The Financial Industry Regulatory Authority (FINRA) filed claims recently against Ahsan R. Shaikh, Ron Y. Itin and El Asset Management. They entered into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA. El Asset Management allegedly conducted a securities business while maintaining insufficient net capital, failing to report to FINRA statistical and summary information about customer complaints, and various recordkeeping violations. For this, the company was censured and fined $75,000. Between July 2008 and April 2012, Shikh and Itin were in charge of the firm’s supervisory system, and they failed to maintain and establish a proper and reasonable one. They did not conduct reviews that were designed and supposed to be put in place to prevent excessive trading in customer accounts. Therefore, excessive trading happened.
Both respondents implemented an email “flagging” system to supervise their representatives’ electronic communication with the public. This system targeted certain words or phrases during random searches of the email database, and flagged words or phrases for further review. This method, however, failed to prevent misleading emails that were sent to the public. These emails were designed to predict the performance of securities, but failed to provide information that would provide a sound basis for those predictions, and did not disclose risks. The emails were also sent in foreign languages, but El did not follow procedures to review foreign language emails. The languages included Spanish, Korean, Vietnamese and Portuguese. These emails were not to be sent from registered representatives’ personal email accounts, but at least 47 of them were. This is against FINRA procedures and rules.
In the time period, El and Itin did not identify red flags of high trading volume and high commissions in customer accounts. On one occurrence, a customer was charged $110,626 in commissions for 89 trades. Another was charged $191,530 for 136 trades. The cost equity ratio for these trades was off, demonstrating that excessive commissions were charged. El and Itin also did not conduct proper suitability reviews in leveraged exchange-traded funds (ETF) accounts. During the relevant time period, El Asset entered into 25 settlement and release agreements with various customers. The language for these agreements was ambiguously interpreted and was not clear. Specifically, the agreements stated: that firm customers agree not to “commence or prosecute, or assist in the filing, commencement or prosecution in any government agency, arbitral tribunal, self-regulatory body or court any claim or charge against El Asset Management.” This was also against FINRA rules and regulations. For this, the firm was fined $25,000 and censured. Shaikh was suspended from the industry for one month in a supervisory capacity and Itin was suspended for one month, to be served upon completion of Shaikh’s suspension.
El Asset Management can be sued for all of the transgressions described above. If you invested money with the firm, and lost finances, please call our securities law firm, based in Chicago, at 312-332-4200. Our attorneys can help you go over your options for suing El Asset Management.
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