The Financial Industry Regulatory Authority has fined Bluechip Securities Incorporated for Texas securities fraud over the alleged churning of public customer accounts by principal Muhammad Akram Khan. The fine against the Houston-based financial firm is $15,000. Khan, who was fined $385,000, has been suspended from associating with any FINRA firm for 18 months. Bluechip and Khan agreed to the securities settlement without admitting to or denying the findings.
According to FINRA, Khan executed or caused to be effected options transactions at unfair prices and that the commissions he charged were excessive. The SRO claims that Khan made about $380,296 in commission charges from theses transactions that he effected, while the accounts sustained losses of about $399,000.
FINRA says that Khan recommended to clients the opening of certain options transactions even though there was no reason to think that these recommendations were appropriate for the customers. FINRA also says that Khan had no reasonable grounds to believe that these clients were capable of assessing for themselves the risks involved in these transactions or that they could financially handle the chances that he was having them take. The SRO claims says that Khan executed these options transactions in clients’ accounts even though none of them had given him or Bluechip Securities the written authorization to take such actions.
Churning involves excessive trading in an account with the goal of making commissions. To be able to churn, a broker has to be able to take charge of investment decisions in your account.
That said, churning is prohibited by the major self-regulatory organizations and it is an illegal activity. It also may be a violation of SEC Rule 15c1-7, FINRA Rules 2310-2(b)(2) and 2310, NYSE Rules 476(a)(6) and NYSE Rule 408(c), and other securities laws.
Our Houston securities fraud lawyers represent clients that have suffered financial losses because a broker engaged in churning. We know how to prove that a client’s account was subject to excessive trading whether for purposes of commission or otherwise. Possible ways of assessing whether you’ve been the victim of churning is calculating the yearly rate of return that would be required so that the commissions charged to you are covered, assessing how many times your account’s equity is turned over to buy securities, and determining how much sale and purchase trading activity occurs in your account.
It is not uncommon for a broker engaged in churning to claim the purpose of the buying and selling of securities in your account was so that you could make a quick profit.
More Blog Posts:
Texas Securities Fraud: Ex-Triton Financial CEO Convicted of Ponzi Scam that Bilked Ex-Heisman Trophy Winner Ty Detmer, Other Former NFL Players, and Hundreds of Other Investors of of Millions, Stockbroker Fraud Blog, August 22, 2011
CapWest Loses $940,000 Dallas Securities Case in FINRA Arbitration, Stockbroker Fraud Blog, August 15, 2011
Texas Securities Fraud: Insurance Agent Could Get 100 Years Behind Bars for Using Fraudulent Annuities to Bilk Elderly Seniors of Over $5M, Stockbroker Fraud Blog, August 9, 2011
Unfortunately, it can be hard to prove that you were the victim of churning, which is why you should contact an experienced Texas securities churning law firm about your case.