Have you ever invested money with Legend Securities (CRD#: 44952)? If so, you need to be aware of the extensive history of complaints against this firm. Most notably, on April 17th, 2017 Legend Securities was expelled from the securities industry for its failure to pay fines and costs related to earlier misconduct cases that it had lost.
The History of Misconduct By Legend Securities
Based in New York City, Legend Securities was first registered as a broker-dealer in 1998. The firm was licensed to operate in all 50 states as well as in Puerto Rico and the District of Columbia. Before being expelled from the industry in April of 2017, the firm and several of its individual brokers faced many different types of allegations of fraud, negligence and general misconduct. Here, our experienced securities fraud lawyers discuss some of the most notable recent examples of misconduct by Legend Securities.
Unsuitable Investment Recommendations
In April of 2015, Legend Securities broker Michael Androulakis was accused by a customer of recommending unsuitable investments. Industry rules require that brokers and brokerage firms only recommend suitable trades to their clients. In determining what qualifies as a suitable investment recommendation, brokers must consider all circumstances of their clients’ financial position and future needs. Some of the most important factors include:
- Investment objectives;
- Risk tolerance;
- Current financial needs;
- Liquidity needs;
- The other positions had by the investor; and
- The general sophistication of the investor.
In this case, the unsuitable investment allegations against Mr. Androulakis were settled for $50,000 in compensation. The case is notable as it is one of many involving individual Legend Securities brokers. Broker-dealers have a legal duty to ensure that the financial advisors employed by the firm are always acting in the best interests of the firm’s customers.
Poor Supervision of Accounts
In February of 2016, FINRA’s Department of Enforcement censured Legend Securities and ordered the firm to pay a fine of $125,000 for its role in allowing penny stock fraud. Specifically, FINRA investigators determined that Legend Securities failed to establish proper oversight protocols for its penny stock liquidation business.
Given the volume of penny stock trades that were flowing through the firm, the lack of oversight procedures made it impossible to properly review the transactions. For example, FINRA investigators determined that the firm failed to flag the fact that one customer deposited 2.2 billion shares of a penny stock, only to immediately liquidate that position and withdraw the proceeds from the firm. The is a textbook example of suspicious activity, the type that often indicates a ‘pump and dump’ scheme. Broker-dealers have a legal duty to review such transactions to ensure legal compliance.
The Churning of Investor Accounts
On November of 2016, a customer brought a complaint against Legend Securities alleging that their account was ‘churned’. Essentially, churning occurs when a broker or brokerage firm makes excessive trades on a client’s account. By making an unreasonably high number of trades, the broker is able to collect additional commissions and fees, while the customer’s account is slowly drained.
Brokers must always have a good, financially sound reason for making each individual transaction. In this case, Legend Securities was ordered to pay a $100,000 fine and $57,950.75 in restitution to the affected customer.
Failure to Pay Fines and Costs
Legend Securities was expelled from the securities industry because the company failed to make payments in relation to its past misconduct. For example, in the previously mentioned churning case that occurred in November of 2016, Legend Securities failed to pay the fine, customer restitution or the legal costs that were required. This happened in several different cases. Indeed, in another claim, Legend Securities failed to pay more than $78,000 in fines and costs.
This is unacceptable. When brokerage firms commit misconduct they must be held accountable. If they fail to pay the damages that they owe, whether because they choose not to, or because they claim to be financially insolvent, they cannot be allowed to operate in the securities industry. Under FINRA Rule 8320, a brokerage firm that fails to pay its fees is subject to expulsion after seven days of receiving notification.
Contact Our Office Today
At Sonn Law Group, our securities fraud attorneys have the skills and experience needed to hold bad brokers liable for their misconduct. If you lost money investing with Legend Securities, we can help.
To request your free initial case evaluation, please call our team today at 844-689-5754. We have offices in Aventura, Miami, Boca Raton, Orlando and Houston and we represent investors throughout the country.