The Financial Industry Regulatory Authority (FINRA) recently filed a complaint against Marlon O. Cole (Cole) concerning allegations he engaged in excessive and unsuitable trading in at least eight customer accounts. Cole, without admitting or denying the findings, recently consented to a 16-month suspension and a $5,000 fine.
Cole (FINRA CRD No. 5054806) was a member of FINRA since 2005. During the relevant time period, from 2013 to 2014, Cole worked for Legend Securities, Inc. (“Legend Securities”). Thereafter, Cole worked for several firms, and most recently at Fordham Financial Management, Inc. Cole is no longer associated with any FINRA-member; however, he remains subject to FINRA’s jurisdiction.
FINRA’s Department of Enforcement investigated Cole and alleged he engaged in excessive and qualitatively unsuitable trading (i.e. churning), and unauthorized trading. Specifically, FINRA alleged Cole controlled the accounts, and his trading generated cost-to-equity ratios ranging from 29.82% to 589% and turnover rates ranging from 6.01 to 63.39. By any objective measure, Cole’s active trading was excessive and unsuitable for his customers.
In addition to allegations of churning, FINRA also raised issue with Cole’s qualitatively unsuitable and unauthorized trading. For example, according to FINRA, Cole engaged in a strategy in one of his customer’s account of purchasing a security, selling a covered call option on that security, and then buying back the call position at a loss, and selling the underlying stock at a loss. The strategy had no beneficial purpose for the customer, and resulted in losses for the customer and sales charges for Cole.
Based upon the foregoing misconduct, FINRA alleges Cole violated FINRA Rules 2010 and 2111. Under FINRA Rule 2111, a registered representative must have a reasonable basis to believe, based on reasonable diligence, that a recommended transaction or strategy is suitable for a customer. Excessive trading occurs when a registered representative: 1) 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.
Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.