Glen J. Rauch, of Syosset, New York, a stockbroker with Avenir Financial Group, Inc., was charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging that Rauch engaged in significant sales practice violations, including the effecting of unauthorized and unsuitable transactions in customer accounts. Department of Enforcement v. Glen Rauch, No. 2014039358002 (Sept. 16, 2016).
According to the Complaint, between August of 2013 and February of 2016, at a time when Rauch was associated with Avenir Financial Group, Inc., he engaged in numerous sales practices which led to customers bearing investment losses. FINRA first noted that in September of 2013, Rauch had effected transactions in the account of an investor, LM. Particularly, Rauch was LM’s broker of record with regard to LM’s trading account and IRA. Apparently, LM did not have experience with investing, and did not understand the meaning of investing speculatively.
The Complaint stated that the customer’s new account documents (which the customer apparently never signed) indicated his intent to invest in a speculative manner. However, FINRA noted that LM’s true investment objective was to invest conservatively, and that Rauch was specifically instructed by LM that LM could not take on the risk of losing funds. Rauch purportedly indicated to LM that his funds would be invested in a safe manner.
The Complaint stated that in September and October of 2013, Rauch effected equity transactions in LM’s account, in which he over-concentrated LM’s account. Rauch reportedly effected such transactions, ten in total, in a manner which FINRA deemed unsuitable and not in conformity with LM’s investment objectives. Further, the order tickets for LM were purportedly mismarked by Rauch as being unsolicited.
FINRA claimed that Rauch’s conduct was designed to make it seem as though LM, who FINRA noted was unsophisticated and inexperienced, comprehended and had control of the options trading which transpired in his investment account. The Complaint stated that LM eventually closed his account with Avenir on November 19, 2013, after he sustained investment losses in excess of $21,000.00. FINRA claimed that such losses accounted for thirty-three percent of the customer’s net worth. FINRA claimed that Rauch violated FINRA Rules 4511 as a result of causing his firm’s records and books to be inaccurate, and committed violations of FINRA Rules 2010 and 2111 as a result of making unsuitable recommendations to LM.
FINRA further detailed in the Complaint that from June through September of 2014, Rauch harmed a second customer, SM, whose objective was to invest on a conservative to moderate basis, and who relied upon the monies invested through Rauch in order to tend to her disabled son’s medical needs. The Complaint stated that Rauch engaged in thirty-seven transactions in SM’s account, all of which were unauthorized. Apparently, SM was never contacted, nor provided authorization for Rauch to engage in the transactions.
FINRA also claimed that Rauch engaged in the unsuitable recommendations of options transactions in SM’s account. The Complaint stated that Rauch failed to adequately explain to SM the risk of investing in an options trading strategy, and the customer did not comprehend the risks associated with such. The Complaint noted that despite SM’s more conservative investment objectives, Rauch effected options transactions which were very risky and speculative. FINRA claimed in the Complaint that SM incurred thousands of dollars in investment losses in connection with Rauch’s unsuitable investment recommendations.
Further, Rauch purportedly caused SM’s orders to be mismarked as unsolicited. FINRA again noted that Rauch’s conduct was geared towards making it seem that the customer authorized and solicited the unsuitable transactions, when it was Rauch who prompted such transactions. FINRA found that Rauch violated FINRA Rules 2010, 4511, 2360(b)(19)(A), and 2111 as a result.
According to FINRA’s BrokerCheck, Rauch has been subject to eighteen disclosure incidents which preceded the FINRA Complaint against him. Particularly, on September 7, 2001, Rauch settled a customer dispute for $27,511.00 after he was alleged by a customer to have made unsuitable and unauthorized trades in the customer’s account. Eleven of Rauch’s ten last employers were closed or forced out of business by securities regulators for fraud and the violation of the federal securities laws. The process of migrating from defunct or shuttered firm to shuttered firm has been commonly described as cockroaching.
On January 6, 2004, Rauch was terminated from his former employer, J.P. Turner & Company, LLC, amid allegations of making unauthorized discretionary trades in customer accounts. Rauch was later terminated by National Securities Corporation amid allegations for contacting firm customers while suspended and under an internal review for complaints stemming from customers.
On August 12, 2008, Rauch settled a customer dispute for $6,000.00 after he was alleged to have churned customer accounts, and effected unauthorized and excessive trades in customer accounts. Rauch settled a customer dispute on October 19, 2004, for $75,000.00 after the customer alleged that Rauch engaged in misrepresentations and failed to follow the customer’s instructions.
Rauch is currently subject to a pending customer dispute from October 19, 2014, in which a customer has requested $370,000.00 in damages after alleging that Rauch made misrepresentations to the customer concerning account balances, failed to follow the customer’s investment instructions, and did not adequately hedge the customer’s risk.
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