Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) Worden Capital Management LLC (Worden Capital) broker Michael Rosalia (Rosalia) has been subject to six disclosed customer complaints, eight tax liens or judgements, and two financial disclosures including bankruptcy. Many of the customer complaints against Rosalia allege churning or excessive trading.
In June 2013 Rosalia declared bankruptcy. 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.
In May 2018 a customer filed a complaint alleging Rosalia engaged in churning, improper use of margin, unsuitability and high commissions. The complaint alleged $503,828 in damages and has been settled.
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.
The number of complaints against Rosalia are unusual compared to his peers. According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.
Rosalia entered the securities industry in 1993. From February 2013 until December 2015 Rosalia was registered with Rockwell Global Capital LLC – a now defunct firm. Thereafter, since December 2015 Rosalia has been registered with Worden Capital out of the firm’s Melville, New York office location.
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 excessive trading and other securities laws violations. Our consultations are free of charge and the firm is only compensated if you recover.