Legend Securities Ordered to Pay Client For Churning His Funds
A Financial Industry Regulatory Authority (FINRA) panel has awarded Herbert W. Voss $1.075M in his securities fraud case against Legend Securities Inc., its ex-chief compliance officer Frank Philip Fusco, and former Legend broker Danard Warthen Brown. Legend is no longer in operation and was expelled by the self-regulatory authority (SRO) in 2012.
Voss reportedly lost $375,000 while Legend was his brokerage firm. Of the more than $1M award granted to Voss, $700K is for punitive damages. His securities fraud lawyer contends that punitive damages were warranted because of how much turnover took place in Voss’s account.
Churning is illegal. It usually involves a financial representative trading in a customer’s accounts in order to earn commissions rather than because it is in the latter’s best interests.
According to Brown’s BrokerCheck record, he is currently with Joseph Stone Capital. He has nearly 20 years experience in the industry as a broker and worked with a number of other broker-dealers, including Seaboard Securities, which FINRA has since expelled, Newbridge Securities, which has a record of hiring rogue brokers, Milestone Financial Services, JP Turner & Co., Cape Securities, and First Standard Financial Company, where he spent less then a year before moving to Joseph Stone Capital.
Brown is named in several disclosures. Four of them are customer disputes, including Voss’s investor fraud case and another broker fraud one in which a customer alleged unsuitable investments and unauthorized margin trades. That securities case was settled for $125K. Legend, meantime has been named in 32 disclosures, 10 of them involving arbitration.
Morgan Stanley Adviser is Sentenced to Five Years for Fraud
James Polese, an ex-Morgan Stanley (MS) financial adviser, is sentenced to five years in prison for investor fraud. Polese had pleaded guilty to conspiracy, investment fraud, aggravated identify theft, and multiple counts of bank fraud for spending clients’ funds on his own bills and investments, including $850K belonging to one 87-year-old customer and other $100K from another client. According to the elderly customer, Ralph Bates, he and Polese used to be good friends.
At the time of the investor fraud, Polese was reportedly earning up to $900K annually at the brokerage firm. In addition to his prison term, Polese will serve three years probation and pay $462K in restitution and a $30K fine.
His co-conspirator, Cornelius Peterson, had also previously pleaded guilty in the criminal securities fraud against him, and in June, the former investment adviser was sentenced to 20 months behind bars. Earlier this month, the US Securities and Exchange Commission (SEC) announced the entry of a final judgment in its civil case against Peterson, who will disgorge over $57K in ill-gotten gains and pay over $5K of prejudgment interest. However, that “judgment will be deemed satisfied” by the restitution that the former investment adviser already paid in the parallel criminal case against him.
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