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- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
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- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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NEWSLETTERS & ALERTS
Customers Unaware that Broker was Churning Their Accounts
by Howard Haykin
CASE IN POINT. “Edward B.” was a broker with less than 4 years’ experience when he joined Craig Scott Capital, a broker-dealer that was later expelled for, among other things, putting company profits ahead of customer interests. While he was with Craig Scott, Edward B. traded all his customer accounts the same way, regardless of their investment objective, risk tolerance, age or stated financial condition – executing a constant stream of buy and sell orders, and applying enormous fees and hidden commission charges to each trade. Over 3 years and 3 months, Edward B.’s customers lost nearly $3 million, while he and Craig Scott earned almost $650,000 in commissions and fees.
CUSTOMER TAKE AWAYS. Edward B.’s customers could have avoided their losses had they taken any of the following actions:
- Not opened an account with Edward B. or with Craig Scott Capital after checking out their questionable disciplinary records on BrokerCheck, at FINRA.org.
- Not given Edward B. or any other broker “Discretionary Authority” over their brokerage accounts – i.e., permission to buy and sell securities in the account without first obtaining the customer's consent for each trade.
- Invested in publicly traded index funds that hold a diversified basket of stocks.
- Employed a reputable broker or investment advisor that charges a fixed annual fee for managing customers’ portfolios – typically available only to investors with sizable net worth.
- Used a friend, relative or trusted third person to serve as a “financial watchdog” who can help oversee the activities of the broker or investment advisor.
[Click on FINRA AWC #2015044823502 for more examples of churning in customer accounts.]