Securities Fraud Attorneys Blog

Articles Tagged with Churning

FINRA Examinations Determine Brokerage Firms are Not Monitoring Client Risk Tolerance

February 28, 2022 | by Stoltmann Law Offices

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses as a result of their broker excessively trading and churning their accounts. Brokers have been known to take advantage of clients who have margin accounts and give them permission to trade at will. Although investors place a great deal of trust in their broker-advisors, sometimes this confidence is abused.

FINRA, the federal securities regulator, found in a recent report that brokers don’t always pay attention to customers’ risk tolerance and violate FINRA rules on risk monitoring. To say this is no surprise to the attorneys at Stoltmann Law Offices, who have fifty years of combined experience representing investors in claims against brokerage firms, is an understatement. According to FINRA, “Firms are required to monitor the risk of the positions held in these accounts during a specified range of possible market movements according to a comprehensive written risk methodology,” which has a stack of rules governing the conduct of brokers and the firms that supervise them.

FINRA’s guidelines on informing clients on portfolio risk include the following:

FINRA Suspends Former Edward Jones Financial Advisor, Albert DeGaetano of Independence, Ohio, for alleged Excessive Trading

December 15, 2021 | by Stoltmann Law Offices

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.

Aegis Capital Nailed by FINRA for Brokers’ Churning and Burning Clients

December 3, 2021 | by Stoltmann Law Offices

Chicago-based Stoltmann Law Offices is investigating financial advisors and brokers who trade excessively in client accounts. “Churning,” or trading excessively to generate broker commissions, is one of the perennial abuses in the securities industry. Investors have been losing millions due to these practices.

FINRA, the U.S. securities industry regulator, said it has ordered New York City-based Aegis Capital Corp. to “pay approximately $2.8 million, including $1.7 million in restitution to 68 customers whose accounts were potentially excessively and unsuitably traded by the firm’s representatives.” FINRA also imposed a $1.1 million fine for Aegis’s supervisory violations, according to fa-mag.com.

“Aegis supervisors failed to detect or act on information that eight Aegis reps excessively and unsuitably traded customer accounts over a period of more than four years, generating $2.9 million in trading costs that would have required the investments to generate more than 71% returns to offset costs,” FINRA stated. FINRA found that “from July 2014 to December 2018, Aegis failed to implement a supervisory system reasonably designed to comply with FINRA’s suitability rule. As a result, Aegis failed to identify and address its representatives’ potentially excessive and unsuitable trading in customer accounts, including trading by eight Aegis representatives who excessively traded 31 customers’ accounts,” the regulator said.

Excessive Trading and Churning Victims Have Recovery Options to Pursue

June 30, 2021 | by Stoltmann Law Offices

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from brokers who churn customer accounts. One of the most perennial abuses in the brokerage industry is when broker-adviser “churn” accounts to generate extra commissions or fees. When that happens, it’s difficult for clients to make money because their accounts are consumed by transaction fees.

Marc Augustus Reda, a registered representative for Spartan Capital Securities in New York City, was recently charged by FINRA, the securities industry regulator, with overcharging clients some $2 million. “From 2017 through 2019,” reports fa-mag.com, “Reda, among other things, recommended unsuitable investments to his clients and traded excessively in those accounts, the FINRA complaint said. His activities resulted in 66 clients paying a total of $952,764 in commissions and fees, while incurring total net losses of $934,482,” FINRA said.

Reda generated the excessive fees through an “active trading” strategy in which he made trades without his clients’ specific permission. FINRA noted that “Reda failed to consider that the substantial commissions and costs associated with his investment strategy made it unlikely his customers could make any profits.”

Coleman Devlin Losses? How to Recover

October 27, 2017 | by Andrew Stoltmann

Did you suffer losses with Coleman Devlin, formerly of IFS Securities? Mr. Devlin has been accused of effecting discretionary trades in five customer accounts without obtaining prior written authorization from the customers and without acceptance of the accounts as discretionary by his member firm. He was also accused of making unsuitable investments, unauthorized trading, making misrepresentations and/or omissions, breaching fiduciary duty, giving unsuitable advice, failure to supervise, suitability, churning, and over-concentration in accounts in aggressive and speculative securities without client authorization, among other things. These are all against securities laws and internal firm rules. Churning, also known as excessive trading, is a particularly egregious tactic used by brokers in order to generate large commissions for themselves, while generating unnecessary fees for the client.
Mr. Devlin, according to his online BrokerCheck report with FINRA, was previously registered with Tamaron Investments, Legg Mason Wood Walker, Dean Witter Reynolds, Gruntal & Co., Ryan Beck & Co., Stifel, Nicolaus and IFS Securities in Atlanta, Georgia. He has 13 customer disputes against him, one of which is currently pending. He is not currently registered as a broker and is suspended from the industry.

