James Flower, Formerly of SW Financial, Facing Allegations of Churning and Excessive Trading

Flower was named in a FINRA complaint alleging unauthorized trades and causing inaccuracies in his firm’s books and records. 

The Sonn Law Group is investigating allegations that James Flower engaged in churning and excessive trading in customers’ accounts. If you or a family member has suffered losses investing, we want to discuss your case. Please contact us today for a free review of your case.

James Flower (CRD#: 2817701) was named in a FINRA complaint alleging that he violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and violated FINRA Rule 2020 by churning and excessively trading in customers’ accounts. 

The complaint alleges that Flower controlled the trading in the customers’ accounts, decided what securities to buy and sell, the quantity of each transaction, and the timing of each transaction.

Flower also made unauthorized trades in a customer’s account. Flower’s trading in the accounts was grossly excessive and quantitatively unsuitable for the customers, as evidenced by the extremely high annualized turnover and cost-to-equity ratios, the frequency of the transactions, and the transaction costs incurred.

Flower’s trading in the customers’ accounts resulted in realized losses totaling over $220,000 while generating more than $210,000 in commissions and fees. Flower’s churning and excessive trading made it virtually impossible for any of the customers to make a profit. 

The complaint also alleges that Flower executed trades in the non-discretionary account of a customer without first obtaining the customer’s required authorization or consent. The complaint further alleges that Flower caused inaccuracies in his member firm’s books and records by mismarking solicited sales transactions in those accounts as unsolicited.

Flower has seven other disclosures on his BrokerCheck report, which are detailed below.

October 2019 Investigation

• Initiated By: FINRA
• Description of Investigation: “On October 15, 2019, FINRA made a preliminary determination to recommend that disciplinary action be brought against James Flower alleging violations of FINRA Rules 2111 and 2010 [Excessive and Unsuitable Recommendations]; Violations of FINRA Rule 2010 [Unauthorized Trading]; and Violations of FINRA Rules 4511 and 2010 [Mismarking Customer Trades]. FINRA Case #20170527011: Supplement proposed alleged violations – On January 15, 2020, FINRA made a further preliminary determination to recommend that disciplinary action be brought against James Flower alleging willful violations of Section 10(b) of the Exchange Act and Securities Exchange Act Rule 10b-5 and violations of FINRA Rules 2020 and 2010.”

June 2017 Regulatory Judgement

• Initiated By: FINRA
• Allegations:  “Without admitting or denying the findings, Flower consented to the sanctions and to the entry of findings that he recommended that 13 of his customers invest in a highly volatile exchange-traded note without having a reasonable basis for recommending the transactions. The findings stated that at the time Flower was recommending the exchange-traded note, Flower incorrectly believed that it traded inverse to the S&P 500 index. This erroneous perception led him to recommend that customers purchase and hold the exchange-traded note as a hedge to an anticipated overall market decline. Based on Flower’s recommendations, 13 customers suffered losses in excess of $249,000 after holding their shares for periods ranging from two weeks to over one year. Flower lacked a sufficient understanding of the mechanics of the exchange-traded note to form a reasonable basis upon which to recommend the purchase of it to his customers.”
• Resolution: Acceptance, Waiver & Consent
• Sanctions: Suspension – All Capacities
• Duration: Three months – Beginning 7/3/2017
• Sanctions: Undertaking – “Within 60 days of the date of the Notice of Acceptance of the AWC, Flower will undertake to attend and satisfactorily complete 10 hours of continuing education concerning complex products, which includes exchange-traded notes, by a provider not unacceptable to FINRA. Within 30 days of following completion of such training, Flower will submit written proof that the continuing education program has been satisfactorily completed. In light of Flower’s financial status, no monetary sanction is being assessed.”

January 2016 Financial Judgement

• Type: Bankruptcy
• Disposition:  Discharged
• Regulator Statement: “PROCEEDINGS IN FINRA ARBITRATION CASE # 15-02278 AGAINST FLOWER, JAMES WILLIAM WERE STAYED BY BANKRUPTCY PROCEEDINGS IN THE U. S. BANKRUPTCY COURT, NEW YORK EASTERN – CENTRALISLIP, CASE # 16-70155.”

September 2015 Customer Dispute

• Status: Settled
• Allegations:  “The Client alleges churning and unsuitability from May 2014 to July 2015”
• Damage Amount Requested: $90,000.00
• Settlement Amount: $45,000.00
• Broker Comment: The claim will be defended vigorously.

September 2015 Customer Dispute

• Status: Final
• Allegations:  “Client alleges over-concentration, unsuitability, excessive use of margin and churning from November 2014 to March 2015”
• Damage Amount Requested: $250,000
• Broker Comment: The claim will be defended vigorously.

April 2010 Customer Dispute

• Status: Settled
• Allegations:  “Misrepresented the characteristics and risks associated with multiple purchases of an ETF, failed to execute a stop-loss order and misrepresentation of the utilization margin.
• Damage Amount Requested: $100,000.00
• Settlement Amount: $67,500.00
• Broker Comment: Complaint settled — without admitting or denying any wrongdoing. I contributed what was advised, after doing an economic analysis of the cost for an arbitration hearing. 

April 2006 Customer Dispute

• Status: Withdrawn
• Allegations:  “Client alleges broker failed to place stop loss as instructed”
• Damage Amount Requested: $21,000.00

Contact Us Today

The Sonn Law Group is currently investigating allegations that James Flower made excessive trades in customers’ accounts. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.