SEC Complaint Alleges Costly In-and-Out Trading Strategy by Mineola Stockbroker
On August 13, 2020, the Securities and Exchange Commission (SEC) initiated a civil action (Complaint) against Ross Adam Barish (CRD# 3094364), a stockbroker affiliated with Joseph Stone Capital, L.L.C. (Joseph Stone) of Mineola, New York. As alleged in the Complaint, Mr. Barish purportedly “defrauded sixteen retail customers by executing a high-cost, in-and-out pattern of trading” which reportedly lost his customers in excess of $800,000, while simultaneously generating commissions in excess of $400,000.
Mr. Barish is a long-time securities industry professional with more than two decades of experience as a broker. From 2013 through the present, Mr. Barish has been affiliated with broker-dealer Joseph Stone. Mr. Barish has been the subject of four customer disputes during the course of his career. Most recently, two of these customer disputes, which were both settled in 2017, concerned allegations of excessive trading or churning.
As alleged by the SEC in its Complaint, Mr. Barish employed a high-cost strategy that involved frequent trading which all but guaranteed that “over time the chances of earning even a minimal profit were essentially nonexistent.” Adding further risk to the defective strategy, Mr. Barish purportedly recommended that his customers use margin—or borrowed funds against existing securities positions to be used as collateral—to further leverage portfolios and thereby facilitate even more trading activity. This use of margin exposed Mr. Barish’s customers to even greater risk and served to magnify losses.
As further alleged by the SEC, Mr. Barish purportedly failed to adhere to FINRA Rule 2111 (Suitability): “As Barish knew, or was reckless in not knowing, the investment strategy that he recommended was almost certain to lose money, and despite his duty, he had no reasonable basis for the recommendations he made. In particular, Barish had no basis to believe that the in-and-out trading that he recommended, combined with the per-trade costs and high leverage, would be suitable for anyone.” In connection with his strategy, Mr. Barish reportedly charged a fixed commission of $75 per trade, of which he directly received $20, in addition to “75% of total commissions.”
When recommending a particular investment or investment strategy, a broker has a duty to, among other things, ensure that the recommendation is suitable, by taking into account a host of factors including a customer’s investment objectives, financial and liquidity needs, as well as risk tolerance. Brokers who fail to adhere to their obligations under FINRA Rule 2111 may be held liable for investment losses sustained. Moreover, a brokerage firm has an affirmative duty to ensure that their brokers are properly supervised, and in instances when a broker engages in misconduct or any negligence, the brokerage firm may well be held liable for any losses suffered.
The attorneys at Giarrusso Law Group LLC have extensive experience in working closely with investors who have been victimized by securities fraud or related misconduct. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some cases, 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 confidential consultation to learn more about their legal rights.