National investment fraud lawyers KlaymanToskes is investigating (“Joseph LaScala Aegis Investigation”) Excessive Trading Investigation”) Aegis Capital broker Joseph LaScala in light of his recent settlement with the Financial Industry Regulatory Authority’s (“FINRA”) relating to excessive trading allegations.
Excessive trading occurs when a broker recommends a high number of trades that, in the aggregate, do not align with the customer’s investment goals and financial circumstances. Where it involves the intent to defraud the customer or was carried out with reckless disregard for a customer’s interests, it is considered “churning”—a form of securities fraud.
According to a FINRA Letter of Acceptance, Waiver and Consent, between July 2014 and April 2016, LaScala engaged in short-term trading in a customer’s individual 401(k) account at Aegis. LaScala placed 235 trades over this period, generating an annualized cost-to-equity ratio of 29.16% and an annualized turnover rate of 5.8.
Because LaScala decided which stocks to trade and when to trade them, and exercised discretionary authority in connection with 139 of the trades, LaScala controlled the volume and frequency of trading in the account.
FINRA alleges that LaScala’s short-term trading in the customer account was excessive and unsuitable given the customer’s investment profile. The alleged misconduct resulted in $90,720 in trading costs and $116,194 in losses.
LaScala allegedly did not obtain prior written authorization from his customer and Aegis to exercise discretion in the customer’s retirement account. LaScala exercised discretionary authority in the account when he placed 139 trades over this 16-month period with a total principal value of approximately $2 million.
Although LaScala discussed his short-term trading with the customer generally, he did not speak with the customer about the specific trades on the dates of the transactions.
Joseph LaScala consented to the following sanctions:
According to FINRA BrokerCheck, FINRA made a preliminary determination to recommend that disciplinary action be brought against Joseph LaScala alleging the following violations:
According to FINRA BrokerCheck, William Athas has 9 customer disputes on his record. The most recent customer dispute, which as of time of writing is a May 2020 customer dispute, is currently pending. The dispute alleges Athas conducted unsuitable trading, and alleged common law fraud; churning; breach of contract; negligent supervision; breach of fiduciary duty.
FINRA suggests 3 steps to protect against excessive trading:
In a FINRA arbitration claim of excessive trading or “churning” in a brokerage account, Claimants may allege a breach of fiduciary duty and conflict of interest for recommended investment strategies whose sole purpose is to enrich the brokerage firm and/or its financial advisor through excessive commissions, fees or costs.
FINRA arbitrations will generally be successful in an excessive trading or “churning” claim if a customer can prove two case facts. First, the panel must conclude the financial advisor controlled or solicited the activity in the account and second, the activity in the account was excessive based on the Claimant’s risk tolerance and investment objectives.
There are many factors an arbitration panel will consider to determine whether a financial advisor had control over the activity in a financial brokerage account. Several factors that may be considered include:
Former and current customers of Joseph LaScala at Aegis Capital with losses in excess of $250,000, and those who have information relating to the manner in which he handled customer accounts, are encouraged to contact Lawrence L. Klayman, Esq., at (561) 542-5131, and download our Special Investor Report.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. KlaymanToskes has recovered more than $225 million for investors in FINRA arbitrations. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.