Impending Investigation: Jose R. Gonzales and Churning Losses

May 1, 2017 | by Andrew Stoltmann

AdobeStock_33766885-1-300x200 Stoltmann Law Offices is investigating Jose R. Gonzales, a former broker with American Trust Investment Services. The Financial Industry Regulatory Authority (FINRA) recently barred him from the industry after he failed to respond to an inquiry against him. Mr. Gonzales was alleged to have churned or excessively traded three of his customer’s accounts. Churning is an especially egregious transgression, as it can generate large commissions for the broker and lead to client’s paying unnecessary fees. It is a tactic used by the broker to make money while making unnecessary trades. If you or someone you know lost money with Jose R. Gonzales, please call our securities law firm today at 312-332-4200 for a no-cost, no-obligation consultation with one of our attorneys today. We are based in Chicago, Illinois and Barrington, Illinois and take cases on a contingency fee basis only so you only pay us money if we recover for you. Please call today as there is a statute of limitations on most cases. We arbitrate cases in the FINRA arbitration forum and bring claims against firms like American Trust Investments Services because the firm may be liable for money losses because of lack of broker supervision.
According to his online, FINRA, public BrokerCheck record, Mr. Gonzalez was registered with Merrill Lynch, Painewebber, Principal Financial Securities, Everen Securities, Raymond James, National Securities Corp and American Trust Investment Services in Chicago, Illinois from November 2013 until October 2016. He has seven customer disputes against him and has been permanently barred from the industry.

Christopher Paul Anthony; Rhodes Securities; Churning Violations

April 11, 2017 | by Andrew Stoltmann

Did you or someone you know lose money with Christopher Paul Anthony, a former registered representative with Rhodes Securities? If so, the Chicago-based attorneys of Stoltmann Law Offices may be able to help you recover those losses on a contingency fee basis. We bring claims against firms such as Rhodes Securities in the Financial Industry Regulatory Authority (FINRA) arbitration forum. Please call 312-332-4200 today for your free consultation about how you may be able to recover your losses. The call is free with no obligation.

Mr. Anthony has been accused of churning, failing to supervise, negligence, breach of fiduciary duty, breach of contract, trading with discretion, trading outside the investment objectives of his client’s accounts and recommending unsuitable investments in products such as Foreign stocks and Indexed Exchange-Traded Funds (ETFs). A broker must only recommend securities that are suitable for his clients by taking into account their net worth, age and investment portfolio objectives. ETFs tend to be risky and illiquid investments that are not suitable for all investors. Churning, also referred to as excessive trading, is a particularly egregious transgression of securities laws, because it is a tactic used primarily for the broker to make large commissions at the expense of the client.

Mr. Anthony was registered with Principal Financial Securities in Dallas, Texas from August 1983 until January 1995, Absolute Investments Inc. in Dallas from December 1994 until June 1995 and Rhodes Securities in Fort Worth, Texas from June 1995 until April 2015. He has two pending customer disputes against him and is currently not registered within the industry, according to his FINRA BrokerCheck online report.

Kelly Althar; Financial West Group; San Francisco, California

January 16, 2017 | by Andrew Stoltmann

Stoltmann Law Offices is investigating Kelly Althar who allegedly engaged in excessive trading (churning) in two accounts held by an elderly customer. Althar also allegedly made unsuitable recommendations. He was also charged with one count of grand theft. This is against securities rules and regulations. Churning accounts is a particularly egregious action done by a broker to generate large commissions for himself. Althar’s former firm, Financial West Group, can be sued in the Financial Industry Regulatory Authority (FINRA) forum on a contingency fee basis for investment losses. Please call our Chicago-based law firm today at 312-332-4200 to speak to an attorney about your options. The call is free with no obligation.

According to his online FINRA BrokerCheck report, Althar was registered with Pruco Securities in Newark, New Jersey from November 1995 until March 1996, Sun Investment Services in Wellesley Hills, Massachusetts from October 1996 until May 1997, M.L. Stern & Co. in San Francisco, California from May 2007 until December 2008, Southwest Securities in San Francisco from December 2008 until April 2011, Financial West Group in San Francisco from April 2011 until December 2015 and Paulson Investment Company in Novato, California from December 2015 until May 2016. He has two customer disputes against him and one criminal final disposition.

