In a complaint filed by FINRA, and reported in September, 2015 Equinox Securities, Inc. of Redlands, California, Stephen Oliveira of Phelan, California and Chris Palkowitsh of Cumming, Georgia were named respondents in a FINRA complaint alleging that Equinox Securities and Palkowitsh engaged in a manipulative, deceptive and fraudulent scheme by churning customer accounts. The complaint alleges that the firm and Palkowitsh acted with intent to defraud and/or reckless disregard of their customers’ interests by seeking to maximize their own remuneration.
The trading in the customers’ accounts had high annualized cost-to-equity ratios and the number of transactions were excessive in light of the customers’ investment objectives and financial situations. None of the customers agreed to the high level of trading in the accounts.
Six of the eight accounts were IRAs that constituted the bulk of the customers’ retirement savings. After the customers suffered substantial losses, Palkowitsh placed their remaining equity at risk by concentrating each account in a low-priced security. As a result of the excessive trading and churning in the accounts, each of the customers suffered extensive losses and paid exorbitant fees and commissions to Equinox Securities and Palkowitsh.
As a result of their conduct, FINRA alleges that Equinox Securities and Palkowitsh willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, NASD Rules 2110 and 2120, and FINRA Rules 2010 and 2020.
The complaint also alleges that Palkowitsh made unsuitable recommendations to customers, and lacked reasonable grounds for believing that the customers’ understood and were willing and able to assume the risk particular to having their accounts heavily concentrated in a single, low-priced security where a significant loss would effectively wipe out the customer’s entire principal in these accounts, many of which were the customers’ sole retirement accounts.
In addition, the complaint alleges that there were multiple red flags suggesting that Palkowitsh was excessively trading, churning, and making unsuitable recommendations.
The complaint charges that the firm and Oliveira failed to establish, maintain and enforce a supervisory system and written supervisory procedures that were reasonably designed to achieve compliance with applicable securities laws and regulations. Moreover, the complaint alleges that Oliveira failed to conduct any meaningful review and take any meaningful action to detect and prevent unsuitable recommendations.
The claim filed by FINRA is not final, and until the allegations have been proven in a court of law, no adverse inferences should be drawn.
Equinox Securities registration and disciplinary history
In order to lawfully sell investments to the public, one must either be registered or exempt from registration. Equinox Securities is registered with the SEC, one self regulatory organization and in 33 states and territories.
According to FINRA’s CRD disclosure report, Equinox Securities has been the subject of one regulatory investigation.
The Law Office of David Liebrader practices exclusively in the field of investment loss recovery. For the past 23 years, we have dedicated our law practice to assisting investors who have been victims of investment fraud via fraudulent and unsuitable investment transactions. During that time we have recovered money for over one thousand individuals, pension plans, trusts and companies. The recoveries we have obtained via judgments, awards and settlements on behalf of our clients exceed $40,000,000.
When investors contact our firm they can expect prompt attention, and a detailed analysis of their issues. Typical claims that we are asked to review involve “unsuitability (where a financial advisor makes investment recommendations that are inconsistent with a customer’s investment objectives), claims for “churning” (where a broker enters into an excessive number of trades for the purpose of generating commissions), claims involving illiquid investments such as private placements (I.e., real estate investment trusts, limited partnerships, equipment leasing and oil and gas drilling programs) as well as claims for violations of state securities laws, which often provide investors remedies like attorney’s fees and interest, if they are successful on the claim.
Since a Supreme Court ruling in the 1980s, most investment related disputes between brokerage firms and their customers have been filed in an arbitration forum hosted by FINRA Dispute Resolution. FINRA, along with the SEC, serves as a securities industry “watchdog” and regulator. Most brokerage firms require their clients to sign binding arbitration agreements, mandating that any disputes between them be arbitrated at FINRA.
Investors pursuing claims at FINRA typically advance claims related to suitability. FINRA rules require that all registered representatives make suitable investment recommendations to their clients. Other claims are based on negligence or breach of fiduciary duty, while another category includes claims based on misrepresentations and fraud. Most claims filed with FINRA are resolved within 15 months, and oftentimes, the cases are resolved via settlement or mediation in under a year.
FINRA’s rules require that all investment recommendations made by licensed financial advisors be suitable in light of a customer’s needs, objectives and risk tolerance. In addition, all registered representatives are required to be properly supervised, with periodic inspections and reviews by qualified supervisors, whose job it is to vigorously investigate suspicions of wrongdoing (red flags).
If you suspect that you have been the victim of investment fraud, or had a financial advisor recommend unsuitable investments to you, call us today for a free, confidential consultation at (702) 380-3131.