We are investigating the potential investment fraud actions of Marlon Cole of Legend Securities. Please call 1-866-817-0201 for a free and confidential consultation with a private attorney specializing in the representation of investors.
Mr. Marlon Cole has also worked for Spartan Capital, Fordham Financial, E.J. Sterling and Blackbook Capital. He has recently been the subject of scrutiny by securities regulators for actions taken while he was with Legend. He recently entered into a settlement agreement with FINRA, one of these regulators where Cole neither admitted nor denied the allegations against him.
The allegations against Cole are that from April 2013 through October 2014, while Cole was associated with Legend Securities, FINRA alleges that Cole engaged in excessive trading, unsuitable trading, and unauthorized trading. Specifically, Cole engaged in excessive trading in the investment accounts of six senior citizen investors that had trusted Cole as their broker.
One way to prove that an account was traded excessively is through the cost/equity ratio, the level of costs of an account per year as a percentage of the value of the account. Turnover, the number of times the account was sold and purchased, also serves to measure illicit activity. During the Relevant Period, Cole’s trading is alleged to have generated cost-to-equity ratios ranging from 29.82% to 589% and turnover rates ranging from 6.01 to 63.39. Such costs and turnover rates were inconsistent with the objectives of the senior investors, yet likely generated steady commissions for Cole.
Under FINRA Rule 2111, a registered representative must have a reasonable basis to believe, that a recommended securities transaction or investment strategy is suitable for a customer. Relevant to Cole’s trading here, the Rule prohibits excessive trading and trading that lacks a reasonable basis in light of a customer’s investment objectives and risk tolerance.
Rule 2111 also requires that where a representative controls an account, a series of recommended transactions, even if suitable by themselves, be deemed excessive and unsuitable for the customer when taken together in light of the customer’s investment profile.
When the costs in an account are so high that there can be no expectation of a reasonable return, no rational investor would knowingly agree to them. That is alleged in the present matter. The six customers here had investment objectives of growth and income or speculation. The sales charges for the six customers were in the form of both commissions and markups and mark-downs. Both were alleged excessive in light of the profiles.
This is not the first time Cole has been alleged to have engaged in securities fraud. In 2011, Cole entered into a similar settlement with the Alabama Securities Commission. That settlement centered on allegations that Cole “engaged in dishonest or unethical practices” including unauthorized trading in a customer account.