Former Aegis Broker Subject of FINRA Complaint Alleging Excessive Trading
On March 17, 2021, former Aegis Capital Corp. (Aegis) stockbroker Kishan Parikh (a/k/a Sean Parikh, CRD No. 5506554) was named as a Respondent by the Financial Industry Regulatory Authority (FINRA) in a Complaint alleging that he “made unsuitable investment recommendations and excessively traded the accounts of five of his customers from August 2014 through November 2016.” As alleged by FINRA’s Department of Enforcement, “Parikh’s excessive and unsuitable trading in [certain customer] accounts resulted in annualized turnover rates ranging from 10.9 to 199.8 and annualized cost-to-equity ratios (or break-even points) ranging from 27.5% to 59.7%...” According to the Complaint, during the same time frame, “Parikh’s trading generated gross sales credits and commissions of $179,112, of which Parikh received at least $89,000.”
As alleged by FINRA, during the relevant time period, Mr. Parikh purportedly recommended to certain customers active short-term trading, combined with the use of margin, or borrowing against securities holdings to potentially enhance returns through leverage. A formerly registered stockbroker, Mr. Parikh’s career in the securities industry began in 2008, when he was affiliated with now-defunct Max International Broker/Dealer Corp. Most recently, from May 2012 until his separation from employment in April 2019, Mr. Parikh was affiliated with Aegis in the brokerage firm’s New York, NY office. As of the date of this writing, FINRA BrokerCheck discloses that Mr. Parikh is the subject of a pending customer complaint alleging “unsuitable investments.”
Excessive trading occurs where (1) a financial advisor exercises control over a customer’s account, and (2) the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading constitutes a violation of industry standards under FINRA Rule 2111 (Suitability). In determining whether trading is excessive, the use of certain factors and corresponding statistical formulas is commonplace, including analyzing an account’s turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account.
Furthermore, under applicable FINRA rules, brokerage firms like Aegis have a legal duty to supervise their employees and affiliated persons. Specifically, under FINRA Rule 3110 (NASD Rule 3010), firms like Aegis must “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance” with applicable FINRA rules, in addition to state and federal securities laws. It is critical for broker-dealers to not only establish such a supervisory system, but to also maintain their supervision by periodically meeting with individual financial advisors to discuss, among other things, the products they are selling and their sales methods. Account activity including trading activity relative to a customer’s investment objectives, stated risk tolerance, and financial situation and needs should also be addressed.
The attorneys at Giarrusso Law Group LLC have significant experience in working closely with investors to resolve all manner of issues concerning investment losses, including losses suffered due to misconduct or negligence by a broker or financial advisor. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and no-obligation consultation.