E1 Asset Management, Inc., a FINRA member broker/dealer since 1999 headquartered in Jersey City, NJ, operates as an introducing broker-dealer via 14 registered reps and 3 branch offices. The Firm, along with their general securities principals Ron Y. Itin and Ahsan R. Shaikh, were censured and fined by FINRA in connection with supervisory deficiencies consisting of failing to create procedures to detect excessive trading and commissions, failures in establishing procedures for suitability reviews in new client accounts, failures with documenting such suitability reviews for leveraged ETF trading, and attempting to utilize unlawful confidentiality rules in the course of customer settlements. Letter of Acceptance, Waiver and Consent No. 2010025835701 (June 5th, 2015). The AWC indicates that E1 consented to censure and a $25,000 fine in connection with the aforementioned conduct, while Shaikh and Itin were to be temporarily suspended in their supervisory capacities.
According to the Acceptance, Waiver and Consent
From July of 2008 through April of 2012, E1 Principles Itin and Shaikh were not only responsible for the Firm’s compliance with FINRA and NAS regulations, but also for supervision of the Firm’s representatives. The AWC indicated that the individuals utilized a faulty supervisory system that had failed to prevent misleading e-mail communications from being sent to the public. The AWC states that two of the registered reps to which Itin and Shaikh were responsible for had sent e-mails projecting the performance of certain securities without showing the basis of such predications along with the risks associated with the securities – prompting a supervisory violation of FINRA Rule 2010 along with NASD Rules 2110 and 3010.
Additionally, the AWC indicates that E1 and Itin had not established proper channels to detect and prevent accounts containing high-activity from being subject to excessive commissions or trading. Consequently, according to the AWC, between August of 2008 and June of 2010, a firm customer was charged over $110,000 in commissions, suffering a cost/equity ratio of 276% in the course of 89 trades. Another customer, according to the AWC was charged over $191,000 in commissions, suffering a cost/equity ratio of 108% on 136 trades. A third customer was identified as being charged $159,322, with cost/equity ratios of 89% in 342 trades.
FINRA indicates in the AWC that E1 and Itin’s failure to implement quantitative measures or exception reports designed to detect such excessive trading/churning red flags based on cost/equity ratios, resulted in E1 Itin’s violations of FINRA Rule 2010 and NASD Rules 2110 and 3010.
The AWC indicates that E1, under the supervisory control of Shaikh, allowed new customers to trade on their investment profile despite not having completed and returned the Firm’s comprehensive paperwork designed for E1 to assess the customers’ risk tolerance, experience, financial status, and objectives. The Department of Enforcement found that such oversight amounted to a failure to establish adequate suitability reviews for trading a violation of FINRA Rule 2010 and NASD Rules 2110 and 3010.
The AWC further indicates that in a total of 60 customer accounts, E1 and Itin failed to document supervisory approval for trading of leveraged ETFs. The AWC indicates that E1’s procedures had required such suitability reviews to be conducted along with supervisory approval to be documented, prior to registered representatives could trade such leveraged ETFs in customer accounts.
According to the AWC, in the course of engaging in settlement and release agreements with E1’s customers, the 25 agreements contained language deemed by the Department of Enforcement to be ambiguous and interpreted to mean customers would be prohibited from partaking in future regulatory investigations. FINRA stated in the AWC that settlement arrangements designed to impede investigation or other actions by securities regulators are impermissible. The AWC indicates that E1 violated FINRA Rule 2010 and NASD Rule 2111 via concocting such settlements.
Public Disclosure Records on Ron Itin
Public disclosure records reveal that Ron Itin has been subject to 8 customer disputes, 3 of which have settled, 1 in which an award was granted, and 1 which is pending. In August 8, 2001, damages were awarded to a party in the amount of $21,854.25 after allegations of misrepresentations. In August 11, 2008, Itin settled a customer dispute for $80,000 after a client alleged fraud in the handling of his accounts and unfair business practices. In January 27, 2011, Itin settled a customer dispute for $310,000.00 after a client alleged failure to supervise. In July 12, 2011, Itin settled a customer dispute for $230,000.00 after a client alleged failure to supervise and control. The pending complaint against Itin on September 24, 2014, contains allegations of breach of contract, unsuitability, misrepresentation, negligence, negligent supervision and fraud from January 2011 through April 2013, along with requested damages amounting to $2,400,107.00. Public disclosure records also reveal a pending financial disclosure on January 30, 2015, for bankruptcy.
Public Disclosure Records on Ahsan R. Shaikh
Public disclosure records reveal that Ahsan R. Shaikh has been subject to 9 customer disputes, 6 of which have settled and 1 which is pending. In January 9, 1998, Shaikh settled a customer dispute for $4,500 after a customer alleged transactions were recommended on the basis of misleading information. On April 16, 1998, Shaikh settled a customer dispute for $9,700.00 after a customer alleged faulty investment recommendations resulted in unrealized damages. On April 5, 2005, Shaikh settled a customer dispute for $75,000.00 after a customer alleged unauthorized and speculative trades in his account. Shaikh, on September 9, 2008, settled a customer dispute for $15,000.00 after a customer alleged dissatisfaction with account performance. On May 31, 2011, Shaikh settled a customer dispute for $40,000.00 after an E1 client named him in an action for supervisory and control failures. On July 12, 2011, Shaikh settled a dispute with a customer for $230,000.00 after allegations of failing to supervise and control. The pending dispute against Itin on September 25, 2014, contains allegations of breach of contract, unsuitability, misrepresentation, negligence, negligent supervision and fraud from January 2011 through April 2013, with requested damages amounting to $2,400,107.00.
Guiliano Law Group
Investors suffering losses or damages caused by E1 Asset Management, Ron Itin, and Ahsan R. Shaikh in connection with this aforementioned conduct may be able to recover their investment losses. Our practice is limited to the representation of investors in claims, for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
