SEC Finding Spotlight: November 2018
There are a variety of ways that your brokerage firm or broker can abuse your trust as an investor, especially if you are new to investing or lack the time and resources to obtain a sophisticated knowledge of the investment industry. The seasoned legal professionals at the Law Office of Steve A. Buchwalter have assisted countless investors with determining whether they were taken advantage of following a major loss to their portfolios. Our lead counsel is a former broker, which means that as a Los Angeles securities lawyer, he has a unique perspective into how investors should be treated and the rules that apply to brokerage firms. We also understand the importance of your financial situation and how devastating a case of fraud or negligence can be for you and your family. To start learning more about our firm and whether you have a claim against the broker or brokerage firm that you believe burned you, contact us today.FINRA Completes Enforcement Action against Carlsbad Broker for Overtrading
FINRA, the Financial Industry Regulation Authority, is the body responsible for ensuring that brokers and brokerage firms operate according to a strict set of rules when engaging with investors and conducting securities-related transactions. FINRA investigates claims of wrongdoing and initiates enforcement actions against brokers and brokerage firms who are found to be in violation of these rules.
Recently, FINRA released information about an enforcement action against John S. Simoncic of Financial West Group in Carlsbad, where he was registered as a Supervising Principal. According to FINRA, between August 2014 and November 2016, Simoncic engaged in churning of customer accounts, excessive trading, and making unsuitable recommendations regarding non-traditional exchange traded funds. These activities violate several FINRA rules and regulations.
First, the rules and regulations clearly prohibit churning, which occurs when a broker makes excessive trades in an investor’s account that are not consistent with the investor’s goals and objectives, and the broker acts with the intent to defraud the client. This practice is also referred to as overtrading. The broker may engage in churning to generate higher fees per transaction or to obtain other financial incentives that are in the broker’s best interests but not in line with the investor’s goals. Some brokers receive bonuses for the number of placements or transactions that they complete, leading some of them to abuse investors’ accounts.
In reviewing instances of churning, FINRA looks at whether the number of transactions in a specific timeframe is appropriate given the client’s investment objectives and needs. The transactions will be classified as churning when the broker is making them with the intent to defraud the client or with a reckless disregard to the client’s interests. Investors must have a reasonable basis for each trade or transaction made.
Regarding Simoncic’s enforcement action, FINRA concluded that he caused the investor client to suffer $60,000 in losses to her retirement savings in her IRA. As a result, he received substantial sanctions including a bar from engaging in FINRA-related activities.Seeking Compensation from a Reckless or Fraudulent Broker
If your broker abuses your fiduciary relationship, you can bring a civil claim against him or her to recover for your losses, and a seasoned Los Angeles securities attorney can help. In the action, you will need to show that your broker failed to act with fiduciary care and skill when handling your accounts and while advising you about the appropriate way to achieve your financial goals. If you are successful in showing a lack of care or intentional fraud, then you are entitled to receive the difference between the actual value of your accounts following the misconduct and the estimated value of your accounts had the broker acted appropriately. You must also show that the broker’s misconduct was the direct cause of the financial losses that you suffered.Meet with a Dedicated Securities Negligence and Fraud Lawyer in Los Angeles
A seasoned securities lawyer can help you ensure that you bring all applicable claims against the broker or brokerage firm that abused your trust. We have handled cases involving overtrading and churning, as well as incidences of intentional broker fraud, on behalf of residents located throughout Los Angeles, Beverly Hills, Irvine, and Santa Barbara. Our team will walk you through each phase of the legal process while ensuring that you receive the responsive and zealous legal representation that you deserve. To schedule your free consultation, call us at 818-501-8987 or contact us online to get started.