The Financial Industry Regulatory (FINRA) announced that it is barring former Aegis Capital broker James Schwartz for allegedly churning four clients’ accounts. The self-regulatory authority (SRO) contends that Schwartz, who is no longer employed in the securities industry, made 256 trades in these accounts without first getting the customers’ permission to execute the transactions. Along with other trades he made in these accounts—535 trades in total—the customers ended up collectively losing over $660K.
FINRA’s BrokerCheck record on its case against Schwartz said that he engaged in about $10M worth of unauthorized trades. Some trades were also allegedly excessive.
The SRO said that Schwartz earned commissions and gross sales credits of $277,705 from these fraudulent transactions, more than $194,000 of which was paid to the former Aegis Capital broker.
The FINRA complaint that resulted in his bar accused Schwartz of the following:
- Fraudulent and deceptive trading
- Unauthorized trading
- Exercising “de facto” control over client accounts
- Excessive trading
The ex-Aegis Capital broker settled FINRA’s case without denying or admitting to the claims. Schwartz was associated with the broker-dealer from 2013 to 2016. However, he worked in the securities industry for 18 years.
After Aegis Capital, Schwartz was a registered broker with First Standard Financial Company and also with Joseph Gunnar, both for less than a year. Previous to Aegis, he was a registered broker with John Thomas Financial, which FINRA expelled from the industry in 2013, Rockwell Global Capital, Paulson Investment Company, GunAllen Financial, Maxim Group, Investec Ernst & Co., First Montauk Securities, Salomon Grey Financial, which FINRA also expelled in 2006, and First American Equities.
Schwartz’s BrokerCheck record shows that several customer disputes have been filed against him over the years. His former clients made various allegations, including those involving misrepresentations and omissions, breach of fiduciary duty, breach of contract, negligence, churning, unauthorized trading, excessive trading, and unsuitable recommendations.
Churning typically refers to when a broker engages in excessive trading in a customer’s account for the primary purpose of making money through commissions. Signs of possible churning may include trades being made without a client’s permission, what may seem like too many trades or trading that takes place too frequently, unexpected/excessive fees, and constant recommendations from your financial adviser that you switch from one investment product to another.
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