Securities Lawyers Blog
The Financial Industry Regulatory Authority (FINRA) sanctioned (Case No. 2010025835701) broker E1 Asset Management, Inc. (E1 Asset) Ron Itin (Itin), and Ahsan Shaikh (Shaikh) concerning numerous irregularities and misconduct including allegations that between July 2008, and April 2012, including the failure to conduct reasonable supervisory reviews designed to detect and prevent excessive trading, otherwise known as churning, in customer accounts.
Itin’s BrokerCheck records reveal at least 9 customer disputes. These disputes involve claims of unsuitable investments, churning (excessive trading), unauthorized trading, breach of fiduciary duty, misrepresentations and false statements, among other claims. The claims state that among the products traded in client accounts were penny stocks, options, and other equities. In January 2015, Itin declared chapter 7 bankruptcy in New Jersey. Itin has been associated with E1 Asset Management, Inc. since 1999 and is a supervisory principal at the firm.
Shaikh’s BrokerCheck records show at least at least nine customer disputes. The disputes involve claims similar in nature to Itin’s records. Shaikh has been associated with E1 Asset Management, Inc. since 1999 and is a supervisory principal at the firm.
According to FINRA, Itin and Shaikh were the principals of E1 Asset and were responsible for establishing and maintaining the firm’s supervisory system. FINRA found that El Asset failed to establish and maintain a reasonable supervisory system in various ways. FINRA alleged: 1) Shaikh implemented an inadequate system to review brokers emails with the public; 2) El Asset and Itin failed to conduct reasonable reviews designed to detect and prevent excessive trading in customer accounts; 3) E1 Asset and Shaikh failed to implement suitability reviews of trading in new customer accounts; 4) E1 Asset and Itin failed to document suitability reviews and supervisory approvals of leveraged exchange traded fund (Leveraged ETFs) transactions in customer accounts; 5) E1 and ltin failed to enforce the firm’s Heightened Supervision Program; and 6) E1 entered into numerous settlement agreements during that contained an ambiguous confidentiality clause that could have been interpreted by customers as prohibiting them from cooperating with securities regulators and potentially impeding regulatory investigations or enforcement actions.
With respect to FINRA’s churning allegations, the agency found that E1 Asset did not utilize exception reports or implement quantitative measures such as portfolio turnover or cost-to-equity ratios to identify red flags of excessive trading or excessive commissions. FINRA gave a couple of examples of customer accounts indicating churning activity that were not properly monitored including one customer where between August 2008, and June 2010, that was charged $110,626 in commissions for 89 trades reflecting a cost-to-equity ratio of 276%. In another example, FINRA alleged that between October 2008, and November 2009, a firm customer was charged $191,530 in commissions for 136 trades reflecting a cost-to-equity ratio of 108%. In a third example, between January 2009, and June 2010, a customer was charged $159,322 in commissions for 342 trades reflecting a cost-to-equity ratio of 89%. FINRA found that these high cost accounts generating fees that made it impossible to generate positive returns.
Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors who have had their accounts excessively traded. Our consultations are free of charge and the firm is only compensated if you recover.