Equinox Securities and its brokers Stephen Michael Oliveira and Chris Blaine Palkowitsh were named respondents in a FINRA complaint alleging that the firm and Palkowitsh engaged in a manipulative, deceptive and fraudulent scheme by churning customer accounts. If you were a victim, or are uncertain if you are a victim, of Oliveira, Palkowitsh or Equinox please call 1-866-817-0201 to speak to a private attorney about your rights and ability to recover your losses. The consultation is free and confidential.
The FINRA complaint alleges that the firm and Palkowitsh acted with intent to defraud and/or reckless disregard of their customers’ interests by seeking to maximize their own commissions. The trading in the customers’ accounts was, as evidenced by the high annualized cost-to-equity ratios and number of transactions, excessive in light of and inconsistent with the customers’ investment objectives and financial situations. None of the customers acquiesced or consented to the heavy level of trading in the accounts.
The effect was particularly pernicious because six of the eight accounts were individual retirement accounts that constituted the bulk of the customers’ retirement savings. After the customers sustained substantial losses, Palkowitsh placed their remaining equity at risk by concentrating each account in a low-priced security. As a result of the excessive trading and churning in the accounts, each of the customers suffered extensive losses and paid exorbitant fees and commissions to the firm and Palkowitsh.
As a result of their conduct, the firm and Palkowitsh willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, NASD Rules 2110 and 2120, and FINRA Rules 2010 and 2020. Palkowitsh also failed to timely amend his U4 to disclose at least three federal tax liens. The complaint also alleges that Palkowitsh made unsuitable recommendations to customers, which the firm is liable for, and lacked reasonable grounds for believing that the customers’ understood and were willing and able to assume the risk particular to having their accounts heavily concentrated in a single, low-priced security where a significant loss would effectively wipe out the customer’s entire principal in these accounts, many of which were the customers’ sole retirement accounts.
The complaint further alleges that the firm and Oliveira failed to adequately investigate and act upon the misconduct Palkowitsh committed over a lengthy period of time, and also failed to ensure that Palkowitsh acted in a manner that was compliant with applicable laws, regulations and rules. In addition, the complaint alleges that there were multiple red flags suggesting that Palkowitsh was excessively trading, churning, and generally making quantitatively and qualitatively unsuitable recommendations. These red flags were known to but not addressed by Oliveira, who was the firm’s chief executive officer (CEO), CCO and Palkowitsh’s supervisor, or, through Oliveira, by the firm. The firm and Oliveira failed to establish, maintain,and enforce a supervisory system and WSPs that were reasonably designed to achievecompliance with applicable securities laws and regulations.
Moreover, the complaint alleges that Oliveira was responsible for establishing and maintaining the firm’s supervisory systems and procedures and for establishing an adequate system and procedures to ensure that Form U4s of the firm’s representatives included all required disclosures and were updated in a timely manner. Oliveira failed to discharge those responsibilities adequately because the firm’s supervisory system and procedures were not reasonably designed to achieve compliance with applicable securities laws, regulations and rules. Oliveira failed to conduct any meaningful review and take any meaningful action to detect and prevent unsuitable recommendations. After Palkowitsh’s initial Form U4 was filed, Oliveira never inquired about his bankruptcies, judgments or liens; and, in particular, never inquired about whether his Form U4s was current and accurate.