Securities Lawyers Blog
The law office of Gana Weinstein LLP is investigating a string of securities arbitration cases involving broker Mark Lisser (Lisser) which generally allege securities violations including churning, excessive use of margin, churning, unsuitable investments, and breach of fiduciary duty. All the cases have been filed before The Financial Industry Regulatory Authority (FINRA).
Lisser was registered with Prestige Financial Center, Inc. from February 2008, until November 2010. Thereafter, he was an associated person with Global Arena Capital Corp.
As a background “churning” occurs in a securities account when a dealer or broker, acting in his own interests and against those of his customer, induces transactions in the customer’s account that are excessive in size and frequency in light of the character of the account. In order to show that churning took place a claimant must demonstrate that the broker-dealer exercised control over the account and that the broker engaged in excessive trading considering the objectives and nature of the account.
Control can be shown through various factors including whether the transactions are made at the dealer’s discretion, the business and investment experience of the customer; and the relationship between the dealer and the customer. Two metrics are commonly used to determine whether an account has been excessively traded, the account’s ‘annualized turnover ratio’ and its ‘cost to equity ratio,’ which is also known as its ‘break even percentage.’ Both courts and the SEC have consistently held that turnover ratios between three and five can trigger liability for excessive trading.
Another important measure of excessive trading is the cost to net equity ratio which measures how expensive the trading strategy was in the account compared to the average net equity. For example, if the annual cost to net equity ratio is 5%, it means that the account needed to return a profit of at least 5% just to keep up with the cost of the trading strategy employed. As the percentage of cost to equity ratio increases it becomes increasingly unreasonable for the broker to have a belief that the trading could possibly be beneficial to the client.
If you believe that you were the victim of churning, the attorneys at Gana Weinstein LLP can help you proceed against the brokerage firm and recover investment losses.