Tag Archives: churning

Churning at Fist Standard Financial

If you are or were an investor with First Standard Financial and believe First Standard churned your account, please call 303-300-5022.  Initial consultations are free and confidential.

A supervisor with First Standard Financial has recently been suspended for two months and fined for failing to supervise churning activities First Standard Financial brokers.  The regulator instituting this stipulated sanction is the Financial Industry Regulatory Authority (FINRA).  FINRA regulates securities brokerage firms under the oversight of the SEC.

Between March 2018 and May 2019, the supervisor at First Standard failed to reasonably supervise a former First Standard broker who had, with a history of violations and was required to given heightened supervision, excessively and unsuitably traded the accounts of three investors.  Excessive trades are commonly referred to as “churning.”

FINRA rules prohibit excessive trading in an investor’s account.  To guard against this, FINRA rules require a brokerage to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.” To comply with this FINRA rule, a firm’s supervisors must reasonably investigate “red flags,” or warning signals, of potential broker misconduct and take appropriate action when misconduct has occurred.   First Standard Financial failed to institute such safeguards.

Not only did the broker have a history that should have required heightened supervision, the supervisor who was charged with monitoring the broker also had a history.  An arbitration panel in 2016 found that this supervisor had committed violations himself while acting as a broker.  These violations included churning.

This same supervisor also has a history of being associated with a number of brokerages that been expelled by regulators.  These facts make the systematic failure to supervise churning at First Standard foreseeable.

NEXT Financial Excessive Trading

On July 13, 2021, NEXT Financial entered into a regulatory settlement for excessive trading.   In the settlement,  the regulator censured, fined $750,000 and required NEXT to certify that it has implemented supervisory systems and procedures reasonably designed to address the issue.  If you believe you have a potential claim, call 1-866-817-0201.

investingstockphoto 1The trading issues stem from unsuitable short-term trading of mutual funds and municipal bonds in customer accounts and over-concentration of customer accounts in Puerto Rican municipal bonds. Without admitting or denying the findings, the NEXT consented to the sanctions and to the entry of findings that it failed to establish, maintain and enforce a supervisory system, including written supervisory procedures, reasonably designed to detect and prevent unsuitable short-term trading of mutual funds and municipal bonds in customer accounts and over-concentration of customer accounts in Puerto Rican bonds.

Rules concerning suitability and excessive trading are designed to protect investors from excessive risk which an investor is not prepared or willing to take.  The motivation for such unsuitable investments is generally a heightened commission to the broker.  In the case of turnover of mutual funds, the costs and commissions incurred from sale and repurchase are much higher than the investor can reasonably re-earn if even the account is turned-over only a few times.

Worden Capital Lack of Supervision

If you have suffered as the result of the lack of supervision at Worden Capital – commonly in the form of either excessive broker trading or failing to transfer your funds – call 303-300-5022.  Jeffrey Pederson is an attorney who represents investors.  Initial consultation is free and confidential.

On December 31, 2020, FINRA, the Financial Industry Regulatory Authority, ordered Worden to pay restitution of over $1 million to investors.  The order stems from systemic problems in supervision of Worden brokers.

FINRA found that from January 2015 to October 2019, Worden and the firm’s owner and CEO, Jamie Worden, failed to establish and enforce a supervisory system to achieve compliance with regulatory rules relating to excessive trading, also known as “churning.” As a result, Worden’s brokers and advisors made more than $1.2 million in excessive commissions. In one instance, a Worden investor paid $205,557 in commissions in the course of one year. Worden did not take action to investigate or stop the trading in this investor’s account and others like it.

The Head of FINRA’s Department of Enforcement said, “FINRA has an unwavering commitment to protect investors from excessive and unsuitable trading. Firms must ensure they establish systems and procedures reasonably designed to supervise representatives’ recommendations to their customers, and firms’ supervisory personnel must have in place the necessary tools and training to address red flags.”

FINRA also found that Worden and its CEO interfered with customers’ requests to transfer their accounts to another brokerage.

Attention Dennis Mehringer Investors

If you were an investor with Dennis Mehringer call 303-300-5022 for a free and confidential consultation with a private attorney.

On October 18, 2019, the Financial Industry Regulatory Authority (FINRA) barred Mr. Mehringer from the securities industry when he failed to defend charges that he handled his investor accounts inappropriately.

