Caldwell International Securities Corp. will pay roughly $2 million to settle charges that it hurt its investors. Further, the company’s founder, Greg Caldwell, has agreed to be banned from the industry. According to FINRA, Caldwell International will pay a fine of $1 million and an additional $1 million in restitution to investors who lost money as a result of excessive trading in their accounts, which is called churning. Caldwell, himself, will pay $50,000 under the settlement.
The firm failed to prevent unsuitable investment methods and churning as it grew and changed strategies, FINRA said. Its supervisory systems and procedures did not evolve with the risks that came with its growth.
Caldwell International had been a small, regional broker-dealer operating its home office out of ex-President Lennie Freiman’s house on a ranch in Fischer, Texas until 2011, according to the regulatory authority. At that point, the firm began to grow quickly, opening new branches in New York and New Jersey. The newly associated broker’s primary business lines included cold calling investors, speculative equity trading, and the solicitation of investors outside of the country.
The expansion was a systemic shift in strategy, which traditionally focused on moderate or conservative equity trading for U.S. investors, according to FINRA. The firm’s supervisory failures included inadequate branch exams and a failure to review for unsuitable transactions and investment strategies.
Freiman also agreed to be barred and pay a $75,000 fine.If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.