he worked at CIBC Oppenheimer Corp., Morgan Stanley DW Inc., Citigroup, and Morgan Stanley. During the course of his nearly thirty-year career, he has been involved in seven customer disputes, each of which concluded with a settlement.

With regard to the AWC, FINRA Enforcement alleged that “Between March 2011 and March 2015 [Mr. Kaplan] engaged in churning and unsuitable excessive trading in the brokerage account of a senior investor” and thus “[v]iolated FINRA Rules 2020, and 2111, NASD Rule 2310… and FINRA Rule 2010.” FINRA’s findings centered on Mr. Kaplan’s customer, identified in the AWC by the initials ‘BP’, as “[a] 93-year-old retired clothing salesman” who opened several accounts at Vanderbilt with Mr. Kaplan during March 2011.

After BP opened his accounts at Vanderbilt, FINRA Enforcement further alleged that over the ensuing months and years, Mr. Kaplan “exercised de facto control over BP’s accounts” and that the elderly investor “[r]elied on Kaplan to direct investment decisions” while simultaneously “[e]xperiencing a decline in his mental health.” FINRA has further alleged that during this March 2011-2015 time frame, Mr. Kaplan “[e]ffected more than 3,500 transactions” in BP’s accounts, which “[r]esulted in approximately $723,000 in trading losses and generated $735,000 in commissions and markups for Kaplan and [Vanderbilt].”

Excessive trading, or churning, occurs where: (i) a registered representative exercises control over a customer’s account; and (ii) the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading constitutes a violation of FINRA’s suitability standards set forth under FINRA Rule 2111.

Brokerage firms like Vanderbilt have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

At Law Office of Christopher J. Gray, P.C., our securities attorneys have significant experience representing investors in cases involving excessive trading or churning, and related broker misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

On February 9, 2017, FINRA Enforcement signed off on a Letter of Acceptance, Waiver and Consent (“AWC”) between FINRA and former financial advisor Matthew C. Maczko (“Maczko” or “Respondent”) (CRD# 1888519). Without admitting or denying FINRA’s findings, Mr. Maczko voluntarily consented to an industry bar from associating with any FINRA member firm in any capacity.

Mr. Maczko first became associated with a FINRA member firm in 1988 as a general securities representative under the employ of UBS Financial Services Inc. (“UBS”) (CRD# 8174). During the course of his career, he worked at UBS for nearly twenty years, and thereafter, from 2008-2016, worked as a registered representative for Wells Fargo Advisors, LLC (“Wells Fargo”) (CRD# 19616).

According to the AWC, “[M]aczko had been terminated on September 2, 2016” by Wells Fargo in connection with the brokerage firm’s “[i]nternal review for adherence to industry standards of conduct based on concerns about the level of trading in a customer account.” Furthermore, the AWC specifically referenced the following instance of alleged excessive trading, or churning, purportedly conducted by Maczko while affiliated with Wells Fargo:

“Between January 2009 and April 2016, Maczko effected excessive transactions in four brokerage accounts of Customer JZ, who is now 93 years old. Maczko effectively controlled these accounts, which had an average aggregate value of $3 million. During this period, Maczko effected over 2800 transactions in these accounts that generated approximately $581,650 in commissions, $84,270 in other fees, and approximately $397,000 in trading losses. This level of trading was unsuitable for Customer JZ given her investment profile; including her age, risk tolerance, and income needs. Accordingly, Maczko violated NASD Rule 2310 and FINRA Rules 2111 and 2010.”

Excessive trading, or churning, occurs where: (i) a registered representative exercises control over a customer’s account; and (ii) the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading constitutes a violation of FINRA’s suitability standards set forth under FINRA Rule 2111.

