FINRA charged Gold Coast Securities (Irvine, CA) broker Joseph C Farah with churning, excessive trading, suitability, undisclosed outside business activities, material misrepresentations, and additional violations and failures related to discretion, according to a Department of Enforcement complaint filed with FINRA's Office of Hearing Officers. According to the charges, Farah created significant risks that were incompatible with his client's investment needs and welfare, and knowingly engaged in a manipulative, deceptive and fraudulent scheme with the intent to defraud and/or with reckless disregard of his customer's interests.
OHO Disciplinary Proceeding #2014041432401
The complaint concerns alleged churning and unsuitable recommendations by Farah (CRD #2978633) related to his dealings with a Gold Coast customer who resides in Los Angeles.
Enforcement's investigators wrote that according to the customer's Gold Coast application, her investment objective was "Long-term growth" and risk tolerance was "Moderate." FINRA also found that she had no previous investing experience and a fixed income. Nonetheless, Farah recommended a variable annuity shortly after the account's opening, and further advised his customer to open an account at TD Ameritrade, and to provide him with discretionary authority over the account. He allegedly promised to reimburse his customer for "any losses" in the TD Ameritrade account in exchange for a portion of any profits.
The complaint states that Farah churned and excessively traded the TD Ameritrade account, causing its value to diminish by over 25%. Notably, FINRA found that Farah placed 43 trades in Apple Inc (APPL) as day trades. In Revenge of the Reverse Convertible, we wrote about Apple's woes and resulting losses for investors.
Shortly after Farah's months-long day trading spree, his customer visited a TD Ameritrade office alarmed by the losses sustained in her account. After trying to contact Farah—who failed to return her call—the customer requested the removal of Farah's trading authority, having already sustained a realized loss due to Farah's churning activity.
The investigation also revealed that Farah simultaneously enjoyed discretionary authority over four other TD Ameritrade accounts, which he similarly concealed from Gold Coast (and, in turn, concealed his association with Gold Coast from TD Ameritrade). In one instance, Farah actually allowed a business associate of his to also enjoy discretionary authority over one of the accounts.
Throughout this series of events, Farah purportedly never informed Gold Coast of his discretionary authority over the TD Ameritrade account, and falsely denied similar claims on annual compliance questionnaires, while also failing to disclose his co-ownership of Farah & Neal Benefits, Executive Benefits/Wealth Management, an outside business that provided financial advice to business owners.
As alleged by FINRA, Farah's actions were unsuitable, reckless, deceptive, and potentially fraudulent.
If you have invested with former Gold Coast Securities (Irvine, CA) broker Joseph C Farah or with any broker or financial adviser whose unsuitably excessive trading and churning or abuse of discretionary authority has created unnecessary and excessive risk, loss, or has otherwise proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.