FINRA suspended Herbert Leonard Kaye, formerly a First Allied Broker, for four months beginning September 2015 and fined him $25,000, including a $11,000 in disgorgement of commissions charged to a customer. According to FINRA, Kaye carried out 2,000 discretionary trades in the account of a sole customer between June 2010 and April 2013. Kaye’s customer had allegedly given him verbal authority to use his discretion in executing trades after suffering a significant loss on the unsolicited sale of equities that she had inherited from her deceased husband. However, Mr. Kaye did not obtain written authority to trade in her account. Moreover, First Allied’s written policies and procedures prevented discretionary trading except in limited circumstances. Nonetheless, between June 2010 and April 2013, Mr. Kaye executed over 2,000 discretionary trades generating over $173,000 in commissions.
FINRA alleged that this conduct violated industry rules. FINRA Rule 2010 states that “A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.” Further, FINRA Rule 2510(b) provides “No member or registered representative shall exercise any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member, as evidenced in writing by the member or the partner, office or manager, duly designated by the member, in accordance with Rule 3010.” And lastly, FINRA Rule 2310 provides that when recommending the purchase, sale, or exchange of any security to a customer, a registered representative must have reasonable grounds for believing that the recommendation is suitable for the customer taking into consideration facts disclosed by the customer as to their other security holdings, financial situation, and investment needs. FINRA alleged that by executing 2,000 trades in the customer’s account without obtaining her prior written authorization, Kaye violated all of the above rules.
If you have suffered significant losses as a result of your investment with Herbert Leonard Kaye or another firm that may have violated securities industry rules, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities fraud attorney atLaw Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.