MORRISON CHARGES AGENT, FIRM WITH SECURITIES FRAUD
Spokane Stockbroker Richard Westerman and broker-dealer firm Raymond James Financial Services ordered to pay fines, restitution for Unsuitable Recommendations and Churning Allegations
Montana State Auditor John Morrison filed an administrative action against former stockbroker Richard Westerman and broker-dealer firm Raymond James Financial Services alleging Westerman committed securities fraud when he churned an IRA owned by a Missoula resident and the company failed to reasonably supervise Westerman. Churning is an abusive sales practice in which unethical securities professionals make unnecessary and excessive trades for the sole purpose of generating commissions.
“The only purpose of churning is to generate commissions for the stockbroker,” said Morrison. “Most often, this activity depletes the value of a customer's investment portfolio which is why churning constitutes securities fraud.”
The Notice of Proposed Agency Disciplinary Action and Opportunity for Hearing filed May 31 also alleges Westerman conducted the unlawful trading in the IRA account without the account owner’s authorization or knowledge. The Securities Department also alleges that Westerman violated Montana securities law, when he omitted the material facts that the type of trading strategy used was unsuitable based on Complainant’s net income, net worth, investment objectives, and age. The Raymond James Financial Services firm is also charged with violating Montana securities laws by refusing to provide information requested by the Department.
“Just as every investor is different, so too are investments. What may be a suitable investment for one investor may not be right for another,” said Morrison. “Securities professionals must know their customers' financial situation and refrain from making recommendations of securities that they have reason to believe are unsuitable. When securities professionals fail to live up to ethical standards, great harm can be done to individual investors.”
The action seeks to require respondents Westerman and Raymond James Financial Services to pay restitution and interest to the Montana Complainant as well as fines of up to $5,000 for each violation of Montana securities code.
“If a broker does excessive buying and selling within your investment account, you may end up paying more in commissions than you earn on your investment,” said Morrison. “It's a good idea to regularly check your financial statements to see what you are earning, what commissions you are paying, and what changes there have been in your account holdings.”
Morrison also urged investors to contact the Montana State Auditor’s Office with any questions about an investment product, broker or adviser, before making an investment. “One phone call can save a lot of money and misery,” Morrison noted.
The State Auditor’s office can be reached at 1-800- 332-6148.