Chicago-based Stoltmann Law Offices is investigating claims by investors in connection with financial advisors who switch clients into more expensive investments that trigger unnecessary fees. Overtrading in a brokerage account or “churning” has long been an industry abuse. But some brokers take churning to new limits.
FINRA, the US securities industry regulator, has suspended a former Edward Jones broker for six months and fined him $7,500 for allegedly making more than 800 transactions in four of his clients’ accounts without their authorization or consent, according to thinkadvisor.com.
From December 2017 to November 2018, Albert L. DeGaetano “executed 470 securities transactions in the accounts of a fundraising organization for a charitable hospital without its authorization or consent,” according to the FINRA letter. The 823 securities transactions in all, which included 389 purchases of exchange-traded fund (ETF) bonds, had a total principal value of about $7.2 million and generated approximately $113,000 in total trading costs, according to FINRA.
Without admitting or denying FINRA’s findings, Albert L. DeGaetano signed a FINRA letter of acceptance, waiver and consent on Nov. 11 in which he consented to FINRA’s sanctions. FINRA signed the letter, agreeing to the settlement.
In March 2019, DeGaetano became registered as a broker with Atlanta-based broker-dealer International Financial Solutions (IFS) Securities. He was fired by that firm in September of that year. IFS filed for Chapter 11 bankruptcy in April 2020 “as a result of the unauthorized speculative bond trading of one of its brokers,” thinkadvisor reported.
In September 2019, DeGaetano became registered with Cabot Lodge Securities. But on Nov. 27, 2019, Cabot Lodge fired DeGaetano’s “for violations of firm policy relating to, among other things, communications with the public,” according to FINRA.
A cautionary note: Broker-advisors don’t always tell clients that frequent trades or switching mutual funds will generate a windfall in commissions and fees for themselves and their firms. Often they make money from moving client funds from one fund share class to another.
Who’s accountable if a broker-advisor gouges you on onerous and unnecessary fees, which erode your total returns? Under FINRA rules, brokerage firms can be charged with “failure to supervise” brokers, which can be the grounds for an arbitration claim. Such transactions can also be seen as “unsuitable” for a client, especially if they are unaware how much it is costing them in terms of reduced retirement savings.
If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!