James Bradley Schwartz of New York, New York submitted an Offer of Settlement to the Financial Industry Regulatory Authority (FINRA) in which he allegedly churned, excessively traded and engaged in unauthorized transactions in willful violation of Section 10(b) of the Securities Exchange Act, Rule 10b-5, and FINRA Rules 2111, 2020 and 2010.
From June 2013 through June 2016, James Bradley Schwartz was registered with Aegis Capital Corp. as a General Securities Representative. According to the FINRA findings, James Bradley churned and excessively traded customer accounts. He executed approximately 535 trades in four customers’ accounts resulting in a combined loss of more than $660,000. The findings also stated that Schwartz’s received more than $194,000 of the generated gross sales and commissions of approximately $277,705. In addition to the FINRA findings, James exercised de facto control over the customers’ accounts and executed 261 trades with a value of approximately $10 million without his customers’ authorization, including unauthorized trades in a deceased customers account. FINRA stated that Schwartz did not have a reasonable basis to believe that his trading in the customers’ accounts were suitable.
Section 10(b) of the Exchange Act, SEA Rule 10b-5, and FINRA Rule 2020 are antifraud rules. They prohibit associated persons from using manipulative, deceptive or other fraudulent devices or contrivances in connection with the purchase or sale of any security (Rule 10b-5) or to induce the purchase or sale of any security (FINRA Rule 2020). FINRA Rule 2010 requires an associated person to “observe high standards of commercial honor and just and equitable principles of trade.” 9 Churning is a manipulative and deceptive device that violates Section 10(b) of the Exchange Act, SEA Rule 10b-5, and FINRA Rules 2020 and 2010. It is fraudulent conduct that occurs in a broker-customer relationship when (i) a broker controls his customer’s account; (ii) the trading in the account is excessive in light of the customer’s investment objectives; and (iii) the broker acts with scienter, i.e., with intent to defraud or with reckless disregard of the customer’s interests.
Without admitting or denying FINRA’s findings, James Bradley Schwartz consented to the sanctions and to the entry of findings and has been barred from association with any FINRA member in all capacities.
Stockbrokers have been known to engage in many practices that may violate 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 supervisory system. The implementation of these industry rules requires supervisors to monitor their employees to ensure compliance with federal and state securities laws, securities industry rules and regulations, and the brokerage firm’s own policies and procedures. If broker-dealers and/or their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages which flow from the broker’s misconduct. Therefore, investors who have suffered losses stemming from churning/excessive trading, unauthorized transactions and/or other misconduct by their broker can file claims to recover damages against broker-dealers, like Aegis, which should consistently oversee its brokers’ activities in order to prevent the above-described misconduct.
Have you suffered losses in your Aegis account due to churning/excessive trading and/or unauthorized transactions by your broker? Was James Bradley Schwartz your stockbroker? 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 Aegis stockbrokers who may have engaged in broker misconduct 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 40 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 firstname.lastname@example.org for answers to any of your questions about this blog post and/or any related matter.