Securities Arbitration Lawyer Blog
On October 9, 2020, FINRA suspended Donatas B. Vildzius from the securities industry for six months and fined him $5,000. This sanction is the third time Mr. Vildzius has been suspended by FINRA, with previous suspensions in 2006 and 2014. Donatas Vildzius is a stockbroker and registered representative at Network 1 Financial Securities Inc. in Danbury, CT.
The latest suspension is the result of a FINRA investigation alleging that between August 2015 and April 2017, while employed by Network 1 Financial Services Inc., Vildzius excessively traded the accounts of two customers.
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. Excessive trading is wrong.
FINRA’s complaint includes the following specific allegations:
- Between August 2015 and April 2017, Vildzius engaged in quantitatively unsuitable trading in two customers’ accounts.
- Vildzius recommended a short-term, active trading strategy that included frequent in-and-out trading, resulting in high turnover rates and cost-to-equity ratios, as well as significant investment losses.
- Vildzius recommended this active investment strategy for an Individual Retirement Account (IRA) that had a stated investment objective of “growth” and risk tolerance of “moderate.” The retirement account exhibited an annualized turnover rate of 6.42 and an annualized cost-to-equity ratio of 50.6%
- Vildzius also recommended this active investment strategy for an individual account with a declared investment objective of “growth” and risk tolerance of “moderate.” The individual investment account exhibited an annualized turnover rate of 4.58 and an annualized cost-to-equity ratio of 41.3%
There are two primary indicators used to evaluate whether an account was excessively traded. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. FINRA’s Department of Enforcement alleged that trading in accounts managed by Vildzius had turnover ratios of 6.42 and 4.58.
The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break-even. A cost-to-equity ratio of 20 percent generally indicates excessive trading has occurred. The accounts that FINRA reviewed had cost-to-equity ratios of 50.6% and 41.3%
Brokerage firms like Network 1 Financial Services Inc. must properly supervise financial advisors and customer accounts. Proper supervision is especially important when a stockbroker has twice previously been suspended by FINRA and has a long disclosure history. According to his BrokerCheck Report, Mr. Vildzius’ disclosures include the following:
- Suspended by FINRA in 2006 arising out of allegations of excessive trading.
- Suspended by FINRA in 2015 for failing to disclose two judgment liens that were issued against Vildzius.
- Four customer complaints between 1996 and 2015, alleging unauthorized trading, churning, and failure to follow instructions.
- Terminated by Wachovia Securities, LLC, in January 2006, after a client complained that margin was used in her account without her authorization.
Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise their financial advisors or the investment account activity sufficiently, they may be liable for investment losses sustained by customers.
If you have lost money with financial advisor Donatas B. Vildzius or Network 1 Financial Securities 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 claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.