An Enforcement Action was commenced against StockCross Financial Services, Inc. and one of its registered representatives, Peter Edward Cunningham by The Commonwealth of Massachusetts, Office of the Secretary of the Commonwealth, Securities Division for fraud in connection with the sale of securities and the violation of the Massachusetts Uniform Securities.
StockCross is a registered securities broker-dealer from Boston, Massachusetts, and currently based in Beverley Hills, California. According to the Complaint, “for years, Cunningham, under the pretense of supervision by StockCross, has engaged in improper trading practices to the detriment of Massachusetts investors.”
Prior to even being hired by StockCross, Cunningham was the subject of at least six customer complaints, investment related complaints. Cunningham was also terminated from his previous employer month before StockCross hired him.
The California Superior Court issued default judgments against Cunningham in two separate civil actions, resulting in orders levying his bank accounts and garnishing his wages to satisfy judgments totaling more than $106,211.80. His primary residence was also subject to foreclosure.
Notwithstanding the foregoing, and with knowledge of Cunningham’s “financial duress,” StockCross left Cunningham “to act unchecked, even as the firm promoted him to Managing Director of Investments.”
During his association with StockCross, Cunningham was found to have engaged in the short-term trading of Unit Investment Trusts in the accounts of his Massachusetts clients. Of Cunningham’s approximate 180 clients, nearly 60, or approximately 30%, are Massachusetts residents. Statements from Cunningham’s Massachusetts client accounts reflect sales of Unit Investment Trusts as soon as 26 days after purchase and sometimes years before the Unit Investment Trusts is predetermined to reach its maturity date. Cunninghamoften used proceeds of the sales to buy other Unit Investment Trusts . As a reuslt of Cunningham’S short-term trading of Unit Investment Trusts, StockCross Financial Services, Inc. and Cunningham were found to have “ reaped at least $753,000.00 in commissions.”
By of background, a Unit Investment Trusts or “UIT,” is a security, comparable to a mutual fund or a closed-end fund, which contains a portfolio typically of stocks or bonds. The trust offers “units” of the portfolio to investors, giving investors the right to distributions of the portfolio. UITs terminate on a specified maturity date predetermined by the sponsor, typically after 15 to 24 months. On the maturity date, the portfolio is sold and proceeds of the sale are distributed to current unit holders.
Because the purchase of a UIT position typically requires payment of a sales charge between 3-5%, frequent purchases generate high commissions for broker-dealers and their agents. In a practice known as “short-term UIT trading,” an agent recommends the sale of UIT units before the maturity date and uses the proceeds of the sale to buy units in another UIT. This practice is injurious to investors because it negates the possibility of receiving both distributions during the life of the UIT and proceeds from the sale of the underlying securities at maturity. Moreover, short-term UIT trading causes investors to incur additional, unnecessary sales charges, thereby subsidizing commissions
During the course of his association with StockCross, Cunningham was subject to special or heightened supervision. However, according to the Complaint, there is no indication that StockCross ever reviewed Cunningham’s UIT trading.
According to the Complaint, StockCross uses no UITspecific documentation in the sale of UITs. StockCross has no written supervisory procedure that specifically discusses short-term UIT trading. StockCross has no procedure to review UIT transactions for short-term UIT trading.
Here, there was also a finding that Cunningham received no StockCross training regarding UITs as StockCross offers no such training.
Investors purchasing a Unit Investment Trusts from StockCross or Cunningham ought to have their accounts evaluated to determine if they have a claim or are entitled to damages.
The information contained herein has been obtained from reliable sources however may not be accurate and is not guaranteed by us. Readers are encouraged to undertake their own independent investigation and evaluation of the relevant facts. All claims and allegations are subject to adjudication, decisions may be subject to appeal, and no inference is intended, nor should any inference be made from any information contained herein from any source.
This posting and the information on our website is for general information purposes only. This content should be not considered legal advice, and any responses, comments, e-mails, other communications do not form any attorney client relationship. Attorney Advertisement. See Important Disclaimer
Guiliano Law Group
Our practice is limited to the representation of investors. Over the last three decades, we have recovered tens of millions of dollars for more than 1,000 injured investors from all over the United States and from all over the World. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a confidential consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
For more information concerning common claims against stockbrokers and investment professionals, please visit us at securitiesarbitrations.com
To learn more about FINRA Securities Arbitration, and the legal process, please visit us at securitiesarbitrations.com
