Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Richard Mireles (Mireles), currently associated with Independent Financial Group, LLC, has been subject to at least one disclosable event. These events include one tax lien. Several of those complaints against Mireles concern allegations of high frequency trading activity also referred to as churning or excessive trading among other securities laws violations.
FINRA BrokerCheck shows a final customer complaint on September 13, 2024.
Without admitting or denying the findings, Mireles consented to the sanctions and to the entry of findings that he failed to reasonably respond to red flags, which were escalated to him, of excessive trading by a registered representative who excessively traded customers’ accounts. The findings stated that Mireles supervised his member firm’s lower-level supervisors who reviewed certain of the firm’s trade alerts and blotters, including a ‘high-principal solicited trade’ alert. Numerous trades placed by the registered representative in all of the affected customers’ accounts repeatedly appeared on that alert, which was based on a ruleset whose parameters were designed to flag solicited trades with a high principal amount. The lower-level designated supervisors reviewing trade alerts developed concerns that the registered representative was excessively trading customers’ accounts and brought these concerns to Mireles’s attention. Mireles, however, directed the supervisor to perform only trade-by-trade assessments to review for compliance with Reg BI and suitability, and not to review the series of trades that the registered representative was placing within an account for potential excessive trading. The registered representative excessively traded the customers’ accounts, causing a level of trading inconsistent with the customers’ investment profiles and that was not in their best interest or was not suitable. Collectively, these customers paid more than $2.2 million in total trading costs and incurred realized losses totaling approximately $2.2 million.
When brokers indulge in excessive trading, often called churning, they typically buy and sell securities, sometimes even the same stock, repeatedly over a short span of time. Often times the account will completely “turnover” every month with different securities. The sole purpose of this kind of investment trading activity in the client’s account is to generate commissions that benefit the broker, not the investor. Securities regulators consider churning to be a distinct form of investment 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.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases. In addition, research has shown a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints. These lower quality firms may average brokers with five times as many complaints as the industry average.
Mireles entered the securities industry in 2007. Mireles has been registered as a Broker with Independent Financial Group, LLC since 2010.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.