Brokerage firms like UBS and Wells Fargo have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

At Law Office of Christopher J. Gray, P.C., our securities attorneys have successfully resolved a number of disputes on behalf of aggrieved investors, including losses sustained due to instances of fraudulent conduct, excessive trading or churning, and related broker misconduct. Investors may be able to recover their losses in FINRA arbitration. Investors may contact a securities arbitration attorney via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

On January 5, 2018, FINRA Enforcement signed off on a Letter of Acceptance, Waiver and Consent (“AWC”) between FINRA and former financial advisor Larry Martin Boggs (“Boggs” or “Respondent”) (CRD# 1582741). Without admitting or denying FINRA’s findings, Mr. Boggs voluntarily consented to an industry bar from associating with any FINRA member firm in any capacity.

Mr. Boggs first became associated with a FINRA member firm in 1986 as a general securities representative. During the course of his career, he worked at a number of brokerage firms, including Ameriprise Financial Services, Inc. (“Ameriprise”) (CRD# 6363) from July 2009 to May 2015. Thereafter, he was associated with Wedbush Securities Inc. (“Wedbush”) (CRD# 877) for less than a year (2015-2016).

In May 2015, Mr. Boggs was discharged from his position by Ameriprise, based on allegations of “violations of company policy related to discretionary trading and suitability.” At around the same time frame, FINRA Enforcement conducted an investigation into Mr. Boggs and his sales practices and handling of customer accounts. FINRA’s findings include the following alleged activities and purported misconduct:

“Between January 2014 and May 2015, Boggs engaged in excessive and unsuitable trading in the accounts of five customer households. Boggs also improperly exercised discretion in these accounts without written authorization to do so. Finally, Boggs changed the investment objectives and risk tolerance for several of the above-referenced customers in order that they would conform to his high-frequency trading strategy, even though the customers’ investment objectives and risk tolerance had not actually changed. By doing so, Boggs caused the Firm’s books and records to be incorrect. As a result of such conduct, Boggs violated NASD Conduct Rule 2510(b), and FINRA Rules 2111, 4511 and 2010.”

In one instance of alleged misconduct cited by FINRA, Mr. Boggs initiated over 100 transactions on behalf of an elderly 82 year-old retired university professor whose investment objectives were growth and income, and whose risk tolerance was moderate. In connection with these purportedly unauthorized transactions, the elderly customer sustained losses of nearly $20,000 and incurred commission charges of $34,889.

Excessive trading, or churning, occurs where: (i) a registered representative exercises control over a customer’s account; and (ii) the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading constitutes a violation of FINRA’s suitability standards set forth under FINRA Rule 2111.

Brokerage firms like Ameriprise and Wedbush have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

At Law Office of Christopher J. Gray, P.C., our securities attorneys have successfully resolved a number of disputes on behalf of aggrieved investors, including losses sustained due to instances of fraudulent conduct, excessive trading or churning, and related broker misconduct. Investors may be able to recover their losses in FINRA arbitration. Investors may contact a securities arbitration attorney via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

The Securities and Exchange Commission (“SEC”) has filed a civil complaint (“Complaint”) in federal court against Mr. Zachary S. Berkey of Centerreach, NY and Mr. Daniel T. Fischer of Greenwich, CT, alleging that these financial advisors made unsuitable trades at the expense of customers. The Complaint addresses alleged conduct that occurred when Messrs. Berkey and Fischer were both employed by Four Points Capital Partners LLC (“Four Points”) (CRD# 43149).

According to the Complaint, Messrs. Berkey and Fischer allegedly conducted “in-and-out trading” that was almost certain to incur losses for investors, while at the same time yielding commissions to the financial advisors. Further, the Complaint indicates that ten (10) Four Points customers lost a total of $573,867, while Messrs. Berkey and Fischer earned commissions of $106,000 and $175,000 on these losing trades, respectively.

The SEC Complaint alleges that because the customers incurred significant costs with every transaction and the securities traded were held for short periods of time, the price of the securities had to rise significantly in order to realize even a minimal profit.

Without admitting or denying the SEC’s allegations, Mr. Fischer ultimately consented to a final judgment that permanently enjoins him from similar future violations and requires him to pay a fine of $160,000. This contemplated settlement is currently pending review by the court for its approval.

