FINRA Files Complaint Charging Broker With Fraudulently and Excessively Trading Accounts of Elderly, Blind Widow

WASHINGTON–(BUSINESS WIRE)–The Financial Industry Regulatory Authority (FINRA) announced today that
it has filed a complaint against broker Hank Mark Werner of Northport,
New York, charging him with securities fraud for churning the account of
his customer, a 77-year old blind widow, and for excessive and
unsuitable trading concerning her account. The complaint alleges that
Werner engaged in a deceptive and fraudulent scheme by churning the
widow’s accounts over a three-year period to maximize his compensation
by charging more than $243,000 in commissions, while causing the
customer approximately $184,000 in net losses.

According to the complaint, Werner had been the elderly customer’s
broker – and that of her blind husband until his 2012 death – since
1995. The complaint alleges that a few weeks after the customer’s
husband passed away, Werner began aggressively trading her accounts to
generate excessive commissions for himself. Werner exercised control
over each of her accounts and recommended every trade, and the customer
followed all of Werner’s recommendations. Because she was blind and
severely debilitated, requiring in-home care, the customer relied
completely on Werner to accurately portray her account activity and let
her know about account performance.

From October 2012 to December 2015, Werner placed over 700 trades in
more than 200 different securities, and charged the widow either a
markup or commission on every purchase and sale, and initially charged a
markup or commission between 2.50 percent and 3.00 percent. When he
changed firms, he increased his markups and commissions on her trades to
3.75 to 4.25 percent, an increase of over 40 percent. The complaint
notes that based on the level of trading and commissions charged, there
was little to no possibility that the customer would profit from such
trading. It also notes the trading in the accounts was excessive, as
evidenced by the high turnover rates and cost-to-equity ratios for her
accounts ranging from 64.40 percent to 97.73 percent.

In addition, FINRA also alleges in the complaint that in light of the
customer’s investment objective and financial situation, Werner did not
have reasonable grounds or a reasonable basis to believe that his
recommended trading was suitable. The complaint also alleges that in
July 2015, Werner recommended an unsuitable variable annuity exchange,
and earned a commission of more than $10,000 on the transaction.

FINRA’s complaint emanated from an examination commenced by FINRA’s
Department of Member Regulation triggered by “red flags” in Werner’s
trading at his former firm.

The issuance of a disciplinary complaint represents the initiation of a
formal proceeding by FINRA in which findings as to the allegations in
the complaint have not been made, and does not represent a decision as
to any of the allegations contained in the complaint. Under FINRA rules,
a firm or individual named in a complaint can file a response and
request a hearing before a FINRA disciplinary panel. Possible remedies
include a fine, censure, suspension or bar from the securities industry,
disgorgement of gains associated with the violations and payment of
restitution.

Investors can obtain more information about, and the disciplinary record
of, any FINRA-registered broker or brokerage firm by using FINRA’s
BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2015,
members of the public used this service to conduct 18.9 million reviews
of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck
or by calling (800) 289-9999. Investors may find copies of this
disciplinary action as well as other disciplinary documents in FINRA’s
Disciplinary Actions Online database. Investors can also call FINRA’s Securities
Helpline for Seniors
at (844) 57-HELPS for assistance or to
raise concerns about issues they have with their brokerage accounts and
investments.

FINRA, the Financial Industry Regulatory Authority, is the largest
independent regulator for all securities firms doing business in the
United States. FINRA is dedicated to investor protection and market
integrity through effective and efficient regulation and complementary
compliance and technology-based services. FINRA touches virtually every
aspect of the securities business – from registering and educating all
industry participants to examining securities firms, writing rules,
enforcing those rules and the federal securities laws, and informing and
educating the investing public. In addition, FINRA provides surveillance
and other regulatory services for equities and options markets, as well
as trade reporting and other industry utilities. FINRA also administers
the largest dispute resolution forum for investors and firms. For more
information, please visit www.finra.org.

Contacts

Financial Industry Regulatory Authority (FINRA)
Michelle
Ong
, 202-728-8464
Nancy
Condon
, 202-728-8379