Kelly Clayton Althar, of San Francisco, California, a stockbroker formerly registered with Financial West Group, has been charged by Financial Industry Regulatory Authority (FINRA) in a Complaint alleging that Althar effected trades in a customer’s account on an excessive basis and made unsuitable investment recommendations to the customer. Department of Enforcement v. Kelly Clayton Althar, No. 2014041137501 (Jan. 6, 2017).
According to the Complaint, from April of 2011 to March of 2014, two accounts belonging to customer CN were plagued with excessive trading and unsuitable investment recommendations made by Althar. Particularly, CN became Althar’s client in 2011, at which time CN was nearing retirement and sixty-eight years old. Apparently, CN held an estimated $161,000.00 of her assets in an individual retirement account, in which she invested in mutual funds focusing on growth and income. The Complaint indicated that Althar additionally held an estimated $100,00.00 of equity in her home.
The Complaint stated that two commission based accounts were subsequently opened by CN in 2011 while Althar was registered with Financial West Group. Particularly, an individual retirement account was funded at Financial West Group in CN’s name via a transfer of assets from CN’s individual retirement account at another institution. The Complaint alleged that a brokerage account was funded in November of 2012 with monies that CN inherited, where she invested an estimated $147,000.00 in blue chip securities as well as cash.
Apparently, CN conveyed to Althar that she did not intend to invest on a risky basis due to her upcoming retirement. Subsequently, Althar apparently took control of CN’s account and began to effect trades on a frequent basis. The Complaint alleged that Althar did not engage CN in consultation prior to effecting trades in her accounts.
The Complaint revealed that the same securities were often bought and sold repeatedly in CN’s account via Althar, and over short investing periods. In one case, 696 American Capital Agency Corp. real estate investment trust shares were bought for $21,559.09. Althar reportedly liquidated Althar’s position a mere two months after purchasing the shares, at a price of $21,298.50. Subsequently, 782 shares of the same real estate investment trust were bought at $26,756.36. After the shares suffered a substantial loss six weeks’ post purchase, Althar effected the sale of the shares at $18,619.03. Althar reportedly made $3,000.00 in commissions in connection with his purchases and sales in this regard, even though CN sustained a loss of more than $8,000.00.
FINRA also alleged in the Complaint that CN’s account was overconcentrated. Apparently, during the April of 2011 to March of 2014 time frame, nearly sixty percent of CN’s entire portfolio had been invested with one business development company. Ultimately, 155 trades were effected in CN’s individual retirement account by Althar, which caused $91,000.00 in commissions to be generated by Althar. CN’s account reportedly had a commission-to-equity ratio of 22%, which required CN to obtain 22% returns just to avoid losses on the investments effected by Althar. The Complaint stated that CN sustained nearly $103,000.00 in trading losses, which was over half the value in CN’s account.
Additionally, from November of 2012 to March of 2014, 91 trades were effected in CN’s brokerage account, which caused $48,000.00 in commissions to be generated by Althar. Apparently, CN’s account had a commission-to-equity ratio of 32%. CN’s brokerage account reportedly sustained $84,000.00 in losses, representing just under half of the value in the account. FINRA alleged that Althar’s excessive and unsuitable trading was conduct violative of FINRA Rules 2010, 2111, NASD IM-2310-2, and NASD Rule 2310.
Public Disclosure records reveal that Althar has been named in two customer disputes concerning misconduct. Particularly, on September 8, 2014, a customer initiated investment related written complaint involving Althar’s conduct was settled for $60,000.00 in damages based upon allegations that Althar effected unsuitable and excessive transactions in the customer’s account, and was responsible for the customer’s dismal investment performance. Subsequently, on September 19, 2014, another customer filed a written complaint concerning Althar’s conduct, based upon allegations that Althar was responsible for the customer’s substandard investment performance concerning exchange traded notes.
Althar’s registration with Financial West Group ended on December 11, 2015. From December 18, 2015, to May 27, 2016, Althar was registered with Paulson Investment Company LLC.
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