Securities Lawyers Blog
According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Russell Macke (Macke) has been the subject of at least 5 customer complaints, 2 regulatory actions, and 2 employment terminations, and 7 judgment or liens. Customers have filed complaints against Macke alleging securities law violations including poor investment performance, churning and excessive trading, unsuitable investments, and investment fraud among other claims. The judgment and liens include a $38,000 tax lien, a $108,000 tax lien, a $105,000 tax lien, a $1,500 tax lien, a $110,000 tax lien, a $24,000 tax lien, and a $14,000 tax lien. Macke was terminated by John Hancock in 1998 due to claims that the firm was unable to supervise him. In 2012, Macke was terminated from Forsyth Securities, Inc. due to a Missouri consent order and pending FINRA inquiry.
One of the regulatory actions brought against Macke by FINRA alleged that the broker took advantage of his discretionary authority over two customer accounts by engaging in excessive trading and use of margin in those accounts. FINRA found that Macke caused both customers to pay excessive margin interest, commissions and fees and that the amount of trading in the accounts was inconsistent with the customers’ financial circumstances and investment objectives.
One of the customers was alleged to have opened a brokerage account at Forsyth and was 85 years old and living in a nursing home and the account balance was $390,558. The customer used money from the account to pay health care and living expenses. FINRA found that the customer withdrew $55,923 to pay expenses and that Macke was aware of the customers’ use of the account and these withdrawals. The account forms listed annual income of $60,000, a net worth of $600,000, and liquid assets of $380,000. The account form’s risk tolerance was noted as moderate and the investment objectives were growth and income and trading and speculation.
FINRA found that Macke controlled the trading in the account from August 6, 2007, through June 30, 2008. During that time FINRA determined that the customers trusted Macke completely to make and execute recommendations in the account. During this time, Macke recommended and effected 99 stock transactions in the account with total purchases of $2,275,730 of which many purchases were made using margin. FINRA found that the account lost $52,905 in value and the customer paid $50,117 in margin interest, fees and commissions.
In examining the account for excessive trading, FINRA found that the average net portfolio value at month end was $299,340, the account’s annualized turnover ratio was 8.29, and its annualized cost-to-equity ratio was 18.26%. FINRA found that this volume of trading was excessive and unsuitable for the customers.
Macke entered the securities industry in 1989. From November 2005, till January 2012, Macke was associated with Forsyth Securities. Thereafter from July 2012, until April 2015, Macke was associated with B.B. Graham & Company, Inc. out of the firm’s Orange, California office location.
The number of customer complaints against Macke is high relative to his peers. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints. In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters. However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck. More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.
Gana Weinstein LLP represents investors who have suffered investment losses due to broker wrongdoing, such as excessive trading and churning. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.