Former PHX Financial Broker Named in FINRA Complaint Alleging Excessive Trading

Halil Kozi, a former registered representative with PHX Financial, Inc., was named a Respondent in a Financial Industry Regulatory Authority (FINRA) complaint for allegedly engaging in excessive trading, known as churning, in his customer’s account, causing his customer to suffer losses of nearly $72,000.

FINRA’s complaint alleges that Halil Kozi, of Middletown, New Jersey, allegedly exercised complete control over the trading in his customer’s account.  Mr. Halil engaged in trading of equities and options, of which he is alleged to have known his customer lacked experience and knowledge.  The complaint alleges that Mr. Halil used high-pressure sales tactics on his customer, and the customer routinely followed his recommendations.  FINRA further alleges that the recommendations were unsuitable for his customer in light of the customer’s moderate risk tolerance and balanced growth investment objective.

With an investment of $200,000, FINRA’s complaint states that within a year and a half, Mr. Kozi recommended equities and options transactions with a principal value of $3 million.  In so doing, Mr. Kozi generated gross commissions of over $135,000 and allegedly caused his customer to suffer losses of nearly $72,000.

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!  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.  Churning may result in substantial financial losses in a client’s account, and even if profitable, may generate a tax liability for a client.

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 PHX Financial, which should consistently oversee its brokers’ activities in order to prevent the above-described prohibited conduct.

Have you suffered losses in your PHX Financial account due to your stockbroker’s 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 PHX Financial stockbrokers who may have engaged in excessive trading 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 pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.