Investment fraud is a serious issue that can result in significant financial losses for investors. One such case currently under investigation involves financial advisor Christopher Kennedy and his former employer, Western International Securities. Allegations against Kennedy include churning and excessively trading customer accounts for his own gain, resulting in over $2.3 million in customer losses and more than $715,000 in total trading costs and margin interest. These actions are a violation of both the Securities Exchange Act of 1934 and the Financial Industry Regulatory Authority (FINRA) Rule 2020.
Details of the Allegations
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Christopher Kennedy is alleged to have directed trades representing net trading of more than $350 million in customer accounts. It’s reported that his trading resulted in an average annualized cost-to-equity ratio of more than 31 percent across all accounts. The allegations also include Kennedy producing fake account statements to hide the results of his trading from two customers, a husband and wife who were co-trustees of a family trust account. As a result of Kennedy’s actions, the couple’s account lost nearly all of its value, with only approximately $160,000 remaining.
Understanding FINRA Rule 2020
FINRA Rule 2020 prohibits fraudulent and manipulative acts and practices in connection with the purchase or sale of any security. This includes excessive trading or “churning” in a customer’s account to generate commissions, which is what Kennedy is accused of. In simple terms, this rule is in place to protect investors from predatory practices by financial advisors and firms.
Violation of this rule can result in severe penalties, including fines, suspension, or even permanent ban from the industry. Kennedy’s alleged actions, including the creation of false account statements, not only violate FINRA Rule 2020 but also Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Why This Matters for Investors
This case serves as a stark reminder of the potential risks involved with investing. It highlights the importance of investor vigilance and the need for robust regulation and oversight in the financial industry. Investors should be aware of red flags such as frequent transactions, high turnover rates, and unexpected account losses. If an advisor is reluctant to explain their actions or provide clear account statements, it may be a sign of malpractice.
Recovering Losses and Protecting Investors
Investors who have suffered losses due to financial advisor malpractice may be able to recover their losses through FINRA Arbitration. Haselkorn & Thibaut, a national investment fraud law firm with over 50 years of experience and a 98% success rate, is currently investigating the allegations against Christopher Kennedy and Western International Securities.
Haselkorn & Thibaut offers free consultations to clients and operates under a “No Recovery, No Fee” policy. They have offices in Florida, New York, North Carolina, Arizona, and Texas. Clients can reach them at their toll-free consultation number 1-800-856-3352.
The firm’s impressive track record and commitment to investor protection make them a strong ally for those seeking to recover losses due to investment fraud or financial advisor malpractice.
