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

Most watched

Events

Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Events

Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.

Latest news & opinion

SEC sets June 5 date for vote on Regulation Best Interest

Commission adds new item to agenda: Interpretation of broker guidance that qualifies as advice

House passes SECURE retirement bill with massive bipartisan support

The measure allows small employers to band together to offer plans and raises the RMD age. Another provision eases use of annuities in 401(k)s, which critics say goes too far

10 IBDs with the most annuity revenue

Here are the independent broker-dealers that brought in the most annuity revenue last year.

DOL sets date to propose new fiduciary rule

The regulation, expected in December, likely will be contoured to the SEC's new advice standards.

LPL expanding platform to include employee brokers

The largest IBD in the country has agreed to buy a small broker-dealer in Florida to kick off the new effort.

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