Unauthorized Trading

Gana LLP Broker Spotlight: Wade Lawrence

February 27, 2015 | by Staff Attorney

According to the records kept by the Financial Industry Regulatory Authority (FINRA) broker Wade Lawrence (Lawrence) has been suspended following the broker’s failure to comply with an arbitration award or settlement and by failing to comply with the regulator’s request for information concerning compliance. In addition, FINRA permanently barred Lawrence for failing to respond to requests for information concerning allegations that he misappropriated funds from customers.

Lawrence first became registered with FINRA in 2002 with MML Investors Services, LLC. Thereafter, from June 2008 through July 2011, Lawrence was registered with Oppenheimer & Co. Inc. (Oppenheimer) Finally from August 4, 2011, until December 2013, Lawrence was registered with Southwest Securities, Inc. (Southwest). On December 12, 2013, Southwest filed a Form U5 that terminated Lawrence’s registration.

In addition to the FINRA regulatory actions Lawrence has been the subject of at least nine customer disputes. These statistics are troubling because multiple customer complaints on a broker’s record are rare. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. FINRA’s disclosure records do not just cover customer complaints but also include IRS tax liens, judgments, and even criminal matters. The number of brokers with multiple customer complaints is far smaller.

FINRA Sanctions Financial Advisor Tory Duggins Over Unauthorized Discretionary Trading

February 19, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned broker Tory Duggins (Duggins) concerning allegations that between November 2011 through May 2012, Duggins exercised discretionary power in two customer accounts by making 17 transactions without obtaining prior written authorization from the customers. Under NASD Conduct Rule 2510(b) Duggins was required to provide written authorization to his firm in order to engage in discretionary trading activity. In addition, FINRA alleged that Duggins made false statements on a member firm semi-annual compliance questionnaire concerning his exercise of time and price discretion in customer accounts.

Duggins entered the securities industry in July 2002. Since that time Duggins has been associated with a total of nine different brokerage firms. Most recently from October 2008 through December 2012 Duggins was associated with vFinance Investments, Inc. (vFinane). Thereafter, Duggins was associated with National Securities Corporation (National Securities) until January 2014. Currently, Duggins is associated with Avenir Financial Group.

In addition to FINRA’s claims, Duggins public disclosures reveal that Duggins has been subject to multiple tax liens totaling over $300,000. Often times such extensive debts influence brokers to engage in excessive trading and churning in order to generate commissions to pay down personal debts. Often times, authorized trading goes hand and hand with churning. In Duggins’ case, three customers have brought complaints against the broker alleging excessive trading designed to generate commissions for the broker.

Gana LLP Files Claim On Behalf of Customer Against Legend Securities for Churning and Unauthorized Trading

November 11, 2014 | by Staff Attorney

Gana Weinstein LLP recently filed a claim against Legend Securities, Inc. (Legend) on behalf of a customer with the Financial Industry Regulatory Authority (“FINRA”) alleging that Legend and Legend broker, Michael Guilfoyle, recommended unsuitable investments while churning his account and executing unauthorized trades in violation of FINRA rules and other applicable law.

In 2013, the customer received a cold call from Guilfoyle soliciting his business. Guilfoyle assured the client that he would only invest according to his investment objectives. In reliance upon Guilfoyle’s assurances, the client transferred his money to Legend. In early 2014, Guilfoyle and Legend also coaxed the client into investing his wife’s money, which she inherited from her parents. Soon after the client transferred the funds to Legend, Guilfoyle allegedly leveraged over concentrated the portfolio and began to churning the account. “Churning” is the Wall St. vernacular when there is unnecessarily high or excessive trading activity in an investor’s account, simply for the purpose of generating commissions for the broker. This is a violation of Securities and Exchange Commission (“SEC”) and FINRA rules.

More egregiously, Guilfoyle failed to contact the client concerning the trades being made in his account and acted without any prior authorization. Guilfoyle allegedly day-traded different stock positions earning fees for himself while providing no benefit to the client. For example, Guilfoyle concentrated the client’s account in speculative small cap stocks, such as Voxeljet AG (Voxeljet) that had only recently gone public. At the time, analysts warned that Voxeljet was a highly volatile stock, not suited for investors looking for long-term growth. Guilfoyle’s misconduct ultimately cost client nearly his and wife’s entire account value.

Thomas Oakes of Royal Securities Sanctioned Over Allegations of Unsuitable Investments

February 11, 2014 | by Staff Attorney

Broker Thomas C. Oakes (Oakes) has been suspended and fined by the Financial Industry Regulatory Authority (FINRA) concerning allegations from 2005 through May 2008, Oakes had engaged in unsuitable short term trading of low priced and/or speculative securities in the accounts of at least three customers causing substantial losses.

Oakes has been in the securities industry as a member of the FINRA since 1988. Since November 2003, Oakes has been a registered representative of Royal Securities Company (Royal). Oakes’ BrokerCheck disclosures reveal that at least 9 customer complaints have been filed against the broker. The customer complaints allege a variety of securities misconduct including securities fraud, unauthorized trading, unsuitable investments, churning, and breach of fiduciary duties.

According to FINRA, in 2005 or 2006, three customers opened new accounts at Royal with Oakes as their registered representative. Each of the customers New Account Form identified a primary investment objective of “Growth.” Royal defined a “Growth” investment objective as the goal of generating long-term capital growth through high quality equity investments consisting of large cap funds and a balanced portfolio of investment grade growth stocks with smaller positions in high grade corporate bonds. Growth investors should also be willing to assume more market risks than balance/conservative growth in return for yields that are expected to meet or slightly exceed the S&P 500 stock market index over the long run.

Former Merrill Lynch Broker David Zeng Barred From the Financial Industry

November 21, 2013 | by Staff Attorney

David G. Zeng (Zeng) was recently barred from the financial industry by The Financial Industry Regulatory Authority (FINRA) over allegations that the broker failed to respond to the regulator’s inquiries concerning at least a dozen customer disputes initiated against the broker. The customer complaints against Zeng include claims of misrepresentations, fraud, unsuitable investments, and unauthorized trading concerning stock investments.

It is also possible that Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch), Zeng’s employing firm during the majority of the customer complaints, failed to properly supervise Zeng’s securities activities. Under FINRA Rule 3010, a brokerage firm is obligated to properly monitor and supervise its employees. The rule states that “[e]ach member shall establish and maintain a system to supervise the activities of each registered representative…that is reasonably designed to achieve compliance with applicable securities laws and regulations…” Thus, brokerage firms are responsible for monitoring a broker’s investment recommendations to clients, outside business activities, and representations to investors.

Zeng became registered with FINRA in 2001 at Morgan Stanley Dean Witter Inc until June 2005. From June 2005 until May 2009, Zeng was associated with UBS Financial Services, Inc. Thereafter, from April 17, 2009, until December 20, 2011, Zeng was employed by Merrill Lynch and worked out of the firm’s Santa Fe, New Mexico office.