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.

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.

According to the FBI’s figures, this type of financial fraud totals around $23 million, with actual victim losses amounting to about $6 million.

If investors notice any signs that their account has been compromised, such as bounced email messages, unexplained password changes, reports of spam, or unauthorized transactions on their investment accounts, they should contact an investment attorney immediately. If you believe you have been the victim of fraud, find out more about your legal rights and options by contacting an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

According to Ken Israel of the SEC, “Wendell and Allen Jacobson misled investors to believe they were financially supporting what was portrayed as a widespread and reputable operation to revamp apartment communities and turn a significant profit. Their promises were anything but truthful.”

If you invested with the Jacobsons or a member of your community you believed to be trustworthy because of their personal association with you, and suffered losses as a result, 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.

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.

During proceedings, there was no shortage of touching victim testimony. One victim lost the last $7,000 of her husband’s death settlement while another widow wrote of the loss of her savings, some of which was the last money her husband earned while battling cancer.

Of the 97 to 121 months in prison Gould was facing, he received only the minimum sentence. According to Assistant U.S. Attorney Hal Goldsmith, Gould has currently only repaid between $40,000 and $50,000. However, he has now been ordered to pay $3.1 million on his own and another $1.2 million together with David Rubin of Chesterfield with whom he defrauded one man. Gould and Rubin both pleaded guilty on April 29. Rubin has not yet been sentenced.

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.