Securities Lawyers Blog

Mark Kaplan Barred by Regulator Over Churning a Customer Account

August 24, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former Vanderbilt Securities, LLC (Vanderbilt Securities) broker Mark Kaplan (Kaplan) has been subject to eight disclosed customer complaints, one employment termination for cause, and one regulatory action resulting in an industry bar. Many of the customer complaints against Kaplan allege churning or excessive trading.

In March 2018, FINRA found that Kaplan violated the securities laws and FINRA rules by churning and engaging in unsuitable excessive trading in the brokerage accounts of a senior customer. FINRA found that Kaplan exercised de facto control over the customer’s accounts and the customer relied on Kaplan to direct investment decisions in his accounts. In addition, FINRA found that the elderly customer was experiencing a decline in his mental health and had a court allow the nephew to act as his legal guardian and manage his financial affairs after he was diagnosed with dementia. Nonetheless, FINRA found that Kaplan effected more than 3,500 transactions in the customer’s accounts resulting in approximately $723,000 in trading losses while generating approximately $735,000 in commissions and markups for Kaplan. FINRA claimed that Kaplan never discussed with the customer the extent of his losses or the amount paid in sales charges and commissions. In sum, FINRA found that this level of trading was excessive and unsuitable for the customer given his investment profile, including his age, risk tolerance, and income needs.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

Rocco Roveccio Subject to Customer Complaint Requesting over $1,500,000 in Damages

August 24, 2018 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are currently investigating First Standard Financial Company LLC (First Standard Financial) broker Rocco Roveccio (Roveccio). According to BrokerCheck Records, Roveccio has been subject to five customer complaints, two of which are still pending. Roveccio has also been subject to a pending regulatory matter, two liens, and a criminal action.

In May 2018, a customer alleged that Roveccio was executing unauthorized trades and recommending unsuitable investments to the customer. The customer has requested $1,500,000 in damages. This dispute is currently still pending.

In January 2018, a customer alleged that Roveccio was executing trades in the account without the customer’s prior permission and also engaged in churning of the account. The customer has requested $115,995.25. This dispute is currently still pending.

FINRA Suspends Mason Gann for Unauthorized Trades at Berthel Fisher

August 23, 2018 | by Staff Attorney

The investment fraud attorneys at Gana Weinstein LLP are currently investigating previously registered broker Mason Gann (Gann). According to BrokerCheck Records, Gann has been subject to a regulatory matter in which the Financial Industry Regulatory Authority (FINRA) sanctioned Gann for violations of the securities laws concerning unauthorized trading. In addition, Gann has been subject to three customer disputes, two of which are still pending. Gann has also been subject to termination from employment and a tax lien.

In February 2018, Gann was terminated from Berthel Fisher & Company Financial Services, Inc. (Berthel Fisher) for allegedly violating the firm’s conditions involving heightened supervision.

Subsequently, in April 2018, FINRA found that Gann had exercised discretionary power in 6 non-discretionary customer accounts without the customer’s prior written approval. By doing so, Gann was in violation of NASD ConductRule 2510 (b) and FINRA Rule 2010. Gann executed a total of 500 discretionary trades at previous firm of employment Berthel Fisher, where all discretionary trades were prohibited. Without admitting or denying the findings, Gann consented to the sanctions and to the entry of findings. Consequently, FINRA imposed a $5,000 fine and 20 day suspension.

David Manor Subject to Multiple Complaints Alleging Unsuitable Investments

August 23, 2018 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are currently investigating previously registered broker David Manor (Manor). According to BrokerCheck Records kept by the Financial Industry Regulatory Authority (FINRA), Manor has been subject to two customer disputes concerning unsuitable investment recommendations and false representations of investments. One of these disputes is currently still pending. In addition, Manor has been subject to resignation from a previous employer.

Most recently, in April 2018, a customer alleged that in 2017, Manor recommended unsuitable investments to the customer. The customer requested $224,837.25 in damages. This dispute is currently still pending.

In January 2016, a customer alleged that Manor falsely represented investments to the customer by failing to disclose the surrender penalty to the investment. The customer further alleged that the investment was unsuitable to her financial status and needs, being that the funds were her only source of income. The customer requested $30,000 in damages.

FINRA Bars Matthew Singer for Alleged Unsuitable Option Investments

August 23, 2018 | by Staff Attorney

Investment attorneys with our offices are currently investigating previously registered broker Matthew Singer (Singer). According to BrokerCheck Records, in March 2018, Singer was barred from the financial industry for failing to appear at an on-the-record testimony concerning allegations that he was recommending unsuitable investments to customers while employed at Morgan Stanley. According to the Financial Industry Regulatory Authority (FINRA), Singer consented to the sanction and bar due to the fact that he refused to appear to the testimony. For failing to appear for testimony, Singer was in violation of FINRA Rules 8210 and 2010 and automatically barred.