According to the SEC, “churning refers to the excessive buying and selling of securities in your account by your broker, for the purpose of generating commissions and without regard to your investment objectives.” In short, churning is a form of broker misconduct in which the financial advisor engages in excessive trading in order to generate unwarranted commissions at the expense of his or her client.

Investors with questions about a possible churning claim may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On October 31, 2017, Carmel, Indiana financial advisor Thomas J. Buck, 63, was charged under federal securities laws with one count of securities fraud. The unsealed criminal charges brought in the U.S. District Court for the Southern District of Indiana allege that Mr. Buck defrauded his clients by charging excessive commissions. Mr. Buck has agreed to plead guilty to the charge.

From 1981-2015, Mr. Buck was a registered financial advisor with Merrill Lynch, Pierce, Fenner & Smith (“Merrill Lynch”), which since January 2009 has operated as a division of Bank of America. The unsealed criminal charges allege, that in recent years, Mr. Buck defrauded some clients by charging excessive commissions, while intentionally failing to advise them of cheaper options for services rendered. Specifically, it is alleged that Mr. Buck took discretion over certain accounts, and in these accounts placed trades without client authorization, resulting in clients paying commissions on these trades. It is further alleged that Mr. Buck informed clients that they were paying less in commissions than were actually charged, and that he also allegedly failed to inform certain clients that a fee-based payment structure was available which could result in financial savings to the client(s).

As a result of the alleged fraudulent enterprise, it is estimated that Mr. Buck’s activities caused clients to incur aggregate losses of approximately $2 million. According to Assistant U.S. Attorneys Cynthia J. Ridgeway and Nick Linder, who are handling prosecution of the case, Mr. Buck has agreed to plead guilty and could face up to 25 years in prison. Contemporaneous with the unsealing of the criminal charges, Mr. Buck has also agreed to a monetary settlement with the Securities and Exchange Commission (“SEC”) in the amount of approximately $5 million.

FINRA BrokerCheck indicates that Mr. Buck has been barred from the securities industry. As disclosed by FINRA, on March 4, 2015, Mr. Buck was discharged from his employment with Merrill Lynch in connection with “allegations including failing to discuss service level and pricing alternatives with a customer, providing inaccurate information to firm management during account reviews regarding this issue, mismarking bond cross trade order tickets as unsolicited, and providing information to a client during an active account review that did not correspond to the firm’s records.”

Since May 2006, Mr. Buck has been involved in a total of 39 customer complaints; currently 36 of these complaints resulted in a settlement. The majority of these complaints reportedly concern allegations including unauthorized trading, misrepresentations and/or omissions of material fact in connection with commissions charged, as well as excessive trading.

Brokerage firms like Merrill Lynch have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be liable for losses sustained by investors.

At Law Office of Christopher J. Gray, P.C., our securities attorneys have successfully resolved a number of disputes on behalf of aggrieved investors, including losses sustained due to instances of excessive trading or churning, and related broker misconduct. Investors may be able to recover their losses in FINRA arbitration. Investors who wish to discuss a possible claim may contact a securities arbitration attorney via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

The claimants asserted gross negligence regarding a naked option trading strategy that was allegedly unsuitable. In addition, they alleged breach of fiduciary duty, churning, margin use and excessive trading.

According to stock fraud lawyers, firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Churning, on the other hand, is a form of broker misconduct in which the broker performs excessive trading to generate personal profit.

Though the accusations were denied by the respondents, the arbitration panel ruled that BBVA and Ascar were liable. The respondents have been ordered to pay damages to Barnard-Diaz in the amount of $635,000 and to the Rodriguezes in the amount of $547,000. In addition, they were ordered to pay expenses in the amount of $15,000 to each Bernard-Diaz and the Rodriguezes. However, claims against Bravo were dismissed with prejudice and the claims against Marbarak were denied. The respondents asked for Bravo and Marbarak’s CRD files to be expunged.

