FINRA Bars NY Broker For Excessive Trading in Blind Senior Investor’s Accounts

A Financial Industry Regulatory Authority hearing panel has barred New York broker Hank Mark Werner for excessive trading and churning in the accounts of an elderly, blind widow. Now, Werner must pay over $155K in restitution to his former client, disgorge more than $10K for commissions from recommending that she buy a variable annuity (VA) that was not suitable for her, and pay an $80K fine.

Werner is accused of employing an “active trading strategy” that allowed him to charge high commissions while making it “impossible” for her to “make money.” He was the broker of the widow and her blind husband, who died in 2012, for two decades.

According to the panel, the widow was in poor health and 77 years of age when he started churning her accounts after her husband passed away. FINRA, in its 2016 complaint, said that only was the client blind, but also she required in-home care. She relied on Werner to keep her abreast of her accounts.

For example, according to the FINRA hearing panel, Werner often would purchase and sell a security for the widow within an up-to-ttwo week period, and he would charge “exorbitant commissions” even though her financial state necessitated that she take on investments that came with the least amount of risk. He purportedly engaged in over 700 trades in more than 200 securities on the widow’s behalf from 10/2012 to 12/2015. During this time, he is accused of causing her to lose over $175K while he made about $210K in commissions.

FINRA said that Werner at times charged markups on trades he made for the older investor. According to the regulator’s complaint, at first he charged her 2.5-3% in commissions or markups. After transferring to another firm, the charges increased, ranging from 3.75-4.25% in markups or commissions.

Legend Securities is also named by FINRA in this matter. It did not respond to the complaint and is now held in default. Legend must pay a $200K fine. It previously paid $20K in partial restitution to the elderly investor.

The regulator said that because the firm did not reasonably supervisor Werner, he was able to engage in broker fraud. FINRA also said that the brokerage firm did not put into place a supervisory system that could make sure that Werner was placed under “heightened supervision.”

Elder Financial Fraud
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The FINRA Extended Panel Hearing’s Decision (PDF)

More Blog Posts:
FINRA Files Securities Fraud Charges Against NY Broker For Churning Accounts of Blind, 77-Year-Old Widow, Stockbroker Fraud Blog, August 1, 2016

Three Ex-Alexander Capital Brokers Charged with Making Unsuitable Recommendations That Cost Investors, September 28, 2017

NY Investment Adviser Accused of Bilking a Non-Profit of $9M, Institutional Investor Securities Blog, October 23, 2017