- November 6, 2023
- Independent Financial Group
Stewart Ginn (CRD#: 4503197) is a registered broker at Independent Financial Group, LLC in Encinitas, CA.
He entered the securities industry in 2002. He previously worked for Navian Capital Securities LLC; Newbridge Securities Corporation; Chicago Investment Group, LLC (FINRA expelled the firm in 2010); Ladenburg Thalmann & Co., Inc; and Ladenburg Capital Management Inc.
Allegations of Misconduct
According to public records released by the Financial Industry Regulatory Authority (FINRA), in October 2023, Ginn was named a respondent in a FINRA complaint alleging that he churned and excessively traded customer accounts. The complaint alleges that none of the customers was an aggressive investor, one of the customers was in her late 80s and suffering from Alzheimer’s disease; a second retired customer was in her late 70s; and a third retired customer was between 69 and 71 years old. Ginn engaged in frequent in-and-out trades in the customer accounts, while charging high commissions on both buys and sells. Ginn’s trading caused the customers to incur realized losses of more than $2.22 million, while generating more than $2.24 million in commissions for Ginn and his member firm. Ginn routinely recommended that the customers buy large equities positions, which he often quickly sold, even when the price of the stocks had changed only minimally. Because of the high commissions Ginn charged-generally three percent on buy transactions and two percent on sell transactions-the customers routinely incurred losses on such trades. Acting with scienter and with de facto control over the customer accounts, Ginn churned these accounts in willful violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and in violation of FINRA Rule 2020. By excessively trading the accounts of retail customers, Ginn willfully violated the Best Interest Obligation under Rule 15l-1(a)(1) of the Exchange Act (Regulation BI). The complaint also alleges that Ginn recommended a series of transactions to one of the customers that was excessive and quantitatively unsuitable in light of the customer’s investment profile. The complaint further alleges that in a majority of the customer accounts, Ginn improperly traded on discretion and frequently engaged in buying and selling securities without obtaining customer authorization for each transaction. Disregarding the cumulative impact of his excessive, high-cost trading, Ginn persisted in placing frequent trades in each of the customers’ accounts, even as each account incurred substantial realized losses. Ginn’s trading resulted in annualized cost-to-equity ratios (or break-even points) of between 14 percent to 27 percent in the customers’ accounts, making it unlikely they would realize a profit.
For a copy of the FINRA Complaint, click here.
In addition, Ginn has been the subject of several other customer disputes, which include the following:
- September 2023—“Alleges investments were not suitable in light of Claimant’s age.” The damage amount requested is $1,400,000, and the customer dispute is still pending.
- March 2023—“Claim that accounts were subject to excessive commission charges. No allegations of loss or other damages.” The damage amount requested is $120,000 and the customer dispute is still pending.
- December 2022—“Client alleges that commissions were excessive, that the investments in her account were unsuitable and that sales in her account resulted in significant profit which, in turn, created capital gains and a tax liability.” The customer dispute settled for $400,000.
For a copy of Stewart Ginn’s FINRA BrokerCheck, click here.
We Help Investors Recover Investment Losses
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.
Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.
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