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Articles Tagged with churning

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Churning-1024x683-300x200The U.S. Securities and Exchange Commission has accused Emil Botvinnik of taking $3.7 million in a fraudulent scheme involving excessive, high-frequency trading. On November 7, 2018, he asked a New York federal judge to toss the suit because he claimed its allegations do not meet the pleading standard for fraud.

The claims against Botvinnik state that he wrongfully used his clients’ accounts while he was employed at Meyers Associates LP. However, Botvinnik denies these claims and he stated that there are no specific allegations that proves his clients were the type of unsophisticated investors who would not benefit from high-frequency trading. He also stated that his clients may only have been simply unaware of the trading strategy and its risks.

The SEC said that from June 2012 until November 2014, Botvinnik solicited five customers to open securities trading accounts for which he claimed he would employ a profitable trading strategy. He then implemented the strategy of frequent, short-term trades that forced significant costs and commissions on the investors. For example, the accounts would have had to reach an annual return of between 31 and 150 percent just to pay off the transaction costs that built up from the trading strategy. This type of trading is frequently referred to as churning.

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Peter Michael Malis (CRD #317892) is a registered broker and investment advisor currently employed with Wells Fargo Clearing Services, LLC (CRD #19616) of Woodland Hills, CA. His previous employers include Prudential Securities Incorporated (CRD #7471) of New York, NY, Bache Halsey Stuart Inc. (CRD #7238) and Paine, Webber, Jackson & Curtis Incorporated (CRD #640). He has been in the industry since 1969.

Antonio-Costanzo-Permanently-Barred-by-FINRA-After-Alleged-Churning-in-Customer-Accounts-300x202According to CRD records, Malis has five disclosures on his record, all customer disputes. The most recent was filed on 12/7/2017, alleging unsuitable investments and that he never discussed any transactions with the client during the time period 2/13/2006 through 12/31/2016. This claim was denied.

The next claim was filed on 09/13/2016, alleging excessive and unsuitable unauthorized trading, churning, and unsuitable account portfolio management from April 2002 through 2015. This claim went to arbitration and settled on May 2, 2017 for $1,100,000.00. Malis did not contribute to this settlement amount.

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Zachary-Bader-Suspended-After-Multiple-Allegations-of-Churning-300x232A man whose account was churned down to $10,000 was awarded both compensatory damages of $375,000 for his original investment plus an additional $700,000 in punitive damages. The client, Herbert W. Voss, was awarded $1.075 million by FINRA.

Mr. Voss’ attorney was quoted as saying that “It was like the Wild, Wild West in terms of lack of controls at the firm. It was unconscionable.”

Legend Securities, expelled by FINRA in April of 2017, was also known as Marlin Trading, Inc. and SPC Securities, Inc. The company’s record lists 32 disclosures. Many of these are similar to Mr. Voss as well as multiple fines and censures.

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Zachary-Bader-Suspended-After-Multiple-Allegations-of-Churning-300x232Back in June, we told you about Yousuf Saljooki (CRD #5045123), who was suspended by the state of Arkansas after failing to disclose an outstanding federal tax lien. This failure led to his discharge of employment by Worden Capital. He was previously discharged by SW Financial in 2017 for opening a branch office in another name and attempting to transfer his client list to the new brokerage. In the process, Saljooki also used an unauthorized email address for private client information.

In October, FINRA suspended Saljooki indefinitely after he failed to respond to a request for information. He is now suspended in all capacities from associating with any FINRA member. He has not yet requested termination of the suspension, and will eventually be permanently barred.

Did You Invest With Yousuf Saljooki at Worden Capital?

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Paul Robert DiPietro (CRD #4313454) is a registered broker and investment advisor currently employed with Dawson James Securities, Inc. (CRD #130645), of Boca Raton, FL. His previous employers include Investors Capital Corp. (CRD #30613) and Chicago Investment Group, LLC (CRD #11853, expelled by FINRA on 9/14/2010), also of Boca Raton. He has been in the business since 2000.

Churning-Other-Allegations-Made-Against-Broker-Michael-Doyle-300x200DiPietro is the subject of a current customer dispute in which is alleged to have engaged in churning. Filed on 4/30/2018, the client alleges that “his account was churned and placed in unsuitable securities by the representatives at Dawson James and Spartan. January 2015 through September 2015.” The client is requesting damages of $100,000. DiPietro denies wrongdoing in this action. The claim is currently pending.

