South Florida Arbitration & Litigation Lawyer Blog
Unsuitable Recommendation and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
November, 2011:
Steven Krasner aka Steven Zarkhin (CRD #4541263, Registered Representative, Copiague Harbor, New York) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000, ordered to disgorge $18,126.81, payable as partial restitution, to a customer and suspended from association with any FINRA member in any capacity for two months. Without admitting or denying the findings, Krasner consented to the described sanctions and to the entry of findings that he made unsuitable recommendations to a customer who was a retiree and inexperienced investor. The findings stated that although the customer agreed to each of Krasner’s recommendations, Krasner employed a trading strategy that was not suitable for the customer’s particular financial situation; the customer indicated in account opening documents that he had an investment objective of capital preservation and a low risk tolerance. The findings also stated that Krasner recommended the use of margin to execute trades in the customer’s account and at times exposed the customer to inappropriate financial risk. The findings also included that Krasner never read the customer’s account opening documents, though they were available to him, and was unaware of the customer’s financial situation and risk tolerance, as stated in the account opening documents.
FINRA found that Krasner’s member firm’s database and computer platform that he used to place trades, as well as the account statements that were mailed to the customer each month, inaccurately indicated that the investment objective was speculation; in his conversations with the customer, Krasner never confirmed the accuracy of the investment objective. FINRA also found that Krasner employed a short-term and speculative trading strategy of short selling stock and using margin. In addition, FINRA determined that while Krasner was not fully aware of the customer’s stated financial condition, he based his recommendations on the erroneous view that the customer could absorb the high risks of these transactions. Moreover, FINRA found that the customer frequently spoke with Krasner on the phone, gave Krasner express permission to execute the recommended trades and informed Krasner that he was willing to engage in some speculation. Furthermore, FINRA found that Krasner based his recommendations on his conversations with the customer and the firm’s inaccurate database, not the accurate financial information that was contained in the account opening documents. The findings also stated that Krasner executed solicited trades in the customer’s account, while charging the account $51,790 in commissions and fees; although several of the individual trades were profitable, including commissions, the customer’s account lost $54,160 in net value, dropping from a net equity value of $162,571 to $108,410.
The suspension is in effect from September 19, 2011, through November 18, 2011. (FINRA Case #2009019995901).