Kelly Clayton Althar, a former registered representative with Financial West Group, submitted an Offer of Settlement to the Financial Industry Regulatory Authority (FINRA) in which he was barred from association with any FINRA member in all capacities amid allegations that he made unsuitable recommendations and excessively traded two accounts held by an elderly customer.
According to FINRA, Mr. Althar, of San Pablo, California, was the registered representative for an elderly customer with hopes of retiring in a few years. Without admitting or denying FINRA’s findings, Mr. Althar consented to FINRA’s findings that he exercised de facto control over two of his customer’s accounts and utilized that control to place frequent trades without consulting his customer in order to generate increased commissions for himself. FINRA found that Mr. Althar often purchased, sold, and subsequently repurchased the same security in his customer’s accounts in order to generate commissions while his customer suffered substantial losses. During the relevant period, FINRA stated that Mr. Althar generated approximately $91,000 in commissions from his excessive IRA trades, and an additional $48,000 in commissions in his customer’s individual. His customer, who was close to retirement and purportedly only wanted low-risk investments, suffered extensive losses in the value of her two accounts, which dropped by more than 50%.
Excessive trading or “churning” involves excessive trading by a broker in a client’s account mainly to generate commissions. Churning is a violation of Federal and state securities statutes, industry rules and regulations and a breach of fiduciary duty to investors under common law. Churning can occur if a stockbroker exercises control over the investment decisions in your account and purchases stocks or recommends that you purchase and sell stocks for his/her benefit, i.e., commissions, not yours! These trades rarely, if ever, make the investor any money. In fact, the additional commissions raise the break-even point for the investor to the level where the stock must perform at an extremely high level in order for the investor to make any money. Although there is no quantitative measure for churning, frequent buying and selling of securities that does little to meet a client’s investment objectives may be construed as evidence of churning. As seen in the aforementioned stockbroker misconduct, churning may result in substantial losses in a client’s account.
In every broker-investor relationship, the broker must assess what the investor’s goals are as well as his or her risk tolerance. This assessment is based on a number of key factors, including the investor’s stated objectives, risk tolerance, financial condition and tax status. It is the broker’s responsibility to only pursue investments suitable for that investor based on these factors. A stockbroker is obligated to only recommend suitable investments and investment strategies. If a Financial West Group stockbroker recommends unsuitable investments and unsuitable trading strategies, it can leave you vulnerable to unnecessary risk and losses.
Stockbrokers have been known to engage in many types of practices that may be in violation of industry and firm rules, practices, and procedures. In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms to establish and implement a reasonable supervisory system. The implementation of the rules require supervisors to monitor employees to ensure they comply with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures. If broker-dealers and their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered losses stemming from excessive trading (churning), unsuitable recommendations and/or other stockbroker misconduct by their broker can bring forth claims to recover damages against broker-dealers, like Financial West Group, which should consistently oversee its brokers’ activities in order to prevent the above-described prohibited conduct.
Have you suffered losses in your Financial West Group account due to your stockbroker’s unsuitable excessive trading? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Financial West Group stockbrokers who may have engaged in unsuitable excessive trading strategies and caused investors’ losses.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 35 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at email@example.com for answers to any of your questions about this blog post and/or any related matter.