Securities Arbitration Lawyer Blog
Summary:
- FINRA has barred financial advisor Charles Kenahan from the securities industry after he refused to cooperate with FINRA’s investigation.
- In 2019, Bank of America Merrill Lynch agreed to pay $40 million to settle with Robert Levine, co-founder of Cabletron Systems, over churning allegations.
- In December 2020, the State of New Hampshire ordered Merrill Lynch, a subsidiary of Bank of America, to pay $26.25 million in fines and restitution to settle allegations including unauthorized and excessive trading to the state and the former Governor of New Hampshire.
- Merrill Lynch was also cited for failure to supervise and ordered to maintain compliance undertakings specifically to address the compliance failures uncovered by New Hampshire’s investigation.
- These are the largest two FINRA settlements involving a Claimant in at least a decade.
Charles Kenahan was registered with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) in Boston, Massachusetts, from December 2007 until July 2019. Merrill Lynch terminated Mr. Kenahan’s employment on July 9, 2019, after customers alleged that Mr. Kenahan engaged in unauthorized trading, unsuitable investment recommendations, and excessive trading.
If you have suffered financial losses investing with Charles Kenahan or suspect that Mr. Kenahan did not have your best interest in mind when recommending investments or trading in your account, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account or annuity contract.
Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Merrill Lynch.
FINRA Letter of Acceptance, Waiver, and Consent No. 2018058015701
On January 22, 2021, Charles Ernest Kenahan and the Financial Industry Regulatory Authority (“FINRA”) entered into a Letter of Acceptance, Waiver, and Consent (“AWC”), after Mr. Kenahan refused to provide documents and information in connection with FINRA’s investigation into customer complaints regarding Mr. Kenahan’s sales practices.
On December 15, 2020, in connection with its investigation into customers’ allegations of churning, unauthorized trading, and unsuitable investment recommendations, FINRA sent two requests to Mr. Kenahan, one seeking the production of information and documents and a second seeking the continuation of his testimony. Mr. Kenahan’s attorney reportedly stated during a phone call on January 8, 2021, that Mr. Kenahan would not provide the requested information or documents or appear for on-the-record testimony at any time.
By refusing to provide the information or documents, Mr. Kenahan violated FINRA Rules 8210 and 2010. Accordingly, FINRA barred him from associating with any broker-dealer in all capacities.
Financial Advisor Charles Ernest Kenahan (CRD# 1351974)
Charles Ernest Kenahan had 34 years of experience in the securities industry. He was employed and registered by the following brokerage firms in Boston, Massachusetts:
- Morgan Stanley Smith Barney from June 1994 until December 2007.
- Merrill Lynch from December 2007 until July 2019.
Merrill Lynch discharged Mr. Kenahan on July 9, 2019, after customers alleged that Mr. Kenahan engaged in unauthorized trading, unsuitable investment recommendations, and excessive trading.
The first complaint was made in or around February 2018 by Craig Benson, the former governor of New Hampshire and co-founder of one-time network equipment maker Cabletron Systems. The complaint alleged that Mr. Kenahan unsuitably churned and excessively traded the accounts at issue. In December 2020, New Hampshire ordered Merrill Lynch to pay $26.25 million in fines and restitution to the state and Mr. Benson. According to reports, the state received $2 million, and Mr. Benson received $24.25 million. This sanction is the largest monetary sanction in the state’s history. The settlement with New Hampshire securities regulators also resolved Mr. Benson’s pending FINRA arbitration claim.
The second complaint was made in or around March 2018 by Mr. Benson’s former business partner, Mr. Robert Levine. Mr. Levine, a co-founder of Cabletron Systems, made similar churning allegations. It has been widely reported that in July 2019, Merrill Lynch agreed to settle the matter with Mr. Levine for $40 million.
New Hampshire’s investigation found that Mr. Kenahan traded without authorization, mismarked trade confirmations, excessively traded stocks and Initial Public Offerings, overcharged commissions, and inappropriately traded inverse and leveraged products. The misconduct led to high commissions for Merrill Lynch and Mr. Kenahan and large losses to the investors.
The settlements to Mr. Benson and Mr. Levine are believed to be the two largest settlements involving an individual claimant in at least a decade.
In non-discretionary accounts, customers retain discretion, and brokers must always obtain their customer’s permission before placing a trade. You can read more about unauthorized trading in the context of both discretionary and non-discretionary accounts here: Unauthorized Trading.
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 unethical and illegal.
Merrill Lynch: A Duty to Supervise
New Hampshire regulators cited Merrill Lynch for failure to supervise Mr. Kenahan’s sales practices and trading activity. The state regulator ordered Merrill Lynch to maintain compliance undertakings specifically to address the compliance failures undercover by the regulator’s investigation.
Financial institutions, like Merrill Lynch, must properly supervise financial advisors and customer accounts. Brokerage firms are required to establish and maintain a reasonably designed system to oversee account activity, such as mutual fund switches and the improper use of discretion, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.
How to Recover Losses or Obtain a Free Consultation
If you have suffered financial losses investing with Charles Kenahan or suspect that Ms. Kenahan did not have your best interest in mind when recommending investments or trading in your account, contact New York securities arbitration lawyer August Iorio of Iorio Altamirano LLP 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. 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.