SEC Alert on Red flags of excessive trading, churning

NY Brokers charged the same day in churning scheme

The Securities and Exchange Commission issued an investor alert In January warning investors about excessive trading and churning in brokerage accounts the same day it charged two New York brokers with benefiting themselves in such a scheme.

The SEC’s complaint alleges that Gregory Dean and Donald Fowler performed no reasonable diligence to determine whether their investment strategy involving allegedly frequent buying and selling of securities could deliver even a minimal profit for their customers.

According to the SEC release, the brokers were charged with fraudulently using an “in-and-out” trading strategy that was allegedly unsuitable for customers in order to generate large commissions. Their strategy, which reportedly generally involved selling the securities within a week or two of purchase and charging customers a commission for each transaction, allegedly resulted in substantial losses for 27 customers, according to the SEC complaint.

According toFINRA Broker Check, both Dean and Fowler have disciplinary histories. Nine of Dean’s customers filed Financial Industry Regulatory Authority arbitrations or complaints against him. Five arbitrations are pending; one customer claim was denied; and three claims were settled through payments to the customers.

Ten of Fowler’s customers filed FINRA arbitrations or complaints against him. Except for two arbitrations, which are pending, the arbitrations and complaints were settled through payments to the customers.

SEC’s Investor Alert

The investor alert told investors to look for these red flags that may indicate excessive trading

Unauthorized Trading – Be alarmed if you become aware of trades in your account that you did not authorize your broker to make.

Frequent Trading – Be wary of frequent in-and-out purchases and sales of securities that don’t seem consistent with your investment goals and risk tolerance.

Excessive Fees – Be suspicious if the total amount of fees seems high or if one segment of your portfolio consistently generates high fees.

The alert also points out that excessive trading can occur even if the overall account value increases, and that if account statements, trade confirmations, and online accounts do not disclose all fees, investors can find more information by asking their broker.

Churning claims can be complex and sometimes difficult to prove.  Brokerage firm almost always hire experience securities defense firms to defend them in these claims.  If you believe that you are the victim of churning by your brokerage firm or financial advisor, it is recommended that you consult with an experienced securities attorney.  For a free consultation with a securities attorney, please call The White Law Group at 888-637-5510.

The White Law Group, LLC is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit http://www.churningattorney.com.