by Howard Haykin

1.  Legend Securities Broker was barred.   Engaged in churning and unsuitable excessive trading in customers’ accounts, 2 of whom were senior citizens.   [December 2017 - FINRA AWC #2017052709201]

►   Exercised control over these accounts, and the high costs and turnover rates were inconsistent with the customers’ objectives.

►   Most of the customers had limited investment experience and all of them relied on the broker to direct investment decisions in their accounts.

►   Since more than half of the trades were mark ups or markdowns (“MU’s” or “MD’s”), customers could not appreciate the extent of the costs.

►   The active trading in the accounts resulted in more than $115,000 in cumulative losses to his customers, while broker generated $160,000 in sales charges.  

2.  Legend Equities Broker suspended one year (no fine in light of his financial status).   Recommended unsuitable replacements (aka exchanges) of non-qualified variable annuities (“V/A’s”) to 2 customers without having reasonable basis for recommending the transactions, resulting in benefits to him and substantial financial harm to the customers.  [December 2017 - FINRA AWC #2015046537501]

►   Transactions generated net commissions of ~$60,000, while customers suffered financial from surrender charges and other extra costs, as well as new or extended surrender periods.
►   Broker misrepresented to his member firm that customers’ annuity purchases did not involve annuity replacements or exchanges.
►   Broker recommended an unsuitable V/A surrender to a semi-retired customer that resulted in a surrender charge and the forfeiture enhanced death benefits.   

3.  Ameriprise Financial Broker fined $7.5K, suspended 45 days.    Effected securities transactions in customer’s account on a discretionary basis without customer’s prior written authority or the firm’s approval.   [December 2017 – FINRA AWC #2015046329201]

►   Exercised discretion (based only on verbal authority of a customer who was a senior investor) to liquidate positions in 6 different securities.
►   Made that customers use margin to effect several trades in their joint brokerage account; use of margin was unsuitable in light of the customers’ investment objectives, risk tolerances, and financial situation and needs. Their account was subject to 7 margin calls during the relevant period.  

4.  Legend Securities Broker fined $5K, suspended 16 months.   Engaged in excessive trading in senior citizens’ accounts.  [December 2017 – FINRA AWC #2014043043601]

►   Broker controlled accounts and his trading generated high costs and turnover rates that were inconsistent with the customers’ objectives.
►   Sales charges were in the form of both commissions and MU’s and MD’s (the latter were not clearly obvious on trade confirms).
►   Broker recommended unsuitable trading strategies involving securities and covered call options that purportedly had no economic benefit for the customers and was recommended solely to generate sales charges.
►   Broker engaged purchased excess numbers of shares that served to generate oversized sales charges and extended losses for customer.   

5.  Next Financial Group Broker fined $15K, disgorged of $101K in net commissions, suspended 9 months.   Engaged in excessive, unsuitable trading in a customer’s accounts, while exercising de facto control over an IRA and a 2nd account of the customer.   [December 2017 - FINRA AWC #2016049316301]

►   De facto control existed because broker solicited all the transactions in the accounts, and the customer, an unsophisticated investor, routinely accepted broker’s recommendations.
►   Customer was in her sixties and had a conservative risk tolerance.
►   Broker excessively traded the accounts in a manner that was inconsistent with the customer’s investment objectives, financial situation and needs - generating $101,000 in net commissions $392,000 in customer losses.  

6.  Morgan Stanley Broker fined $20K, suspended 18 months, to pay restitution of $717K.   Made unsuitable investment recommendations to 5 elderly, retired customers, ranging in age from 72 to 90, by over concentrating their accounts in a single, high-risk energy sector security.  [January 2018 - FINRA AWC #2015047910601]

►   Unsuitability based on customer age, risk tolerance, investment objectives and financial circumstances.

►   Broker’s investment recommendations resulted in collective losses of >$960,000.   

These cases were reported in FINRA Disciplinary Actions for December '17 and January '18.

For details on any case, go to ...  FINRA Disciplinary Actions Online, and refer to the Respective AWC Number.