Mehringer was previously named a defendant in a FINRA regulatory complaint, a legal action brought by the national regulatory body overseeing securities brokers, alleging that he made unsuitable recommendations that caused a customer to engage in excessively expensive short-term trading and intra-day switching of mutual fund Class A shares.   

“Unsuitable” recommendations are recommendations of securities transactions or purchase of strategies that are inconsistent with the risk tolerance or investment objectives of an investor.  They can also be when a broker makes trades with the objectives of increasing the broker’s commission.  That is what happens with short-trading of mutual funds.  The high commissions of mutual funds are repeatedly charged so that there is little to no chance for the investments to make a reasonable return.  This is sometimes referred to as churning.  

The FINRA complaint alleges that Mehringer repeatedly recommended, and caused the investor to engage in, short-term purchases and sales of 84 mutual fund Class A positions (involving the sale of shares within a year of purchasing them) in five of the customer’s accounts.

In 47 of the 84 purchase transactions, investors paid front-end sales loads ranging from four to five percent. All but 17 of these 84 mutual fund positions were held for less than six months, and approximately 35 of them were held for less than three months. Mehringer received $169,735 in commissions from the transactions. Mehringer recommended the short-term mutual fund trading and the intra-day mutual fund switching alleged above without reasonable grounds to believe that the recommendations were suitable for the investor.

Given the long-term nature of Class A mutual fund share investments, along with the costs and commissions incurred in connection with frequent trading and switching between the mutual funds and mutual fund families, Mehringer’s short-term trading was unsuitable for any customer. The complaint also alleges that Mehringer exercised discretion in the same customer’s accounts without obtaining the customer’s written authorization and his member firm’s approval to do so. 

The actions of Mehringer are currently the subject of eleven arbitration suits brought by his investors against either him or his former employers.

Though Mehringer passed away in September 2020, his former firm is still responsible for the many frauds committed by Mehringer.

Attention Stokesbary Investors

If you were one of the investors of Arlyn Roy Stokesbary, formerly of Thrivent Investment Management, please call 303-300-5022.   Initial consultations with an attorney are free and confidential.

The Financial Industry Regulatory Authority (FINRA) accused Stokesbary of a large number of unauthorized trades in the accounts of his investors.  FINRA is the regulatory arm of the New York Stock Exchange and the NASDAQ, and is overseen by the SEC.  FINRA alleged that Stokesbary took such fraudulent actions in the accounts of 20 separate investors.   The actual number may be much higher.

In August 2017, Thrivent identified Stokebary trading for two unrelated investors within several minutes of each other, actions which raise a red flag that appropriate authorization was not obtained.  Stokesbary confessed to his employer, Thrivent, that he did not speak to either customer prior to the trades.  Thrivent warned him of the need for contemporaneous authorization of trades, but did not fire him at the time.

Unauthorized trading is a form of fraud.  A broker can enrich himself at the expense of his investor when the broker makes unauthorized trades.  As such, a broker cannot exercise such control over an account absent written authorization.

Unfortunately, the warning from Thrivent was not heeded.  FINRA identifies that shortly thereafter, Stokesbary effected an additional 109 trades without contacting investors on the day of the trade.  Once again, this number may be much higher.

On September 20, 2018, Thrivent disclosed that it  terminated the employment of Stokesbary.  Thrivent stated the termination was for his  “failing to discontinue improper trading practices [in customer accounts] after being educated.”

Thrivent, and its predecessor Lutheran Brotherhood had been the employer of Stokesbary since 1987.

FINRA suspended Stokesbary for 15 days from the industry and imposed a $5000 fine.

Investors holding accounts at Thrivent should contact an attorney if they believe that Stokesbary effectuated trades in their accounts.

 

Buckman, Buckman & Reid Loss Recovery

If you suffered investment losses with Buckman, Buckman & Reid (BBR) please call 303-300-5022 about potential loss recovery.  BBR has been censured and officer, Chip Buckman, suspended for a culture of insufficient supervision leading brokers to make excessive trades and recommend overly aggressive securities

From January 2013 through April 2017, BBR failed to maintain a supervisory system and enforce written supervisory procedures. In addition, BBR and Chip Buckman—who was the Firm’s designated supervisory principal responsible for conducting suitability reviews failed to reasonably supervise two former registered representatives, who the regulatory documents identify only by initials GK and RI, recommended excessive and unsuitable trades in dozens of investor accounts.

