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Articles Tagged with stock broker fraud attorney

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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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On January 27, 2012, the Financial Industry Regulatory Authority (FINRA) issued an Investor Alert warning investors of fraudsters compromising investor email accounts to send trading instructions as a way to commit fraud. According to FINRA, fraudsters will use the email account to gain access to information that they can then use to request wire transfers to overseas accounts. Because this form of fraud can be committed by stock brokers and traders, stock broker fraud attorneys are encouraging defrauded investors to come forward with potential claims.

Broker Misconduct: Illegal Transfer of Funds Through Email Hacks

In some cases, firms failed to verify the instructions via telephone but released the funds anyway. This violation in procedure may entitle defrauded investors to a recovery of losses through securities arbitration. According to the SEC, four brokerage firms have been charged for allowing traders to trade in the U.S. securities market, despite the fact that they were unregistered. In the same case, Igors Nagaicevs, a trader, was charged with making $874,896 through unauthorized purchases and sales. He also broke into accounts 159 times from 2009 to August 2010. According to the SEC, he cost investors possibly over $2 million.

“Nagaicevs engaged in a brazen and systematic securities fraud, repeatedly raiding brokerage accounts and causing massive damages to innocent investors,” says the director of the SEC’s San Francisco regional office, Marc J. Fagel.

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Stock broker fraud attorneys are all too familiar with the idea that many people believe that investing with friends or members of their own community protects them against investment fraud. However, this is simply not the case. Investors are often swindled be fraudsters within their own community. They will swindle their family, friends, coworkers — even, as in a recent case emerging following a complaint to the Securities and Exchange Commission, members of their church congregation.

Investing With “Friends” does NOT Protect from Fraud

Wendell and Alan Jacobsen, members of the Church of Jesus Christ of Latter-Day Saints in Salt Lake City, used their membership in the church to gain the trust of around 225 investors and perpetuate a $220 million fraud. The scheme has been in operation since 2008 and was only recently halted by a SEC emergency order.

According to the SEC, victims of the fraud were offered the opportunity to participate in an investment that would receive 5 to 8 percent annual returns, with a guarantee of safety for their principal investment. The investors were told they would be investing in apartment communities that would be purchased at discounted rates and then, within 5 years, would be renovated and sold for a profit. However, the investments suffered losses, which were then covered up by the Jacobsons by using new money collected from investors to pay returns to previous investors. Furthermore, money collected from investments was used to pay personal business expenses and family expenses.

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While stock broker fraud is always a despicable crime to the victims of the fraud, the case of Joshua Gould's broker misconduct seems infinitely worse for the close relationship between victim and perpetrator, as well as the vulnerable nature of other investors. Gould, a former independent broker for Woodbury Financial Services in University City, defrauded friends, family, and investors, including the elderly, widows, and religious organizations.

Hedging and “Failure to Hedge” Claims

Not even Gould's own mother was safe, and she lost around $500,000 to her son, the bulk of her inheritance. All in all, more than 25 people were swindled out of more than $5 million. Gould spent some of the money on charitable donations to boost his reputation while at the same time spending it on strippers and entertaining them at St. Louis hotel parties. In addition, he paid the rent of at least one stripper. Gould also paid off personal debt, renovated his home, started several businesses, and facilitated a ponzi scheme.

Once the theft was discovered, Gould confessed and, according to his lawyer, has cooperated and attempted to remedy the losses of his victims. During his trial, he expressed remorse for his actions and disdain for himself.

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The nature of “churning” within an investor’s account is difficult to prove. 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. If an investor feels they may be a victim of churning, he should check his monthly statements for numerous stock trades and then contact a stock broker fraud attorney. If you believe you are a victim of churning, contact the law office of Christopher J. Gray, P.C. for information and guidance.

Investment Churning: A Slippery Slope of Broker Misconduct

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.

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