A FINRA Dispute Resolution Services arbitration panel in Richmond, Virginia, found Westpark Capital, Inc. to be liable for actions of its disgraced former broker, Lawrence Fawcett, and ordered the firm to pay nearly $800,000 to customers Charles and Karen Hailey. The award included over $545,000 in compensatory damages, $33,500 in costs, and $215,000 in attorneys’ fees. The arbitration panel found Westpark liable for failing to supervise Mr. Fawcett, who churned the Hailey’s accounts and made unsuitable investment recommendations. The unsuitable investment recommendations related to private placement investments in the following entities: Protagenic Therapeutics, Inc., Monster Digital, Inc., Miamar Labs, Inc.
The former stockbroker, Lawrence (Larry) Fawcett, was barred from the securities industry by FINRA in March 2018 for failing to cooperate with a FINRA investigation into his outside business activities. FINRA subsequently revoked Mr. Fawcett’s securities license for failing to pay a fine and suspended him for failing to comply with an arbitration award. Mr. Fawcett, who had only been in the securities industry for five years, had an extensive history of customer complaints, regulatory sanctions, associations with disreputable brokerage firms, and an employment termination after allegations of wrongdoing.
If you have lost money with Lawrence Fawcett or Westpark Capital, Inc., contact FINRA arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Westpark Capital, Inc.
Charles A. Hailey and Karen G. Hailey v. Westpark Capital, Inc., FINRA Case No. 20-00320
On May 25, 2021, a FINRA Dispute Resolution Services arbitration panel awarded customers Charles A. Hailey and Karen G. Hailey nearly $800,000.
In the Statement of Claim, filed in January 2020, Claimants asserted the following causes of action: breach of fiduciary obligations; breach of contract; negligence/professional negligence; violations of the Virginia Securities Act and blue sky statutes; violations of federal securities law; common law fraud/ misrepresentations and, omissions; unsuitability, including both quantitative and qualitative, specifically including overconcentration and use of significant margin; failure to supervise; violations of state and federal rules and regulations; agency, respondeat superior and control person liability; and general equitable principle that apply in arbitration.
The causes of action related to private placement investments in Monster Digital, Inc., Miramar Labs, Inc., Protagenic Therapeutics, Inc. stock, the volume of trading (i.e., excessive trading/churning) in other securities. In addition, the claim sought damages for the recommended purchase of gold, through GFS Associates, and precious metals, through Omega Knight 2 LLC. In 2018, Omega Knight 2, LLC was charged by the Commodity Futures Trading Commission for fraud. The investments in GFS Associates and Omega Knight 2 LLC were private securities transactions sold by Mr. Fawcett without the approval of his firm, Westpark Capital, Inc.
In a rare occurrence, the arbitration panel devoted uncompensated time to drafting and issuing an explained decision which the parties did not request. A summary of the panels’ findings are below:
Private Placements:
The arbitration panel found that Mr. Fawcett had no prior experience in recommending private placement investments to customers prior to joining Westpark Capital, Inc. in June 2015. The panel also found that the customer, Mr. Hailey, had invested in only one private fund prior to following Mr. Fawcett’s recommendations and investing in the subject private placements. The prior private fund related to real estate and was recommended by people whom Mr. and Mrs. Hailey had known well from their years of experience in the Richmond, Virginia scene. Accordingly, the arbitration panel concluded that the three private placement investments recommended by Mr. Fawcett were far outside of Mr. Hailey’s range of sophistication, and therefore unsuitable for him. The panel also concluded that the illiquid private placement investments were unsuitable given the Hailey’s advanced age and lack of liquidity in their assets. Ultimately, the panel determined that the recommendations to invest in the private placements were made for Mr. Fawcett’s best interests, not those of the customers.
Private placements are private securities offerings exempt from registration with the Securities and Exchange Commission (SEC). There are significant risks associated with investments in private placements, particularly their lack of liquidity and speculative nature.
Churning:
The arbitration panel concluded that the level of activity in the customers’ accounts was unsuitable for any investor and that it was done in order to generate commissions. The panel held Westpark Capital, Inc. liable for permitting the churning and responsible for returning the commissions to the Haileys.
Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.
Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.
Excessive trading and churning are unethical and illegal practices in the securities industry. They are all also violations of securities rules and regulations and can cause enormous harm to customers.
Failure to Supervise:
The customers argued that Westpark Capital, Inc. failed to adequately supervise Mr. Fawcett and their accounts. They argued that Westpark Capital, Inc. took a laissez-faire approach to supervision, ignoring warning signs of trouble. Their expert concluded that Westpark Capital, Inc.’s failure to follow up on these “red flags” was negligent. The incidents that the panel found the most troubling included the following:
- Westpark Capital, Inc. hired Mr. Fawcett without an in-person interview, despite his brief and checkered history as a broker. Mr. Fawcett twice failed his Series 7 (General Securities Representative Qualification Examination), then moved from firm to firm six times in four years. One of the firms terminated him for “failure to provide services to the firm for he was engaged.” Another was subsequently expelled by FINRA. Although members of the five-person hiring committee testified, they never made clear why they hired someone with such a weak track record in the first place.
- Westpark Capital, Inc. permitted Mr. Fawcett to work from his home in Queens, New York, even though Westpark Capital, Inc. maintained an office in Manhattan. The two members of Westpark Capital, Inc.’s office in Boca Raton, Florida, assigned to supervise Mr. Fawcett had FINRA infractions on their records that did not inspire confidence.
- Six months after Westpark Capital, Inc. hired Mr. Fawcett, FINRA required him to participate in an in-person interview. Two months later, Mr. Fawcett settled an arbitration claim filed by a client at Salomon Whitney by agreeing to pay $30,000.00 out of personal funds. Westpark Capital, Inc. evidently did not regard the claim, interview, or settlement as cause for concern.
- For its only in-home inspection of Mr. Fawcett, Westpark hired Bernard E. Young, who had been banned from the securities industry for participating in a Ponzi scheme. Not surprisingly, Mr. Young noted that Mr. Fawcett had a personal fax machine but did not inquire how it was being used. Nor did he follow up when Mr. Fawcett described Bullhammer, which he listed on his application as an account used for tax purposes, as a software program. No one from Westpark followed up either. Mr. Fawcett used the fax machine to send false information to Mr. Hailey. He used the back account to accept funds from Mr. Hailey for purchases of gold from other firms.
The arbitration panel held that Westpark Capital, Inc. accorded Mr. Fawcett far more freedom and trust than he had earned and that the consequences were predictable.
Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.
Selling Away:
The arbitration panel concluded that Westpark Capital, Inc. was not liable for Mr. Fawcett selling the gold and precious metal securities that were not approved by the firm.
When a financial advisor participates in a private securities transaction that is not approved by a firm, it is referred to as “selling away.” The prohibitions on selling away are designed to protect investors by ensuring that all brokers’ activities are reasonably supervised by firms that employ them. Further, securities that are sold away from a firm have not been vetted by the firm.
Financial Advisor Lawrence John Fawcett Jr. CRD No. 5851474
Lawrence John Fawcett Jr., who also goes by Larry, was barred from the securities industry in December 2020. Mr. Fawcett’s license was revoked by FINRA for failing to comply with another arbitration award.
Mr. Fawcett, who had only been in the securities industry for five years, had an extensive history of customer complaints, regulatory sanctions, associations with disreputable brokerage firms, and an employment termination after allegations of wrongdoing.
Past Associations:
Mr. Fawcett entered the securities industry in 2012. During the course of his brief 5-year career as a broker, Mr. Fawcett was associated with five different brokerage firms, including two firms that have been expelled from the securities industry by FINRA:
- Westpark Capital, Inc., from June 2015 to March 2018.
- Salomon Whitney Financial, from September 2013 to June 2015.
- Rockwell Global Capital LLC, from June 2013 to September 2013.
- John Thomas Financial (expelled by FINRA), from April 2013 to June 2013.
- Rockwell Global Capital LLC, from August 2012 to April 2013.
- EKN Financial Services Inc. (expelled by FINRA), from April 2012 to August 2012.
One of the firms terminated him for “failure to provide services to the firm for he was engaged.”
Mr. Fawcett was fired from Westpark Capital, Inc. in March 2018 for conducting business from a non-disclosed location and making false representations to the firm.