Regulatory rules require securities firms and their brokers to have a reasonable basis to believe that a recommended securities transaction or investment strategy is “suitable” for the customer, based on the information obtained through the reasonable diligence of the firm or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, investment objectives, investment experience, investment time horizon, liquidity needs, and risk tolerance.  Failure to do so is a “suitability” violation.

Unsuitable investment recommendations and excessive trading are forms of fraud.  Both enable a broker to make commissions that significantly above those that would be earned if the broker handled the account in a manner consistent with regulatory obligations.  Both also create unnecessary risks in the portfolios of their investors.

 

BBR was required to maintain procedures to make sure that investment recommendations were suitable BBR’s system failed to monitor its brokers in such a fashion.  No one at BBR reviewed the monthly reports and alerts that could have helped the Firm detect excessive trading and unsuitable concentration levels in customer accounts.

The supervisory failures allowed the fraud to occur.  At least one of the brokers involved had a history of misdeeds when he was first hired by BBR including many complaints for unsuitable securities sales.  Despite this history of fraud, BBR failed to supervise this broker.  Not surprisingly, the broker continued to commit fraud in the accounts of his investors.

We assist investors who lose value in their portfolio when brokers commit misdeeds and brokerages fail to supervise.  Please call for a free and confidential consultation.

 

 

Christopher Duke Bennett Fraud Victims

If you have suffered losses with Christopher Duke Bennett of J.J.B. Hilliard, please call 303-300-5022.   Victims may receive a free and confidential consultation with an attorney.  Bennett is accused of participating in systemic fraud of his investors.

Bennett engaged in unauthorized trading, or churning.  This is where a broker makes trades in an account to effectuate commissions for himself without regard for the investor.  Between January 2014 and December 2015, Bennett violated federal and state securities laws by exercising discretionary trading authority in the accounts of several customers without written authorization, in violation of NASD Rule 2510(b) and FINRA Rule 2010.  This was the grounds for a regulatory action filed against Bennett by the Financial Industry Regulatory Authority (FINRA).

Between January 2014 and December 2015, Bennett made unauthorized trades in the accounts of four customers, one of whom was a senior investor, by placing approximately 75 total trades in those accounts. A broker is required to speak to an investor contemporaneously to a trade, or have written authorization that the broker has authority to make a trade at the broker’s discretion.  Bennett did not obtain express authorization from those customers for those trades prior to placing them, did not have written authorization from the customers to exercise discretionary authority in those accounts, and neither sought nor obtained from Hilliard Lyons prior written acceptance of the accounts as discretionary.

To date, at least 10 of Bennett’s former clients have filed suit, via FINRA arbitration, seeking redress.

Ami Forte Investigation

If you suffered losses with Ami Forte, please call 303-300-5022 for a free and confidential consultation.  Jeffrey Pederson, PC handles claims against securities brokerages nationwide for unsuitable securities and unauthorized trading violations.

The Financial Industry Regulatory Authority (FINRA) announced on October 3, 2018 that it was widening the investigation of Ami Forte.  FINRA is the national regulatory agency that oversees securities brokerages.  It does so with the oversight of the SEC.

The October 3 notice advises Forte that the regulator will include additional potential violations of rules tied to conflicts of interest and fraud. Other violations included in the October 3 notice relates to rules tied to suitability, municipal securities advisory activities and books and records.

Forte, once Morgan Stanley’s most celebrated and prominent financial advisor with $2 billion in assets under management, lost her job at Morgan Stanley when an FINRA arbitration panel entered a substantial judgment against her.  The panel ordered her, her branch manager and Morgan Stanley to pay $34 million to the estate of Home Shopping Network co-founder Roy Speer in 2016. Lynnda Speer, Roy Speer’s widow, argued that the estate had been harmed by unauthorized trading, churning and elder abuse.

The initial investigation began in January 2018.  FINRA had made a preliminary determination concerning violations of multiple FINRA rules.  These rules concerning inappropriate exercises of discretion in an account and inappropriate recommendation of direct participation investments.

Forte had recently begun a career resurrection of sorts. In March 2018, Pinnacle Investments announced Forte as its chief business development officer.

