The Financial Industry Regulatory Authority claims that Caldwell International Securities Corp. engaged in the churning of customer accounts and that this purportedly resulted in $1 million in excess commissions for the firm. The self-regulatory organization says that the alleged violations began in 2011.
According to FINRA, the Texas-based company’s founder Greg Caldwell and supervisors Lennie Freiman and Paul Jacobs decided to ignore that four OSJs (offices of supervisory jurisdiction), three in New York and one in New Jersey, were churning customer accounts and making yearly commission revenues of at least 100% of the customers’ equity.
The regulator said that brokers at the OSJs contacted foreign investors to persuade them to take part in speculative stock and option trading. Even after 15 customers lost $1.1M and paid over $1M in commissions and fees, Caldwell and its supervisors purportedly still did not take any action.
Cost-to-equity ratios in customer accounts are believed to have varied from 18% to over 100%. The firm is also accused of not reporting that it had been the subject over three dozen customer complaints.
In 2012, a compliance consultant retained by Caldwell International cautioned that one of the OSJ’ was beginning to resemble a “chop shop.” The regulator is also pursuing five former-Caldwell registered representatives over their involvement in the alleged churning.
Our Texas securities fraud law firm represents investors seeking to recover their losses caused by the negligence of brokers, investment advisers, broker-dealers, and others in the financial industry. Contact Shepherd Smith Edward and Kantas, LTD LLP today.
Finra Charges Texas Firm In $1 Million Churning Case, Financial Advisor, January 5, 2006