Kelly Clayton Althar, of San Francisco, California, a stockbroker formerly registered with Financial West Group, has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon an Office of Hearing Officers’ Order Accepting Offer of Settlement containing findings 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 (Feb. 10, 2017).
According to the Order, from April 2011 to March 2014, customer CN’s two investment accounts were exposed to Althar’s excessive trading and suffered from Althar’s unsuitable investment recommendations. In particular, Althar began servicing CN’s accounts in 2011, during which point CN was sixty-eight years of age and had been approaching retirement. CN reportedly held an estimated $161,000.00 in her individual retirement account, wherein CN invested in growth and income oriented mutual funds. The Order revealed that CN held an estimated $100,00.00 of equity in her household.
Evidently, CN opened two commission based accounts in 2011, during which time Althar had been registered with Financial West Group. Specifically, CN transferred assets from an outside institution to fund an individual retirement account at Financial West Group. Subsequently, a brokerage account was funded by CN in November 2012 with CN’s inherited assets, in which CN invested an estimated $147,000.00 in cash and blue chip securities.
The Order stated that Althar was instructed by CN that she had not planned to invest speculatively based upon the fact that CN’s retirement was approaching. Yet, Althar evidently took control of CN’s portfolio subsequent to the funding of her accounts, and began to effect trades in CN’s account on a frequent basis. Additionally, the Order revealed that Althar had not consulted with CN before Althar placed trades in CN’s investment accounts.
According to the Order, Althar had routinely purchased and sold the same securities in CN’s investment account, where Althar engaged in short-term trading of CN’s investments. In one example provided in the Order, a total of 696 American Capital Agency Corp. real estate investment trust shares had been purchased for $21,559.09. Yet, two months after effecting the transaction, Althar purportedly liquidated CN’s position in the American Capital Agency Corp. real estate investment trust, resulting in CN sustaining a loss.
Subsequently, 782 shares of American Capital Agency Corp. real estate investment trust shares were purchased in CN’s account for $26,756.36. Approximately six months following the purchase, the investment suffered a substantial loss, prompting Althar to liquidate the position at $18,619.03. Critically, Althar reportedly made $3,000.00 in commissions in connection with his trading in the customer’s account, notwithstanding CN’s accumulation of at least $8,000.00 in losses.
The Order additionally indicated that Althar overconcentrated CN’s investment portfolio. Evidently, from April of 2011 to March of 2014, approximately sixty percent of CN’s investment portfolio was invested in one business development company. In sum, Althar reportedly effected 155 trades in CN’s individual retirement account, which resulted in Althar’s accumulation of $91,000.00 in commissions. FINRA stated that CN’s account suffered from a commission-to-equity ratio of 22%, which meant that CN was required to achieve 22% annual returns in order to avoid sustaining losses on the investments which Althar effected. The Order additionally stated that CN sustained $103,000.00 in trading losses, which equated to half of CN’s account value.
Moreover, from November of 2012 to March of 2014, 91 trades were apparently effected in CN’s brokerage account, which caused $48,000.00 in commissions to be accumulated by Althar. Apparently, CN’s brokerage account had a commission-to-equity ratio of 32%. The Order stated that CN’s brokerage account sustained losses amounting to $84,000.00, which represented slightly less than half of the value in CN’s brokerage account. Consequently, FINRA found Althar’s excessive and unsuitable trading to be conduct violative of FINRA Rules 2010, 2111, NASD IM-2310-2, and NASD Rule 2310.
FINRA Public Disclosure reveals that Althar has been named in two customer disputes concerning misconduct while employed with Financial West Group. 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 poor investment performance.
Subsequently, on September 19, 2014, another customer filed an investment related 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 was terminated on December 11, 2015. From December 18, 2015, to May 27, 2016, Althar was registered with Paulson Investment Company LLC.
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