Articles Posted in Churning

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Customers of barred broker or “financial advisor” Gabriel “Gabe” Block of Red Bank, New Jersey may have arbitration claims if Block caused the customers losses by recommending over-concentration of the customer’s accounts in stocks, excessive use of margin loans and/or trading in microcap stocks.

Piggybank in a Cage
According to BrokerCheck records kept by the Financial Industry Regulatory Authority (FINRA), Block has been subject to at least 12 customer complaints and five regulatory actions during his career.  Block is currently barred from the industry but was formerly employed by First Standard Financial Company LLC, National Securities Corp., and Oppenheimer & Company, among other brokerage firms.  Several of the customer complaints against Block concern allegations of high frequency trading activity also referred to as churning.

On August 28, 2015, The State of Delaware’s Investor Protection Unit filed an administrative complaint against Block, with the following allegations: churning, excessive trading, unsuitable investment recommendations, and narcotics use.  Block denied the Delaware allegations, but consented to a cease and desist order, and relinquished his right in the future to apply to be a broker or investment advisor in the state of Delaware.

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financial charts and stockbrokerEffective March 13, 2018, the Financial Industry Regulatory Authority (“FINRA”) imposed an industry bar against former financial advisor Gabriel “Gabe” Block (CRD# 2103543), of Rumson, New Jersey.  FINRA Enforcement’s sanctions stem from a prior Administrative Consent Order (“Order”) entered into on or about June 25, 2015, between the State of Delaware Investor Protection Unit through its Director and Mr. Block’s then employer, Oppenheimer & Co. Inc. (CRD# 249, “Oppenheimer”).

The 2015 Order encapsulates findings of fact and allegations that Block made unsuitable investment recommendations to an investor that earned Mr. Block and Oppenheimer substantial brokerage commissions and fees of $867,900 on approximately $3,023,242 that the investor had invested with Oppenheimer.

Pursuant to the Order, Oppenheimer was assessed a fine of $685,000.  The Delaware Investor Protection Unit found fault with Oppenheimer’s failure to take action, although the subject accounts reportedly appeared on a branch office compliance review report 23 out of the 24 months that the accounts were open.

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Piggy Bank in a CageFinancial 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.”

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money whirlpoolFinancial 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.

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Money in WastebasketOn 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:

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Piggy Bank in a CageOn 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:

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Piggy Bank in a CageThe 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.

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Financial Fraud 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.

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Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of the unsuitable recommendation of investments sold by BBVA Securities of Puerto Rico representatives. Reportedly, a Financial Industry Regulatory Authority arbitration panel recently awarded $1.2 million to claimants Felix Bernard-Diaz, Julian Rodriguez and Luz Rodriguez. The defendants in the hearing were BBVA Securities of Puerto Rico Inc., Rafael Colon Ascar, Jorge Bravo, Sonia Marbarak and Julio Cayere.

BBVA Securities of Puerto Rico Ordered to Pay $1.2 Million to Investors

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.

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Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of doing business with Bambi Holzer. According to a Forbes article, Holzer’s investment advice has resulted in securities settlements amounting to more than $12 million. Despite this article, which appeared three years ago, her trades are still being cleared by brokerage firms.

Bambi Holzer Still Trading Despite Numerous Customer Complaints

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.