Regulatory Sanctions:
In November 2017, Mr. Fawcett and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”), after FINRA alleged that Mr. Fawcett recommended unsuitable mutual fund transactions to a customer. Mr. Fawcett consented to a 15-business day suspension and a fine of $2,500.
In March 2018, FINRA barred Mr. Fawcett from the securities industry after he refused to cooperate with FINRA’s investigation regarding Mr. Fawcett’s outside business activities.
In June 2018, FINRA revoked Mr. Fawcett’s license pursuant to FINRA Rule 8320 for failing to pay the monetary fine that was issued in 2017.
In December 2020, FINRA suspended Mr. Fawcett for failing to comply with an arbitration award.
Customer Complaints:
In just five years, Mr. Fawcett racked up numerous customer complaints:
- Customer Dispute (October 2020): A customer filed a securities arbitration complaint alleging nearly $85,000 in damages as a result of unsuitable investment recommendations related to equity positions (common or preferred stock) and private securities. The claim alleged the following causes of action: suitability, churning, unauthorized trading, fraud, negligent misrepresentation, breach of fiduciary duty, breach of covenants of good faith, breach of fair dealing, negligent supervision, breach of contract, Section 20 violations, failure to supervise, unjust enrichment, and lost opportunity. The dispute is pending.
- Customer Dispute (March 2020): A customer filed a securities arbitration complaint alleging negligence, qualitative and quantitative unsuitability, failure to supervise, breach of fiduciary duty, breach of contract, negligent misrepresentation and omissions, and lost opportunity damages. The causes of action related to BlackBerry Ltd. stock and the customer sought $15,633 in damages. An arbitrator found Mr. Fawcett to be liable and ordered him to pay $5,663 in compensatory damages and $30,0000 in punitive damages. As of December 2020, Mr. Fawcett has not paid the arbitration award to the customer.
- Customer Dispute (February 2020): Westpark Capital, Inc. was found liable, and the Haileys were awarded nearly $800,000 in damages, including over $545,000 in compensatory damages, $33,500 in costs, and $215,000 in attorneys’ fees.
- Customer Dispute (May 2018): A customer filed a securities arbitration complaint seeking $33,271 in damages as a result of excessive trading, churning, and unsuitable transactions. The dispute is pending.
- Customer Dispute (April 2018): A customer filed a securities arbitration complaint seeking $260,038 in damages as a result of churning, negligence, unsuitability, unauthorized trading, and breach of contract. The causes of action related to equities (common or preferred stock). The alleged conduct occurred when Mr. Fawcett was employed by SW Financial. The dispute is pending.
- Customer Dispute (June 2017): A customer submitted a written complaint to Westpark Capital Inc. alleging that Mr. Fawcett purchased 1000 shares of Blackberry stock without his knowledge. According to Westpark Capital, Inc., Mr. Fawcett’s supervisor contacted the client, where the client “changed his tone” and stated that he was “sill” for writing the note and that it was “mainly due to buyer remorse.” The client supposedly apologized for the letter and misunderstanding. The dispute was marked closed and withdrawn.
- Customer Dispute (September 2015): A customer filed a FINRA arbitration claim against Salomon Whitney and Mr. Fawcett for unauthorized trading. The claim alleged $20,000 in damages. Salomon Whitney and Mr. Fawcett settled the matter for $13,500.
- Customer Dispute (November 2014): A customer filed a FINRA securities arbitration claim against Salomon Whitney and Mr. Fawcett for unauthorized trading, unsuitable investments, and an unsuitable investment strategy. The claim alleged $214,000 in damages. The parties entered into an agreement to present to the arbitration panel a Stipulated Award. The panel accepted the award and found Mr. Fawcett liable for $30,000.
- Customer Dispute (April 2013): A customer submitted a written complaint to Rockwell Global Capital, LLC alleging unauthorized trades. The customer did not file a securities arbitration complaint. The firm denied the customer any compensation.
How to Recover Losses or Obtain a Free Consultation
If you have lost money with financial advisor Lawrence (Larry) Fawcett Jr. or Westpark Capital, Inc., contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@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. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.