There are seven previous customer dispute allegations filed against DiPietro, either withdrawn, denied or settled. The two most recent were filed on 12/1/2014, with identical allegations of “rep failed to follow instructions by not executing orders as instructed which caused the customer losses because of the decline of the stock price.”  The first claim requested damages of $126,105.24, and the second one $115,010.81. DiPietro strenuously denied the allegations during the firm’s investigation. The claims were both withdrawn, one on 4/24/2015, the other on 4/25/2015.

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A pump and dump scheme is a method used by fraudsters to artificially boost the price of a security that they own shares of in order to make a profit. According to the Securities & Exchange Commission, pump and dump schemes consist of two parts. First, stock promoters will try to boost the stock price by sharing misleading or false statements about the underlying company’s performance. The promoters may use several methods to spread this false information, including cold calling, emailing, and social media. The promoters may claim to have inside information on the company, and will often encourage their followers to quickly purchase shares of the stock.

Then, once the stock price is inflated by this false information, the promoter will put his own shares of stock on the market, selling them at an artificially high price. This harms investors purchasing these shares because they now hold stock that may drop drastically in price once it is revealed that the information is false.

Engaging in a pump and dump scheme is a violation of both FINRA rules and federal securities laws. FINRA requires that its members refrain from engaging in fraudulent or deceptive practices. FINRA also requires its members to “observe high standards of commercial honor and just and equitable principles of trade.”

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Churning: How it Affects Elderly Investors and What to Do About It on elderfinancialfraudattorneys.com

Unnecessary trading leads to losses for many investors, and the elderly are especially vulnerable to churning

Churning is the process of a broker or investment adviser making unnecessary trades for a client with the sole or primary purpose of generating commissions. While there is no specific test to determine if an account has been churned, it’s usually straightforward; brokers who churn client accounts are responsible for demonstrating that the buying and selling of investments align with their customer’s specific investment objectives.

Why the elderly are especially vulnerable to churning and other forms of financial fraud

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The Silver Law Group has filed an arbitration claim before FINRA on behalf of two Florida teachers alleging, among other things, that financial advisor Curtis Milakovich (CRD# 5471527) churned their accounts while two national broker/dealers turned a blind eye.

The claim also alleges that the two national broker/dealers did not follow adequate policies and procedures to address the misconduct and failed to follow up on the red flags that would have alerted them to the misconduct being perpetrated on the clients who lost significant portions of their retirement savings.  At times, Milakovich operated as Aspire Wealth Management.

Excessive trading or “churning,” as it is known in the industry, is the act of a broker who excessively and needlessly engages in trading in a client’s account primarily to generate commissions for the broker on each trade without regard for the client’s financial well-being.  Churning is an illegal and unethical practice that violates SEC rules and securities laws.

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Churning, Other Allegations Made Against Broker Michael Doyle on silverlaw.com

After 7 complaints and millions in settlements, Doyle is suspended by FINRA

According to a FINRA BrokerCheck report, Michael Doyle has received complaints from seven clients and was suspended for failing to comply with an arbitration award and to respond to the FINRA’s request to provide information concerning the status of compliance.

The complaints against Doyle date back to March of 1998 when a customer alleged that her account was churned in relation to stock option trades. In addition to this complaint, numerous others would continue to be made against Doyle over the 17 years that followed.

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Broker Bradley Drude Suspended and Fined due to Undisclosed Conflict of Interest on silverlaw.com

Drude’s failure to disclose details surrounding fraud of elder investor drives FINRA action

In response to allegations surrounding his relationship with an elderly investor, Louisiana-based broker Bradley Drude agreed to an Offer of Settlement to FINRA in which he was assessed a deferred fine of $25,000 and suspended from association with any FINRA member in any capacity for six months, according to the FINRA Disciplinary Action report.

It is alleged that Drude failed to disclose that an elderly client had named him as executor and beneficiary in her will and granted him general power of attorney. It is also alleged that he typed a new will for the client naming himself as such and drove the client to a notary’s office to have her sign it—all without the involvement or assistance of the client’s attorney. The estate was valued at approximately $3 million. When the client requested a change to the will, it is alleged that Drude prepared a codicil to the will, but did not drive the client to the notary to have it notarized, knowing it would be invalid without notarization.

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