Marlin O. Cole, of New York, New York, a stockbroker registered with Legend Securities, Inc., has been fined $5,000.00 and suspended for sixteen months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity by consenting to findings that he effected trades on an excessive and unsuitable basis in customer accounts. Letter of Acceptance, Waiver and Consent, No. 2014043043601 (Oct. 11, 2017).
According to the AWC, between April of 2013 and October of 2014, during the time that Cole was employed with Legend Securities, he effected trades in the accounts of six customers: DK, TT, AD, WJ, BB and CA. Apparently, those customers were not experienced with investing, and depended on Cole to make investment decisions accordingly. The AWC reported that customers had turnover rates ranging from 6.01 to as high as 63.39, and cost-to-equity ratios ranging from 29.8 percent to as high as 589 percent.
The AWC stated that those cost-to-equity ratios and turnover rates hindered customers’ chances of profiting through Cole’s trading strategy – an issue that was exacerbated through the excessive mark-downs and mark-ups that were charged to customers. FINRA concluded that Cole’s conduct in that regard was violative of FINRA Rules 2010 and 2111.
In addition, the AWC stated that from April of 2014 to October of 2014, an investment strategy was pursued by Cole in customer WJ’s investment account, where Cole would buy a security, sell a covered call option regarding that security, where the call position would be repurchased by Cole at a loss, only for the security itself to be sold at a loss. Apparently, WJ sustained $30,000.00 in total losses as a result of Cole having executed the investment strategy in thirty occasions. Yet, Cole accumulated $26,000.00 in sales charges. The same strategy was reportedly implemented with customer CA in July of 2013, leading CA to sustain investment losses.
FINRA deemed Cole’s investment strategy involving the covered calls to be economically flawed, in that customers were in no position to benefit; the strategy was pushed to generate sales charges from customers. As a result, FINRA found that Cole’s conduct was violative of FINRA Rules 2010 and 2111.
Moreover, the AWC stated that in July of 2013, Cole effected the purchase of two thousand shares of ABC stock even though the customer only approved of five hundred shares to be purchased. $2,980.00 in sales charges had reportedly been generated by Cole as a result. Then, twelve transactions in June and July of 2014 were placed by Cole in customer AD’s account even though the customer never consented to the transactions. Cole purportedly generated $8,000.00 in sales charges while the customer lost at least $12,000.00.
Cole’s registration with Legend Securities, Inc., a firm which FINRA expelled on April 17, 2017, was terminated on October 29, 2014. Cole has also been associated with four other firms that have been expelled by FINRA: Prestige Financial Center, Inc; Global Arena Captial Corp; Blackbook Capital LLC; and Avenir Group.
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