Claims Against David Cannata For Churning Violations; Ordered to Pay $1.6 Million in Restitution

October 21, 2016 | by Andrew Stoltmann

According to public records by the Financial Industry Regulatory Authority (FINRA), David Cannata was permanently barred from acting as a broker or otherwise associating with firms that sell securities to the public. FINRA claimed that Cannata excessively traded and churned three customer accounts while associated with Craig Scott Capital. In the claim, it was alleged that he used excessive trading as a means to turn over the accounts quickly to generate large commissions for himself and used an aggressive, short-term trading strategy in the accounts that had relied heavily on buying and selling equities of companies releasing their earnings reports. He then reportedly solicited to buy transactions just prior to the earnings’ announcements and then sold the positions shortly after the earnings were released in order to avoid losses. He allegedly did this with hundreds of trades for customers in their accounts. Some of the customers allegedly had losses in the millions of dollars, while Cannata made hundreds of thousands of dollars in commissions for himself.

Churning, also known as excessive trading is fraudulent conduct in a brokerage account where a broker over-trades an account to generate inflated commissions. This can cause high fees for the investor and is a particularly egregious form of securities law violation. Cannata was also accused of “willfully failing to amend and timely disclose on his Form U4 tax liens totaling $189,449 and was ordered to pay almost $1.6 million in restitution. Cannata was also accused of breaching contract, breaching duty of good faith and fair dealing, and intentional torts and negligence. These are all against securities rules and regulations and Craig Scott Capital, his former firm, can be held responsible for these losses in the arbitration forum. The firm is responsible for its brokers actions and if it does not reasonably supervise them, can be held responsible for financial investment losses. Please call our securities law firm today at 312-332-4200 to speak to an attorney about how you may be able to bring a claim against Mr. Cannata and Craig Scott Capital. The call is free with no obligation.

David Charles Cannata was registered with Continental Broker-Dealer Corp, First United Equities Corp, Institutional Equities Corp, Advanced Planning Securities, JP Turner & Co., JHS Capital Advisors, Brookstone Securities and Craig Scott Capital in Uniondale, New York from February 2012 until September 2014. He has seven customer disputes against him, three of which are currently pending. According to his online, FINRA BrokerCheck report, he is not licensed and has ben barred from the industry.

Paul Lebel of LPL Financial; Cambridge, Massachusetts

October 19, 2016 | by Andrew Stoltmann

Did you lose money with Paul Lebel, a former broker with LPL Financial? If so, the attorneys at Stoltmann Law Offices may be able to help you bring legal recourse against LPL for failing to supervise him while he was registered there, causing investment losses. Firms such as LPL may be responsible for financial losses and we bring legal action against firms such as LPL in the Financial Industry Regulatory Authority (FINRA) arbitration process on a contingency fee basis. This means, we don’t make money unless you recover yours. The call to us is free with no obligation, so please call today. 312-332-4200. Our law offices are based in Chicago.

According to a recent InvestmentNews article, Paul Lebel was barred from the industry on Tuesday by the Securities and Exchange Commission (SEC) for churning and excessively trading mutual funds in customer accounts and generating excess fees. He was accused of defrauding four customers in several of their accounts, according to an SEC administrative proceeding against him. It stated: “In particular, Lebel exercised de facto control over these customers’ accounts and excessively traded mutual fund shares which carry large front-end load fees.” These mutual fund shares were A shares, which are typically meant to be long-term, buy-and-hold investments. Mr. Lebel allegedly made $50,000 in commissions from the sale of them. A broker such as Mr. Lebel must take into account a customer’s net worth, investment objectives, investment sophistication and age, among other factors before recommending an investment to them. If he does not, his firm may be responsible for investment losses. Churning, or excessive trading is an especially egregious securities law violation, as it typically generates large fees for the broker and causes the client to pay unnecessary and, sometimes, high fees.

According to his online FINRA BrokerCheck report, Lebel was registered with Montano Securities Corp, Gruntal & Co., AG Edwards & Sons, Oppenheimer & Co., LPL Financial in Cambridge, Massachusetts from August 2008 until November 2014 and Wood (Arthur W.) Company. He has eight judgment/liens against him. He is not licensed within the industry at this time.

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