Securities Arbitration Lawyer Blog
Iorio Altamirano LLP is investigating claims on behalf of Worden Capital Management LLC (“WCM”) customers after the firm was sanctioned more than $1.5 million by FINRA for making unsuitable recommendations and excessively trading customers’ accounts. If you have lost money with WCM, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
WCM and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) over allegations that between January 2015 and October 2019, WCM and its owner and CEO, Jaime Worden, violated FINRA rules. Specifically, that WCM and Mr. Worden:
- Failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to excessive trading.
- As a result, WCM registered representatives made unsuitable recommendations and excessively traded customer accounts, causing customers to incur more than $1.2 million in commissions.
As part of the AWC, WCM was ordered to pay approximately $1.2 million in restitution to customers whose accounts were excessively traded by the firm’s representatives. The firm must also pay a $350,000 fine for supervisory and other violations and agreed to retain an independent consultant to review relevant portions of its supervisory systems and procedures. Mr. Worden received a $15,000 fine, a 15 business-day suspension in all capacities, and a three-month suspension in all supervisory capacities.
WCM is headquartered in Garden City, New York, and has been a FINRA member firm since February 2009. The firm is an introducing broker-dealer, generating most of its revenues from commissions charged in connection with buying and selling equities for its retail customers. WCM has six branch locations, primarily in the New York metropolitan area, and 49 registered representatives. Mr. Worden has been registered with FINRA through WCM since February 2009.
AWC Findings
WCM recommended active short-term trading to retail customers with speculative investment objectives. Many WCM representatives also recommended that customers use margin to increase their buying power. WCM did not take action to investigate or stop trading in customers’ accounts, even though WCM received a monthly active account report that routinely flagged dozens of customer accounts indicative of excessive trading.
As part of its investigation, FINRA found the following instances of excessive trading:
- 635 trades in a customer’s account between May 2015 and September 2017. The account had an annualized cost-to-equity ratio of nearly 84% and an annualized turnover rate of more than 92. The customer incurred realized losses of over $1 million, which included $285,169 in commissions.
- 83 trades in a customer’s account between December 2016 and October 2018. The account had an annualized cost-to-equity ratio of nearly 135% and an annualized turnover rate of more than 29. The customer incurred realized losses of $36,838, which included $45,082 in commissions.
- 313 trades in a customer’s account between November 2016 and September 2017. The account had an annualized cost-to-equity ratio of nearly 103% and an annualized turnover rate of more than 25. The customer incurred realized losses of $118,490, which included $205,557 in commissions.
- 65 trades in a customer’s account between June 2016 and March 2017. The account had an annualized cost-to-equity ratio of 81% and an annualized turnover rate of more than 36. The customer incurred realized losses of $118,136, which included $35,365 in commissions.
The cost-to-equity ratio represents the amount an account must appreciate just to cover commissions and other expenses; this is knowns as the “break-even point” where a customer may begin to see a return. The turnover rate represents the number of times a portfolio of securities is exchanged for another portfolio of securities. Typically, a turnover rate of 6 suggests that excessive trading has occurred. Likewise, a cost-to-equity ratio above 20% suggests excessive trading.
FINRA also found that, in August 2017, WCM and Worden interfered with customer requests to transfer accounts from WCM to another member firm in connection with the change in employment of 13 registered representatives. Additionally, from January 2016 to December 2020, WCM failed to timely file 59 amendments to the Uniform Applications for Securities Industry Registration or Transfer (Form U4s) and Uniform Termination Notice for Securities Industry Registration (Form U5s) for 13 of its registered persons to disclose the filing or resolution of customer arbitrations.
A FINRA restitution order does not preclude investors from pursuing their own claims to seek restitution or other available remedies. Investors harmed by WCM’s supervisory failures may have a claim against the firm.
If you have lost money with WCM, contact New York securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.