Legend Securities Stockbroker Charged With Fraud.
Hank M. Werner, of New York, New York, a stockbroker associated with Liberty Partners Financial Services, LLC, and later Legend Securities, Inc., was charged by Financial Industry Regulatory Authority (FINRA) in a Complaint alleging that Werner engaged in securities fraud, made unsuitable investment recommendations, and engaged in excessive amounts of trading. Department of Enforcement v. Hank M. Werner, No. 2015048048801 (August 1, 2016).
According to the Complaint, Werner took advantage of an eighty-year-old investor, DC, who was also physically disabled and blind, through the course of concocting and effecting a fraudulent and deceptive scheme consisting of churning DC’s accounts that she held with Werner while he was associated with his firms.
The Complaint stated that Werner was the broker of record for DC and her husband, TC, since 1995. Apparently, upon TC’s death in 2012, Werner became apprised that DC’s health had deteriorated to such a point that she was in need of in-home care. Despite DC’s status in this regard, Werner continued to service DC’s accounts, where Werner would make a myriad of investment recommendations and ultimately trade with discretionary control in DC’s accounts.
The Complaint alleged that Werner knew that DC had relied upon him regarding his investment recommendations. DC apparently called upon Werner to keep her apprised of the activity within her account, given her aforementioned health conditions and disabilities.
FINRA alleged in the Complaint that between October 1, 2012 and December 31, 2015, at a time when Werner was associated with Liberty Partners Financial Services, LLC, as well as associated with Legend Securities, Inc., he had engaged in the excessive churning of DC’s accounts. Particularly, throughout this timeframe, Werner had charged DC with fees and commissions amounting to $243,000.00, even though DC had actually lost an estimated $184,000.00. The Complaint noted that the cost/equity ratio associated with DC’s accounts, due to Werner’s conduct, ranged from sixty-four percent to nearly ninety-eight percent.
FINRA alleged in the Complaint that Werner’s churning of DC’s accounts was conduct violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, in addition to FINRA Rules 2010 and 2010. FINRA additionally alleged that Werner’s conduct was violative of FINRA Rules 2010 and 2111 based on allegations of his unsuitable and excessive trading.
In the Complaint, FINRA further alleged that in July 2015, while Werner was associated with Legend Securities, Inc., he made a recommendation for DC to exchange her existing variable annuity to a new product. FINRA claimed that this recommendation was unsuitable, as Werner had no legitimate basis to make the recommendation. The Complaint stated that Werner’s commissions amounted to $10,300.00 in connection with the variable annuity exchange. FINRA alleged that Werner’s conduct in this regard was violative of FINRA Rules 2010 and 2111, as well as FINRA Rules 2330(b).
Public disclosure records via FINRA’s BrokerCheck reveal that Werner has been subject to ten disclosure incidents. On April 26, 1994, Werner was terminated by Robert Thomas Securities amid allegations that Werner had taken four clients’ orders prior to being registered with the firm in violation of the firm’s procedures and policies.
On May 1, 1997, Werner settled a customer dispute for $190,000.00 after being alleged to have failed to disclose risks to the customer regarding investments in certain securities. On October 15, 2009, Werner was terminated from National Securities Corporation after the firm alleged that Werner failed to disclose numerous judgments and liens against him.
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