If you believe you have suffered significant losses as a result of unsuitable recommendations, churning, margin use or excessive trading, you may be able to recover your losses through a securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Currently a broker at Newport Coast Securities, Holzer has also worked with a number of other firms, including UBS, Brookstreet Securities Corporation, AG Edwards, Wedbush Morgan Securities Inc. and Sequoia Equities Securities. Holzer and UBS have already been compelled to pay to settle securities claims amounting to $11.4 million. These claims alleged that Holzer misrepresented variable annuities through misrepresentation of guaranteed returns. Holzer was fired from AG Edwards in 2003 for allegedly engaging in business practices that did not coincide with the firm’s policies. Further allegations against Holzer include misrepresentations while at Brookstreet. These misrepresentations allegedly occurred in 2005 at a Beverly Hills presentation at which Holzer allegedly stated that a fictional couple was able to make $9 million by deferring $732,000 in taxes through the use of trusts. In another claim, a customer of Wedbush Morgan Securities alleged breach of fiduciary duty, account mishandling, and breach of contract that allegedly resulted in damages of $824,000.

According to securities fraud attorneys, allegations against Holzer include fraud, churning, unsuitable investments, misrepresentations of fees, Securities Act violations, private placement-related fraud, negligent representations related to variable annuities, inadequate supervision, variable annuity-related fraud, negligent recommendation and sale of Provident Royalties LLC, negligent sale and recommendation of Behringer Harvard Security trust and other unsafe products as well as elder abuse.

Stock fraud lawyers say that in many cases, investment firms can still be held liable for a broker’s actions if their supervision of that broker was negligent. As a result, it may possible for investors to recover their losses from Holzer or the brokerage firm she was employed with when the fraud occurred.

If you have a claim arising from the conduct of Bambi Holzer or another financial advisor, you may be able to recover losses through securities arbitration. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

In the case of First Midwest Securities, securities arbitration lawyers say FINRA’s findings indicated that the firm failed to provide an adequate supervisory system and enforce adequate supervisory procedures to prevent excessive trading and ensure the suitability of equity transactions. Furthermore, the firm allegedly failed to utilize exception reports that would help in detecting excessive and unsuitable trading. Instead, according to the allegations, the firm relied on turnover ratio reports and daily trade blotter reviews that were prepared manually. However, these reports failed to address accounts’ cost-to-equity ratios.

Investment fraud lawyers are also investigating claims against Scott & Stringfellow based on FINRA’s findings that indicated the firm failed to maintain an adequate supervisory system related to the sale of Non-Traditional ETFs, or Non-Traditional Exchange Traded Funds. In addition, the firm allegedly allowed the recommendation of a Non-Traditional ETF by its registered representatives to customers without performing adequate due diligence. FINRA stated that some of the firm’s customers received unsuitable recommendations of the investment. The firm’s supervisory system, according to FINRA, was not reasonably designed for compliance with applicable FINRA and NASD rules and did not provide adequate guidance, tools, or adequate formal training to educate the firm’s supervisors and registered representatives about these investments.

If you believe churning occurred in your First Midwest Securities account or a Scott & Stringfellow representative made an unsuitable recommendation of a Non-Traditional ETF, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

In this case, the investors whose accounts were churned had conservative investment objectives. However, securities fraud attorneys say that when “churning” an account, the broker will disregard investment objectives and, instead, excessively trade in the account in order to generate commissions, margin interest, and fees for themselves or the firm at which they are employed. According to the SEC allegations, Calabro, Konner and Koutsoubos engaged in churning between January 2008 and December 2009, while they were employed with JP Turner.

Together, these three brokers generated approximately $845,000 through churning, while their customers suffered significant aggregate losses totaling around $2.7 million. If it can be proven that the firm failed to adequately supervise their brokers, in many cases that firm may be held liable for customer losses regardless of the employees’ ability to reimburse their clients for fraud.

“Broker-dealers’ supervisory systems must provide customers with reasonable protection from churning and similar abuses,” says Associate Director of the SEC’s Atlanta Regional Office, William P. Hicks. “JP Turner’s supervisory system failed to do that.”

