A FINRA hearing panel barred broker Henry "Hank" Mark Werner for fraudulently churning an account held by a 77-year-old blind widow, resulting in hundreds of thousands of dollars of excessive commissions for Werner and six-figure losses for his disabled customer, who was still grieving the recent loss of her husband. The panel also found that Werner engaged in unsuitable securities recommendations.
The extended panel's decision comes 15 months after FINRA first filed a complaint against Werner, who formerly served as a registered representative with Liberty Partner Financial Services, headquartered in Bakersfield, California, and Legend Securities of New York City, NY.
OHO Decision #2015048048801
The very first sentence of the hearing panel's decision summarizes its findings: "Respondent Hank M. Werner fraudulently churned the accounts of a customer and made unsuitable recommendations." FINRA went on to write that Werner engaged in "such an active trading strategy that, when the high commissions he charged were taken into account, it was impossible for [his client] to make money," despite an investment objective of "Growth."
Among the unsuitable recommendations cited by FINRA was a variable annuity switch from a Hartford VA called "Director M" to the "Destination B 2.0" VA sold by Nationwide that investigators said posed no advantage nor benefit to the client.
The panel concluded that Werner (CRD #1615495)'s misconduct occurred from 2012-2015 while he was associated with both Liberty Partner Financial and Legend Securities, writing that Werner victimized a blind elderly client in poor health whose also-blind husband died just one month before Werner began churning her accounts.
For instance, Werner purportedly engaged in unsuitable speculative trading in his client's IRA accounts, and allegedly tried to hide from his employers that he intended to engage in speculative trading, marking "many" transactions as unsolicited even though he solicited all of the trades, a fact Werner himself admitted to during testimony.
Per Werner's own words, his relationship with this client was "way beyond a casual adviser-client relationship," adding, "I felt a strong bond with her." When interviewed by investigators, Werner's customer stated that she "absolutely" trusted Werner; she marked on account forms that she entrusted Werner with most investment/financial decisions.
The panel found that Werner was in a "dire financial condition" when he started churning the accounts, with multiple outstanding tax liens. For instance, Werner purportedly "frequently asked his employer for advances on commission payouts so that he could meet his financial obligations."
Werner's BrokerCheck report indicates a handful of judgment/lien disclosures from 2006-2011. In 2009, former employer National Securities Corporation discharged Werner after finding that he "failed to disclose several liens and judgments."
When a broker fails to disclose outstanding judgments and liens, a potential conflict of interest situation arises that might prompt unsuitable recommendations as the broker attempts to steer a client toward high-commission or complex products that might not be in the customer's best interests, but could be more lucrative for the broker due to higher fees and commissions. Excessive trading is another risk, as fraudulent churning generally results in an increase in commissions or other sales charges.
Investigators concluded that Werner's "sole motivation was to use [his client]'s accounts to generate commissions to cover his financial liabilities, not to make money for his client."
Although FINRA's August 2016 complaint against Werner claimed $243,000 in ill-gotten commissions and $184,000 in customer losses, the extended hearing panel ordered restitution of just $155,393.61, disgorgment of only $10,030, and an $80,000 fine.
If you have invested with Hank Mark Werner, formerly of Liberty Financial Services and Legend Securities, or with any broker or financial adviser whose fraudulent churning and excessive trading or unsuitable recommendations have resulted in excessive fees and commissions that have 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.