In addition, Singer has been subject to multiple customer complaints. In December 2016, a customer alleged that from May 2015, to January 2016, Singer misrepresented investments and executed unauthorized trades in the customer account regarding option investments. The case was settled at $60,000.

In February 2016, a customer alleged that Singer recommended unsuitable options to the customer. The customer requested $381,929 in damages. In October 2015, a customer alleged that from June 2015, Singer recommended highly risky and unsuitable investments to the customer.

Broker Michael Morrissett Subject to $2,300,000 Unsuitable Hedge Fund Dispute

August 22, 2018 | by Staff Attorney

The securities attorneys at Gana Weinstein LLP are currently investigating Wells Fargo Clearing Services, LLC (Wells Fargo) broker Michael Morrissett (Morrissett). According to BrokerCheck Records kept by the Financial Industry Regulative Authority, Morrissett has been subject to 4 disputes, one of which is still pending. The majority of these concern unsuitable alternative investments.

Most recently, in April 2018, a customer alleged that from 2013 to 2015, Morrissett misrepresented two hedge funds by providing misleading information to the customer about the suitability of the funds, when in fact the hedge funds were unsuitable to the customer’s investment objectives. The customer has requested $2,300,000 in damages. This dispute is currently still pending.

in January 2014, a customer alleged that in 2000, Morrissett placed the customer into an unsuitable investment strategy that made the customer suffer vast losses in the global financial crisis. The case settled for $85,000.

Synery Investment Advisor Alan New Accused of Selling Fraudulent Woodbridge Mortgage Investments

August 22, 2018 | by Staff Attorney

The law offices of Gana Weinstein LLP continue to investigate the Woodbridge Group of Companies and the Woodbridge Mortgage Funds (Woodbridge). The Securities and Exchange Commission (SEC) has alleged that the Woodbridge operated a billion-dollar Ponzi scheme ensnaring about 8,400 investors. Woodbridge solicited hundreds of disreputable insurance agents and investment brokers to sell its false notes that the firm claimed to be backed by mortgages. In plain sight to regulators, Woodbridge engaged in a nationwide investment fraud by offering the sale of unregistered securities.

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) Alan New (New) appears to be an agent for Woodbridge fraudulent note sales. New was formerly associated with NYLife Securities LLC (NYLife Securities) out of the firm’s Fort Wayne, Indiana office location and is currently still registered with advisory firm Synery Investment Services LLC. At least six customers have accused New of selling them the fraudulent Woodbridge investment.

Federal securities laws and the FINRA rules require firms to monitor and supervise its employees, like New, in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including recommending fraudulent investments.

Gana Weinstein LLP Wins $5 Million FINRA Arbitration Award against a New York Broker-Dealer for Churning

August 13, 2018 | by Staff Attorney

A FINRA arbitration panel ordered Windsor Street Capital, to pay two customers more than $1.3 million in compensatory damages, interest, punitive damages of over $3,000,000, attorneys fees in the amount of $552,321 and sanctions in the amount of $44,450 for churning customer accounts. The total award will be in excess of $5,000,000.

The Claimants alleged that Windsor churned their accounts over a very short period of time and violated know-your-customer rules and misrepresented the investments Windsor recommended.

You can find the award here.

FINRA Bars Bradley Tennison for Alleged Selling Away Practices

August 3, 2018 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP are currently investigating previously registered broker Bradley Tennison (Tennison). According to BrokerCheck Records, the Financial Industry Regulative Authority (FINRA) barred Tennison indefinitely from the financial industry for failing to appear to an on the record testimony regarding an investigation of Tennison’s outside business activities at Geneos Wealth Management, Inc. (Geneos Wealth Management). In addition, Tennison has been subject to three customer disputes, one of which is still pending. The majority of these disputes involve unsuitable limited partnerships and selling away. Tennison has also been subject to termination from two firms of employment.

In April 2018, a customer alleged that in 2016, Tennison recommended a former client to invest $300,000 in “The Joseph Project”, which he represented to be a 12 month investment with 5 % returns. The customer never received any statements or returns on her principal payment. The customer has requested $300,000 in damages. This dispute is currently still pending.

Subsequently, in April 2018, Tennison was terminated from Geneos Wealth Management for failing to be in compliance with the firm’s policies and regulations regarding outside business activities and selling away.

Financial Advisor Edward Klug Subject to Multiple Tax Liens

August 3, 2018 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former Newbridge Securities Corporation (Newbridge Securities) broker Edward Klug (Klug) left the securities industry in May 2018 after disclosing several large tax liens in the prior years. Klug has made seven financial related disclosures and lists four customer complaints. The customer complaints against Klug allege churning or excessive trading.

In March 2018 Klug disclosed a $141,711 tax lien against him. In May 2017, Klug disclosed a $482,714 tax lien against him. Prior to that, in April 2016 Klug disclosed a $44,229 tax lien against him. Such disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. FINRA discloses information concerning a broker’s financial condition because a broker’s inability to handle their own personal finances has also been found to be material information in helping investors determine if they should allow the broker to handle their finances.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.