As a result, stock fraud lawyers believe investors believe JP Turner could be held liable and made to reimburse defrauded investors’ losses.

If you have suffered significant losses as a result of your investment with JP Turner, Calabro, Konner or Koutsoubos, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Investment fraud lawyers say churning is a common problem in the securities industry. According to the S.E.C., “Churning refers to the excessive buying and selling of securities in your account by your broker, for the purpose of generating commissions and without regard to your investment objectives.” In short, churning is a form of broker misconduct in which the broker performs excessive trading to generate personal profit. For more information on churning, see the previous blog post, “Investment Churning: A Slippery Slope of Broker Misconduct.”

A Financial Industry Regulatory Authority arbitration claim was recently filed on behalf of an 81-year-old Peoria, Illinois resident. The claimant, a retired widow, was sold various life insurance policies and annuities. These investments were allegedly held for only a short period of time before being liquidated. According to the claim, the investments’ proceeds were then rolled into other annuity contracts and policies. Allegedly, most of these transactions incurred surrender charges and fees that were charged to the claimant. As an example detailed by the Statement of Claim, the funds of a Lincoln Annuity, purchased on August 20, 2003 and surrendered two years later, were rolled into a 15-month Fidelity Annuity. The proceeds of this transaction were rolled, on the same day of the sale, into a Hancock Annuity. The Hancock Annuity was held for just over two years. When it was sold, its proceeds were rolled into a Jackson Annuity.

In February 2011, John Edward Watson, the claimant’s advisor, was discharged from Securities America. Stock fraud lawyers say he was discharged for “providing inaccurate information on client disclosure documents.”

If you believe you have been the victim of churning, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

1. Unauthorized Trading: Unauthorized trading occurs when a broker makes trades without permission. This is surprisingly common and brokers will often defend their actions by saying that the investor either agreed to the trade or ratified it by raising no objection when they received a confirmation.
2. Unsuitable Investments: Surprisingly, it is common for brokers to be unable to accurately measure risk. As a result, investors may have a portfolio that is far more risky than is appropriate. Brokers must, by law, take into account the risk tolerance and investment objectives of each client and make suitable recommendations based on those criteria. Unsuitable investments include investments that carry a risk that is not in keeping with the investor’s risk tolerance, as well as inadequate diversification and improper asset allocation. Churning, which generates excessive commissions through excessive trading, is also a form of unsuitable investments. Investors who suspect the trading on their account is excessive will most likely have to consult an investment attorney for an analysis of their portfolio.
3. Misrepresentations and Omissions: If a broker fails to disclose the inherent risk of an investment or trading strategy, he or she has made misrepresentations and/or omissions. If it can be proven that the investors would have made different investment choices if the misrepresentations and/or omissions hadn’t occurred, they become material and the investor may have a valid securities arbitration claim.
4. Other Claims: Other forms of broker misconduct that could mean a valid claim for investors include front running, forgery, selling away, order failure and failure to supervise.

If you believe you have been a victim of any of these types of stock broker fraud, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Two ways investors can be victims of fraud through mutual funds are churning and break point fraud:

1. Churning: As market condition change, a stockbroker may suggest switching to a different mutual fund. If the new fund is within the same company as the old one, the investor usually doesn’t have to pay a commission. However, if the new fund comes from a different company, the investor must pay commissions and fees on the transaction. If the stockbroker encourages switching to a different company despite suitable options within the same company or attempts to generate commissions by encouraging the investor to switch multiple times to different companies, they may be “churning.”
2. Break Point Fraud: When investing in a mutual fund, the commission percentage drops as you invest more money in a company. The term “break point” refers to the financial intervals at which the commission percentage drops. An investor can purchase separate funds within the same company and combine the total money invested to reach a lower break point and, thus, pay less in commission. If a stock broker does not make them aware of this concept and/or recommends small purchases with multiple companies — rather than one or a few companies — without good reason, then they have committed break point fraud.