This was short-lived.  BrokerCheck records indicate that the employment with Pinnacle ended Oct. 17,

Jeffrey Pederson has represented hundreds of investors over the past 15 years in FINRA arbitrations nationwide.  Time limitations may exist.  Investors suspecting wrongdoing should call at their earliest convenience

John Simoncic Investment Fraud

The Financial Industry Regulatory Authority (“FINRA”) barred John Scott Simoncic from the securities industry.  Mr. Simoncic had most recently been a broker for Financial West Group.  Please call 303-300-5022 for a free consultation if you were an investor of Mr. Simoncic.

There are multiple allegations concerning multiple investors against Mr. Simoncic.  They include the unauthorized and excessive trading in client accounts.  Allegations also include the sale of unsuitable investments.  This is the sale investments to an investor that are inconsistent with the risk an investor was willing to assume.

Between August 2014 and March 2016, Simoncic executed 54 of the 97 trades in a single customer account in inverse and/or leveraged Exchange Traded Funds (ETFs), an investment vehicle somewhat similar to a mutual fund.  The investor did not have an understanding of the ETFs Simoncic traded in her account; she did not understand how inverse and leveraged ETFs worked, the risks associated with the extended time Simoncic held the ETF positions in her account, or that her account was concentrated in one particular volatility ETF, the ProShares Ultra VIX Short-Term Futures ETF (UVXY), for over nine months.

Such ETFs are especially dangerous.  Although leveraged and/or inverse ETFs seek daily investment results, Simoncic held the ETF positions in the investor’s account for multiple trading sessions. For example, Simoncic executed 37 transactions in shares of the ProShares UltraShort S&P 500 (SDS), an inverse double-leveraged ETF, with holding periods generally ranging from four to 97 days. These transactions in the SDS resulted in an overall loss of more than $15,000. Simoncic also concentrated 93 percent of the investor’s portfolio in shares of UVWY, the ProShares Ultra VIX Short-Term Futures—a risky, double-leveraged and speculative ETF—for 295 days, that resulted in losses that exceeded $20,000. Thus, approximately $35,000 of the investor’s total losses of approximately $60,000 related to ETF trading.

Mr. Simoncic has previous regulatory actions and customer complaints that should have alerted his employer.  We believe that the former employers of Mr. Simoncic are responsible for investors losses.

 

Investors of Mark Kaplan of Vanderbilt

We are currently looking to speak to investors of Mark Kaplan of Vanderbilt Securities.  Please call 1-866-817-0201 is you have suffered investment losses.  We believe there is potential for certain investors to recover these losses.

Between March 2011 and March 2015 , Mark Kaplan of Vanderbilt Securities engaged in investment churning and unsuitable excessive trading in the brokerage accounts of a senior customer. We believe that such actions were likely widespread and impacted many of Kaplan’s investors.  Kaplan willfully violated federal securities laws and FINRA regulations by such actions.

Invest photo 2Kaplan has been known for years by Vanderbilt to have problems in his handling of investor accounts.  Morgan Stanley terminated Kaplan in 2011 for his alleged improper activity in Kaplan’s customer accounts.  Additionally, Kaplan has been the subject of seven separate customer lawsuits concerning improper securities transactions.

A recent regulatory action by the Financial Industry Regulatory Authority (“FINRA”) alleges that Kaplan took advantage a 93-year-old retired clothing salesman who had an account with Kaplan.   This investor not only placed his complete reliance in Kaplan but was also in the beginning phases of dimensia.

The investor opened accounts at Vanderbilt Securities with Kaplan during March 2011.  As of Match 31, 2011, the value of the investor’s accounts was approximately $507,544.64. Social Security was the investor’s only source of income during the Relevant Period. Kaplan exercised control over the accounts.  The investor relied on Kaplan to direct investment decisions in his accounts, contacting Kaplan frequently.

The investor was experiencing a decline in his mental health.  In 2015, a court granted an application by the investor’s nephew to act as his legal guardian and manage his financial affairs.

During the Relevant Period, Kaplan effected more than 3,500 transactions in the investor’s accounts, which resulted in approximately $723,000 in trading losses and generated approximately $735,000 in commissions and markups for Kaplan and Vanderbilt. Kaplan never discussed with the investor the extent of his total losses or the amount he paid in sales charges and commissions.

More can be learned about such excessive trading at the warning page for the SEC.

Please call the number above to determine if you have also been taken advantage of and your rights for recovery.