Efrain Balderrama Trujillo of Los Angeles California a stockbroker formerly registered with Financial West Group has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity and has been fined $20,000.00 based upon findings that he neglected to supervise those of his stockbrokers who executed unsuitable securities and options trades in customer accounts. Letter of Acceptance Waiver and Consent No. 2017054755208 (Nov. 17, 2020).
According to the AWC, from December of 2013 to July of 2017, the branch office which Trujillo supervised had the responsibility for overseeing at least four stockbrokers who FINRA barred for trading infractions. Before those stockbrokers were barred, Trujillo’s supervisor was responsible for ensuring that those four stockbrokers’ recommendations were appropriate for Financial West Group customers. The AWC stated that Trujillo was made responsible for monitoring account transactions and to ensure suitability.
Warning signs came about relating to Financial West Group brokers who were under Trujillo’s watch. These warning signs should have caused Trujillo to do something like investigate possible sales practice violations. FINRA stated that there were no additional steps taken by Trujillo to determine whether there were unsuitable recommendations of penny stocks, options and non-traditional exchange traded products (ETPs) in customer accounts. Trujillo did not check these trades to see if they were being made on an excessive basis.
The AWC stated that Trujillo was well aware of the red flags that pertained to stockbrokers. Trujillo was presented with red flags by all four stockbrokers by November 2016 but this did not result in any investigation on Trujillo’s part.
FINRA noted that there were ways in which Trujillo could have uncovered unsuitable trading and recommendations relating to the investments. The customers’ accounts contained high turnover rates and a large number of transactions. These were indicated by the monthly supervision exception reports made available to Trujillo. Lofty commissions were conveyed through a daily trade blotter that had also been made available to him.
The regulator indicated that the objectives of investors conflicted with the trades being made by Trujillo’s stockbrokers on a short term basis and on an in-and-out basis. FINRA also referenced the inverse or leveraged exchange traded products which had been held for periods which extended well beyond one trading session. The AWC also referenced low priced securities which had been frequently traded. The regulator noted options trades in a customer’s account which were not compatible with that customer’s tolerance for risk and objectives for investing. Customers’ accounts contained substantial losses because of the excessive trading by the stockbrokers who Trujillo did not supervise.
The AWC stated that Trujillo did not reasonably respond to red flags given all the information concerning the stockbrokers’ problematic trading in customers’ accounts including excessive trading, qualitatively unsuitable recommendations and unsuitable options transactions.
Trujillo was even notified by a principal at Financial West Group in regard to a possibly inappropriate double-leveraged exchange traded fund that had been held by a customer for multiple trading sessions. That customer had objectives including capital preservation and income. FINRA stated that the alternative investment was held by the customer for more than 520 days. Trujillo’s failure to supervise his stockbrokers was violative of FINRA Rules 2010, 3110(a), 2360(b)(20) and National Association of Securities Dealers (NASD) Rule 3010(a).
FINRA Public Disclosure reveals that a customer initiated investment related written complaint regarding Trujillo’s conduct was resolved for $45,474.00 in damages supported by allegations that investment recommendations were not suitable for the customer.
Trujillo’s registration with Financial West Group has been terminated as of August 21, 2017. On August 21 ,2017, he became registered as a stockbroker of Western International Securities and on April 11, 2019, he became registered as an investment adviser representative of the firm.