If you believe you’ve been a victim of mutual fund fraud, either through churning or break point fraud, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Cooper began investing with Saleh after his mother trusted her with her own finances. According to arbitration proceedings, Saleh had been invited into his mother’s home and she received gifts from Cooper at Christmas. Cooper, now living in a mobile home, expressed his thoughts of suicide when he lost everything and could not make payments on his condominium. The arbitration panel expressed its disgust by ordering Saleh to pay a $500,000 emotional distress payment and a $1 million elder abuse payment, a rarity for securities arbitration. In addition, Wedbush itself was ordered to pay $300,000, and its chairman another $200,000, for emotional distress. Together, Wedbush and Saleh will pay $390,000 for Cooper’s attorney fees and $471,000 in compensatory damages.

Wedbush failed to supervise and curb Saleh’s wrongdoing, making the firm partially responsible for her actions.

“They did absolutely nothing to stop this woman from continuing to take advantage of her customers,” Cooper’s attorney said.

According to FINRA, regulators have investigated Saleh four times, and a total of ten customers have filed complaints against her. Even after customer complaints, Wedbush failed to take action to curb her misconduct. This is the second arbitration loss the firm has faced in as many months.

“Saleh’s conduct was premeditated, egregious and unconscionable,” the arbitration panel said.

Saleh was permanently barred in 2009 from working in the securities industry.

If you believe you may be the victim of churning, contact an investment attorney immediately. The Law Office of Christopher J. Gray can be reached at (866) 966-9598 for a no-cost, confidential consultation.

Bailey’s broker misconduct took place over the span of nearly two years, from January 2006 to December 2007. His misconduct affected seven investors between the ages of 66 and 93. In addition, three customers were convinced by Bailey to hold their variable annuities for only a short time before switching them to new ones. FINRA determined that this was a violation to the broker’s suitability standard because it did not improve their financial situations and was not in keeping with their needs and financial objectives.

During this time period, Bailey recommended 484 “short-term mutual fund switch transactions,” according to FINRA. The average turnover for Bailey’s trades was only 60 days — a practice known as “churning.” Sales charges and trading fees for these 484 transactions amounted to $147,000 and Bailey’s commissions for these transactions amounted to more than $120,000. Currently, there is no mention of financial restitution and Bailey did not admit or deny wrongdoing.

With or without admission of fault, Bailey’s suspension does set an example, according to FINRA Executive Vice President and Chief of Enforcement Brad Bennett.

“Brokers who engage in excessive trading will be held accountable,” Bennett stated. “In this case, Mr. Bailey rapidly switched his elderly and unsophisticated customers in and out of mutual funds with high costs, providing a benefit to Bailey instead of to his customers.”

Churning is excessive trading of an investor’s account in order to generate broker commissions. If you believe that you, like William Bailey’s seven customers, are a victim of churning or unauthorized trading, you may have a valid securities arbitration claim and should contact Christopher J. Gray, P.C., for a no-cost, confidential consultation.

Although churning is clearly prohibited in both the Securities Exchange Act of 1934, Section 10(b) and the Securities Exchange Commission Regulation 10(b)(5), proving it in arbitration can be a challenge. Two critical factors of determining if churning has occurred are time and frequency of transactions. In addition, the broker must be acting willfully and not in the best interests of the investor. Finally, the broker must be in control of the trades that occurred. If the account is a discretionary account or if the broker is recommending most, or all, of the trades to the customer, the broker is said to be in control of the trades.

A case against churning is one in which the entire picture must be taken into account. A stock broker fraud attorney must analyze a large amount of data because of the high number of trades that occur in churning. Furthermore, the attorney must look at the Annualized Turnover Ratio, the Commission/Equity Ratio, the Total Cost/Equity Ratio, the commissions of the broker and factors that affect broker motivation. Above all, the trades must be done for the benefit of the broker, rather than the investor.

Because of the nature of churning and the difficulty of proving it in arbitration, it is imperative that victims choose their investment attorney carefully. At the Law Office of Christopher J. Gray, if you recover nothing, you pay no legal fees — that’s how committed the firm is to recovering your financial losses.