Alain J. Florestan of New York New York a stockbroker formerly registered with Caldwell International Securities has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity according to a Default Decision containing findings that (1) Florestan made unsuitable investment recommendations to customers and (2) Florestan failed to cooperate in a FINRA investigation into allegations of his misconduct. Letter of Acceptance Waiver and Consent No. 2014039091903 (June 2, 2017).
The Decision stated that between July of 2012 and July of 2014, an active trading strategy had been recommended to customers by Florestan. Apparently, through the investment strategy, customers were charged at least four percent on each transaction. Florestan apparently failed to comprehend that the high commissions and frequent trading contributed to customers’ accounts containing excessive cost-to-equity ratios. FINRA’s Hearing Officers indicated that because of Florestan’s ignorance in this regard, he lacked an adequate foundation for concluding that his investment strategy was appropriate for customers.
Evidently, Florestan only agreed to service the accounts of customers whose objectives included speculation. However, Florestan reportedly failed to inform the customers about the costs and risks inherent with speculation as the investment objective.
The Decision stated that Florestan implemented an investment strategy which involved him advising customers to buy one security at a time. Supposedly, Florestan told customers to anticipate a market event shortly after the security was purchased. Apparently, regardless of whether the event transpired, Florestan advised customers to liquidate the one security and use the proceeds to buy another security. The Decision stated that Florestan used the same pitch to rationalize the transactions. However, each time Florestan executed a transaction, it caused customers to pay high commissions.
For example, the Decision stated that PVDK was advised to purchase one security and then advised to sell it after the customer only held the security for a month. Evidently, Florestan’s active trading strategy and imposition of large commissions led PVDK to incur a 16.01 annual turnover rate and a 63.9% turnover rate. Ultimately, PVDK sustained $38,742.96 in losses.
The Decision revealed that no due diligence had been conducted in regard to Florestan’s trading strategy involving PVDK or other customers. Indeed, Florestan was unable to explain how a cost-to-equity ratio or turnover rate worked. Moreover, no analysis had been performed by Florestan to assess how the customers’ accounts would be impacted by costs. Consequently, FINRA’s Hearing Officer found Florestan’s conduct violative of FINRA Rules 2010 and 2111.
FINRA’s Hearing Officer additionally concluded that Florestan obstructed a FINRA investigation into his conduct. Evidently, two requests had been made by FINRA to retrieve information and documentation from Florestan. Florestan failed to timely respond, and when he did respond, he only partially complied with FINRA’s request. FINRA found that Florestan’s failure to timely comply with FINRA’s requests was violative of FINRA Rules 2010 and 8210.
FINRA Public Disclosure further reveals that Florestan is referenced in four customer initiated investment related disputes pertaining to accusations of his violative conduct during the time that he was associated with RAON Capital Partners, Caldwell International Securities Corporation and ISG Solid Capital Markets.
For example, a customer filed an investment related complaint concerning Florestan’s activities where the customer requested $14,999.00 in damages based upon allegations that Florestan charged the customer commissions that were excessive, and Florestan made stock recommendations to the customer that were not suitable.
Florestan’s registration with Caldwell International Securities has been terminated as of May 21, 2015. He has been associated with seven different brokerage firms which have been expelled by securities regulators for violation of federal securities laws or are otherwise defunct. #cockroach
