Previously Registered J. P. Morgan Securities Broker/Investment Advisor Trevor Rahn Suspended for Violations Including Unsuitability and Excessive Trading
Trevor Rahn (CRD#: 2196155) is a previously registered Broker and a previously registered Investment Advisor at J. P. Morgan Securities, LLC in Los Angeles, CA. He entered the securities industry in 1992 and previously worked for Deutsche Bank Securities, Inc.; Morgan Stanley & Co., Inc.; Morgan Stanley DW, Inc.; and Merrill Lynch, Pierce, Fenner & Smith, Inc.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in March 2021, FINRA sanctioned Trevor Rahn, assessing a civil and administrative penalty and fine of $10,000 and suspending him from all capacities for a period of 18 months beginning on April 5, 2021 and ending on October 4, 2022. The FINRA sanction states, “Without admitting or denying the findings, Rahn consented to the sanctions and to the entry of findings that he failed to conduct the necessary reasonable diligence to understand the cost implications of a recommended average pricing investment strategy and, as a result, lacked a reasonable basis to recommend the strategy to his customers. The findings stated that Rahn recommended the strategy to the customers in which he executed orders in accounts by breaking them into multiple smaller trades that he entered at different times on the same day. When entering the smaller trades, Rahn often entered a separate commission on each trade that was greater than the amount that would be charged under his member firm’s standard commission schedule. Rahn relied on the firm’s system to automatically assign commissions in accordance with its commission schedule without taking steps to confirm it actually did so. In connection with his strategy, Rahn exercised time and price discretion on over 7,500 trades without the written authority from any of his customers or written acceptance from his firm. None of the tickets for the trades reflected an exercise of time and price discretion. Instead, Rahn entered all of these trades as held orders, meaning that each order was intended to be promptly placed. The findings also stated that Rahn executed trades in a customer account without her authorization. The findings also included that Rahn caused his firm to create inaccurate records by mismarking solicited trades in customer accounts as unsolicited.”
For a copy of the FINRA sanction, click here.
In addition, Trevor Rahn has been the subject of five customer complaints, including the following:
● April 2020—”Client alleges selling away regarding private placement investment. Activity dates 01/01/2010-12/31/2010.” The customer dispute was denied.
● June 2019—”Customer alleges that the trading activity increased dramatically and resulted in losses and significant tax obligations. Activity dates January 2014-September 2015. Subsequent correspondence received on 06/12/2019. Customer alleges financial advisor engaged in a pattern of unauthorized trading and margin use in customer’s account in order to generate commissions, and resulting in losses to customer. Activity dates January 2014 – November 2015.” The customer dispute was settled for $549,184.
● November 2018—”Customer previously alleged that the number of transactions in the account were unauthorized and that claim was settled. Subsequent correspondence received asserting additional demands related to the same account. The overall time period is 03/2014-09/2017.” The customer dispute was settled for $114,000.
● September 2018—”UNACCEPTABLE PRACTICES BY THE REPRESENTATIVE RELATING TO THE TIMING AND SIZE OF ORDERS ENTERED AND RESULTING TRANSACTION CHARGES IN A CLIENT ACCOUNT AND RELATING TO THE MARKING OF CERTAIN ORDERS FOR THE ACCOUNT AS UNSOLICITED.” Trevor Rahn was discharged by J.P. Morgan Chase Bank, NA following the allegations.
● November 2017—”Customer alleges that the number of transactions was unauthorized. Activity dates 08/2017-09/2017.” The customer dispute was settled for $64,590.
● October 2016—”In October 2015, the administrators of a client’s estate requested the transfer and liquidation of positions that were then transferred and sold. Later, the administrators of the estate alleged that they were not made aware of the fees for liquidating the estate account and that the fees were excessive.” The customer dispute was settled for $57,847.
● July 2014—A civil judgment/lien was placed against Trevor Rahn in the amount of $763,424.76.
For a copy of Trevor Rahn’s FINRA BrokerCheck, click here.
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.
FINRA has defined the standards in which investment recommendations made by brokerage firms and registered financial advisors are evaluated. The FINRA suitability rule focuses on three fundamental concepts: (1) reasonable basis suitability, (2) quantitative suitability, and (3) customer-specific suitability.
● 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, other investments, financial situation and needs, tax status, and investment objectives. Other considerations include the customer’s time horizon, liquidity needs, risk tolerance, and any other information disclosed by the customer.
When a financial advisor carries out frequent trades engineered to drive up commissions rather than in the best interests of the client, it’s commonly called churning. This conduct is also in violation of FINRA regulations, as excessive trading fails to put the investment goals of the client first.
Failure by a financial advisor to adhere to these requirements is evidence of negligence or, worse, investment fraud. If you as the investor can establish, at a minimum, negligent misconduct, you may be entitled to recover your investment losses.
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at firstname.lastname@example.org.