FINRA Alleges Worden Capital Advisors Churned Customer Accounts
The White Law Group is investigating potential securities claims involving Worden Capital Management and the liability it may have for failure to supervise its financial advisors.
According to a Letter of Acceptance, Waiver and Consent (AWC) signed on December 31, 2020, the Financial Industry Regulatory Authority (FINRA) has sanctioned Worden Capital Management (CRD#: 148366) for supervisory failures connected to charges of excessive trading in customers’ accounts.
FINRA charged Worden Capital Management with more than $1.5 million, including approximately $1.2 million in restitution to customers whose accounts were excessively traded by the firm’s representatives, and a $350,000 fine for supervisory and other violations.
Worden Capital will also reportedly be required to retain an independent consultant to review its supervisory systems and procedures, according to the AWC.
From January 2015 to October 2019, Worden Capital and the firm’s owner and CEO, reportedly failed to establish and enforce a supervisory system reasonably designed to achieve compliance with FINRA’s rules relating to excessive trading. Consequently, Worden Capital’s registered representatives allegedly made unsuitable recommendations and excessively traded customers’ accounts, causing customers to incur more than $1.2 million in commissions.
In one example, a Worden Capital customer whose account was traded for approximately one year had a cost-to-equity ratio (or breakeven point) of more than 100 percent and incurred realized losses of $118,490, inclusive of the $205,557 the customer paid in commissions.
Worden Capital apparently did not take action to investigate or stop the trading in this customer’s account, and similar accounts, even though the firm received a monthly active account report that routinely flagged dozens of customer accounts indicative of excessive trading.
FINRA’s findings also said that the firm interfered with customers’ requests to transfer their accounts to another member firm. In addition, as a result of supervisory failures, Worden Capital failed to timely file amendments to registered representatives’ Form U4s and Form U5s to disclose the filing or resolution of customer arbitrations.
The CEO reportedly agreed to a 15-day suspension in all capacities, a three-month supervisory suspension, a $15,000 fine and must complete 20 hours of continuing education.
In settling this matter, Worden Capital and its CEO neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
Excessive Trading and Churning Attorneys
When a broker engages in excessive trading of securities in a customer’s account without considering the client’s investment goals and primarily to generate commissions that benefit the broker, the broker may be engaged in an illegal practice known as churning.
Churning fraud is an illegal and unethical practice. The more a broker trades the more they get paid. In many cases this is enough incentive for unscrupulous brokers to over-trade in a client’s account.
Often churning fraud occurs when a broker has discretionary authority (either actual or implied) of a client’s account, meaning they do not need the clients consent to trade on their behalf. Churning may result in significant losses and exposes the client to unnecessary tax liabilities.
Free Consultation with a Securities Attorney
The White Law Group continues to file FINRA arbitration cases on behalf of clients who have suffered losses as a result of churning or excessive trading. If you are concerned about your investments with Worden Capital Management, the securities attorneys at The White Law Group may be able to help you.
For a free consultation with a securities attorney, please call The White Law Group at (888) 637-5510.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois. For more information on The White Law Group and its representation of investors, please visit https://www.whitesecuritieslaw.com.