Finra charges broker with fraud for churning blind widow's account

Excessive trading and commissions cost an elderly investor $184,000, Finra alleges

Aug 1, 2016 @ 12:08 pm

By Greg Iacurci

The Financial Industry Regulatory Authority Inc. charged a broker with securities fraud for churning the account of an elderly, blind widow.

The “deceptive and fraudulent scheme” generated $243,000 in commissions for the broker, Hank Mark Werner, and caused the 77-year-old customer $184,000 in net losses over a three-year period, Finra alleged.

Mr. Werner isn't currently registered with a broker-dealer. He most recently was registered with New York City-based Legend Securities Inc., from December 2012 until March 2016, when Finra made a preliminary determination to recommend disciplinary action be brought against Mr. Werner for potential willful violations of securities law, according to Finra's BrokerCheck website.

Mr. Werner had been the broker of the elderly client and her now-deceased husband since 1995. The client's husband passed away in 2012.

Between October 2012 and December 2015, Mr. Werner allegedly placed more than 700 trades on more than 200 different securities, and charged a markup or commission of between 2.5% and 3% on each sale, ultimately rising to 3.75% to 4.25% when he switched firms, according to Finra.

Based on the level of trading and commissions charged, there was “little to no possibility that the customer would profit from such trading,” according to the regulatory body.

Further, based on the investment objective and financial situation of the client, Mr. Werner didn't have a reasonable basis to determine recommended trades were suitable, Finra said.

Mr. Werner was not immediately available to comment.

Mr. Werner is allowed to file a response to the compliant and request a hearing before a disciplinary panel. Depending on the outcome of proceedings, he may be fined, censured, suspended or barred, and disgorged of profits due to alleged violations.

Elder financial abuse has been on regulators' and legislators' radar screens. Last month, laws requiring financial advisers to alert state authorities of suspected elder financial abuse and giving them immunity from civil liability went into effect in three states: Alabama, Indiana and Vermont.

The U.S. House of Representatives last month approved legislation that would protect financial advisers from liability under privacy laws for reporting such financial abuse.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

The bizarro world of DOL and SEC rule supporters

Managing editor Christina Nelson talks with senior reporter Mark Schoeff Jr. about why groups that supported the Labor Department's fiduciary rule oppose much of the SEC advice package, and vice versa.

Latest news & opinion

10 most affordable U.S. cities for renters

Here are the U.S. cities that are most affordable for renters, according to Business Student.com, which compared the cost of rent to average salaries.

9 best - new - financial adviser jokes

Scroll through for nine new financial adviser laughs.

Captrust, prominent 401(k) advice firm, ramps up its wealth management business

Captrust wants to grow annual revenue from wealth management to 50% from 30% over the next five years.

Fidelity CEO says zero-fee funds aimed at expanding its universe

Johnson says way to prosper in financial services is 'by building relationships.'

SEC advice rule contains a huge hole

Jay Clayton aims to clear up investor confusion by drawing a distinction between brokers and advisers in the agency's proposed package of revised standards. But where do dual registrants fit?

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print