According to the Financial Industry Regulatory Authority’s “Disciplinary and Other FINRA Actions” report for August 2011, Bluechip Securities Inc. and Muhammad Akram Khan were disciplined and fined. Bluechip was censured and fined the amount of $15,000, while Khan was suspended from association with FINRA members for 18 months and fined $385,000. Both Khan and the firm consented to FINRA’s ruling but did not admit nor deny the findings.
Khan’s transactions generated just over $380,000 in commissions. According to FINRA’s findings, just under $400,000 of money from customer accounts was lost. Two customer accounts showed extreme commission-equity ratios of 22,131 percent in one account and 450 percent in the other. In addition, Khan executed unsuitable transactions, transactions at unfair prices, and could not reasonably believe that his customers were knowledgeable or experienced enough to evaluate the risks of the transactions on their own. Furthermore, they were not financially able to bear the risks associated with the transactions, none of the customers gave him written authorization to exercise discretion and none of the accounts were accepted by the firm as discretionary accounts.
Khan, who was also AML Compliance Officer for the firm, neglected to conduct an independent test of the program, did not retain accurate records, did not maintain minimum net capital for a securities business-violating SEC Rule 15c3-1-and filed inaccurate Financial and Operational Combined Uniform Single Reports. In addition, through sending and receiving text messages, Khan violated Securities and Exchange Act Rule 17a-3 because of a failure to preserve the electronic communications properly.
Khan will be able to resume association with FINRA-related firms on January 4, 2013.
If you believe that you, like Khan’s investors, have been the victim of excessive trading or unsuitable investments, 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.