Former Ohio Financial Advisor Barred from Securities Industry Following Alleged Excessive Trading
On March 27, 2019, former Coastal Equities, Inc. (Coastal) financial advisor, Sam Aziz (a/k/a Sam Azizieh, Sam Yehya, CRD# 1721932), was barred from associating with any FINRA-member broker-dealers or other affiliated persons. Pursuant to a Letter of Acceptance, Waiver and Consent (AWC), Mr. Aziz consented to the industry bar, without admitting or denying any wrongdoing, following his alleged refusal to cooperate with a FINRA Enforcement investigation. As set forth in the AWC, Mr. Aziz was discharged by his then-current employer, David A. Noyes & Company (Noyes), while under internal investigation by Noyes after FINRA sent Mr. Aziz a Wells notice related to his activities at his prior firm, Coastal.
Mr. Aziz first entered the securities industry as a stockbroker in 1987. From September 2015 until July 2018, he was affiliated with Delaware-headquartered Coastal in that firm’s Dublin, Ohio office. According to FINRA BrokerCheck, Mr. Aziz has disclosed a total of nine customer disputes over the course of his career, including seven disputes which resulted in a settlement and two disputes which remain pending as of this writing. Notably, the most recently initiated arbitration claims concern allegations that Mr. Aziz engaged in “unsuitable and excessive trading.”
On the state level, in January 2019, the Ohio Division of Securities commenced regulatory proceedings against Mr. Aziz. Ohio securities regulators alleged that Mr. Aziz, in certain instances, excessively traded or churned customer accounts, and otherwise effected unsuitable trades on behalf of certain clients. It was further alleged that during the relevant time frame in question, Mr. Aziz’s trading activity generated in excess of $2.4 million in commissions. Ohio securities regulators issued a Cease and Desist Order on July 8, 2019 (Ohio Division of Securities Division Order #19-016) and revoked his license to sell securities products in the State of Ohio on January 7, 2020 (Ohio Division of Securities Division Order #20-004).
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 Coastal have an affirmative legal duty to supervise their employees and affiliated persons. Specifically, under FINRA Rule 3110 (NASD Rule 3010), firms like Coastal 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 discussed.
In instances where a customer suffers losses due to excessive trading, or account churning, then the brokerage firm may be held liable for any failure to adequately supervise their employee. 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 excessive trading or other misconduct. 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 are invited to contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.