Securities Lawyers Blog
The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Bruce Stark (Stark). According to BrokerCheck records Stark has been the subject of at least three customer complaints and one judgement or lien. The customer complaints against Stark allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.
The most recent complaint was filed in August 2015 and alleged that the customer’s account was traded without authority, unsuitable, and churned causing $534,150 in damages. The complaint is currently pending. In addition, in March 2009 a tax lien of $37,875 was filed. Substantial judgements and liens on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. A broker’s inability to handle their personal finances has also been found to be relevant 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.