The Financial Industry Regulatory Authority (FINRA) announced today a complaint filed against Hank Marker Werner for allegations including securities fraud for churning the account of a senior-aged blind widow customer and for making excessive and unsuitable trading recommendations in a News Release.
According to his publicly available BrokerCheck report records maintained by FINRA, Mr. Werner was employed and licensed by Legend Securities, Inc. from December 2012 to March 2016. Prior to working at Legend Securities, Inc., he was employed by Liberty Partners Financial Services, LLC from July to December 2012, Brookstone Securities, Inc. from March 2011 to June 2012, and Alexander Capital, LP from November 2009 to March 2011, per Mr. Werner’s BrokerCheck report.
FINRA’s News Release detailed that Mr. Werner allegedly engaged in a deceptive and fraudulent scheme by churning the elderly client’s over the course of three years “to maximize his compensation by charging more than $243,000 in commissions, while causing the customer approximately $184,000 in net losses.” The News Release also stated:
Werner had been the elderly customer’s broker – and that of her blind husband until his 2012 death – since 1995. The complaint alleges that a few weeks after the customer’s husband passed away, Werner began aggressively trading her accounts to generate excessive commissions for himself. Werner exercised control over each of her accounts and recommended every trade, and the customer followed all of Werner’s recommendations. Because she was blind and severely debilitated, requiring in-home care, the customer relied completely on Werner to accurately portray her account activity and let her know about account performance.
FINRA’s Complaint further alleged that the customer, who was blind and debilitated, was not aware of the significant amount of trading in her account, which involved over 700 trades in more than 200 securities, most being held for less than one month.
FINRA’s Complaint stated causes of action against Mr. Werner for churning in violation of securities fraud sections of the Securities Exchange Act, excessive trading in violation of FINRA Rule 2111 (Suitability) and 2010 (Standards of Commercial Honor and Principles of Trade), and unsuitable investment recommendations in violation of FINRA Rules 2330 (Members’ Responsibilities Regarding Deferred Variable Annuities), 2111 and 2010.
Churning is generally defined as excessive trading by a broker in a client’s account largely to generate commissions for the broker. If a broker is found to have churned an account, the broker and potentially the broker’s employing broker-dealer firm may be liable for the losses sustained.