On Monday, FINRA charged a New York broker-dealer, as well as a number of current and past registered representatives, with churning customer accounts and other illicit actions the resulted in significant losses to retirees and other investors. According to FINRA enforcement attorneys, Newport Coast Securities Inc. and five of its current and past brokers knowingly engaged in a “manipulative, deceptive and fraudulent scheme” to churn the accounts of about twenty-four customers in order to receive higher commissions.
Newport Coast and three of its brokers are accused of making unsuitable sales of complicated securities to elders and other investors. Two of Newport Coast’s former supervisors are alleged to have ignored a number of warning signs regarding trading activity that led to the near disappearance of many people’s retirement savings. These included large numbers of riskless trades where commissions exceeded 3 percent, high levels of margining and concentration in accounts, and large losses in nearly all of the accounts.
FINRA believes Newport Coast’s managers knew what was happening but only took steps to rectify the situation after the firm’s representatives were placed under additional supervision following a FINRA examination. The misconduct, however, continued. FINRA further charged two of the brokers with obstruction when they allegedly attempted to dissuade certain customers from cooperating in the investigation.
With the exception of one, all of the people named in FINRA’s complaint have left Newport Coast and are now registered with other firms. Donald Wojnowski, who took over as Newport Coast’s chief executive in March 2013, said the firm has spent the past year overhauling its management, compliance and supervisory functions in response to the issues presented in FINRA’s complaint. Wojnowski further stated that Newport Coast has had ongoing discussions with FINRA about a potential settlement and the corrective actions it has been taking.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.