Tag Archives: excessive trading

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 1-866-817-0201.  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.

Losses with Maczko of Wells Fargo

If you invested with Matthew Maczko, a broker with Wells Fargo Advisors in Oak Brook, Illinois and suffered losses that you question, please call 1-866-817-0201 for a free and private consultation with an attorney concerning your rights.

Wells FargoMaczko was suspended from the securities industry last week, the week of February 7, 2017, for alleged excessive trading in the brokerage accounts of a 93-year-old customer, according to a FINRA. Maczko effectively controlled the customer’s accounts, which had an average aggregate value of $3 million.

Maczko’s trading  generated more than 2800 transactions resulting in $582,000 in commissions, $84,270 in fees and approximately $397,000 in trading losses for the account in question. Such trading activity was not only churning but was also unsuitable for Maczko’s victim given the customer’s age, risk tolerance and income needs.

Maczko also intentionally mislead FINRA regulators and investigators by telling them during testimony that he had not spoken to  other senior customers after his termination from Wells Fargo, when in fact he had spoken with them several times.

Securities brokers are required to follow the rules of FINRA.  FINRA requires that investments not only be suitable in terms of the nature of the investment, but also that the investments be quantitatively suitable.  This means that the number of trades cannot be excessive in light of the wants and needs of the customer.  Above a certain level, the trades can be seen as not being for the benefit of the customer, but for the broker.

The trades of Maczko went well beyond the acceptable number of trades.