SEC charges Birmingham B-D with churning

The Securities and Exchange Commission and the Alabama Securities Commission announced today that they have charged Aura Financial Services Inc., a Birmingham-based broker-dealer, with churning customer accounts, supervisory failures and other violations.

Several of the firm’s senior officers and six registered representatives are included in the complaint.

Churning occurs when a broker engages in excessive trading without regard to the customer’s investment objectives for the purpose of generating commissions and other revenue.

The SEC’s complaint, filed in U.S. District Court for the Southern District of Florida, alleges that Aura and six registered representatives used fraudulent sales practices and high-pressure sales tactics to convince customers to open and invest money in brokerage accounts, which the brokers subsequently churned.

The firm and brokers received $1 million in commissions and fees while they depleted the customers’ accounts, the SEC alleges.

For its part, the ASC alleged in an amended order that many of the firm’s representatives had criminal or disciplinary backgrounds and multiple prior customer complaints. Nonetheless, Aura and three of its managers failed to adopt appropriate procedures, enforce rules, conduct branch office inspections or maintain files of complaints, according to the statement.

The order gives Aura 28 days to show cause as to why its registration as a broker-dealer should not be revoked or suspended in the state.

The SEC is seeking court orders permanently prohibiting all the defendants from engaging in violations of the anti-fraud provisions of the federal securities laws and requiring them to disgorge their ill-gotten gains and pay financial penalties.

The SEC’s and the ASC’s investigations continue.

A spokeswoman for Aura Financial was not immediately available for comment.

Related Topics: Churning, Securities and Exchange Commission