On July 13, a three-person arbitration panel of the Financial Industry Regulatory Authority (FINRA) handed down a $1.7 million arbitration award against JHS Capital Advisors Inc. and one of its former brokers.
Claimant John Sisk claimed excessive trading and churning, common law fraud, ordinary negligence, gross negligence, breach of contract, negligent retention and hiring, control person liability, respondent superior, and violation of federal securities laws, according to the arbitration award.
The Award Breakdown
$1.5 million in compensatory damages in plus interest at the rate of 9 percent per year from May 2010 until the award is paid in full; punitive damages in the amount of $100,000; and attorneys’ fees of just over $93,000. With interest, the award is likely to reach $1.9 million.
Sisk filed his arbitration claim last year. His attorney Timothy Feil told Investment News that it was the most egregious case of churning he’d ever seen. The alleged excessive trading occurred from July 2009 to April 2010 and required the client to generate returns of 160 percent just to break even, Feil said.
Broker Enver R. Alijaj was also named in the award. According to FINRA public disclosure records, he was registered with Pointe Capital Inc. from May 2007 to December 2008, left to work for John Thomas Financial for a time, then rejoined Pointe in June 2009 after it was purchased by JHS Capital Holdings Ltd. and rename JHS Capital Advisors.
Alijaj was registered with John Thomas from December 2008 to June 2009, but the arbitration panel dismissed all claims asserted against Alijaj while he was associated this firm, the award shows.
According to FINRA Public Disclosure Records
The claims by Sisk were not the first time Pointe Capital and Alijaj were accused of churning. FINRA public disclosure records show the firm settled a customer’s claims of excessive commissions for $1.2 million in August 2010. Alijaj personally contributed $500,000 to that settlement. Investment News reported that he denied the allegations that led to the settlement.
Public disclosure records also show Alijaj has been registered with Legend Securities Inc. in New York since December 2010.
The holding company that owns JHS Capital is controlled by John Sykes, who entered the broker-dealer industry in 2008 when he purchased the preferred shares of GunnAllen Holdings Inc. When Sykes resigned from the GunnAllen board in 2009, his holding company bought Pointe Capital and renamed it JHS Capital Advisors.
Investment News also reported that a Securities and Exchange Commission (SEC) filing from earlier this year showed that JHS Capital held roughly $500,000 in net capital at the end of last year, about a quarter of the total arbitration award including interest. JHS Capital reported a net loss of $6.6 million in 2011, according to the same SEC filing.
The award indicates that Sisk originally claimed $3.1 million in compensatory damages, $3 million in disgorgement of ill-gotten gains, and loss of opportunity damages of $500,000, plus interest.
A spokeswoman for JHS Capital Holdings LLC, the broker dealer’s parent company, told Investment News that her company was disappointed in award “related to this legacy acquisition item,” and that the firm was reviewing its options.
Alijaj did not comment on the award, Investment News reported.
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