Founded in Boston and now based in Beverly Hills, California, StockCross Financial Services and its Los Angeles-based broker Peter Edward Cunningham stand accused of causing losses in customer accounts while earning $750,000 in commissions from short-term unit investment trust (UIT) trades that Massachusetts securities regulator William Galvin says were unsuitable. The complaint states that some of Cunningham's harmed customers were elderly and/or unsophisticated investors, and that Cunningham failed to specify an adequate reason or basis for his recommendations, which often involved selling UITs prior to their maturity dates.
According to the regulator's news release entitled, "Secretary Galvin Charges Broker-Dealer with Making Short-Term Trades to Increase Commissions," Galvin's group charged StockCross Financial and Peter Cunningham (CRD #2400211) with engaging in fraudulent practices, unethical or dishonest conduct, and the firm with failing to supervise Cunningham and/or other investment adviser representatives, brokers, or employees.
Regulators found that Cunningham, who is Managing Director of Investments for StockCross Financial, fraudulently and/or dishonestly recommended purchases of UITs—many sponsored by First Trust Portfolios, LP, such as the Market Strength Allocation Select Portfolio Series 10—and then proceeded to engage in short-term UIT trading, effectively driving up commissions and profits for the firm and Cunningham personally, while harming his clients due to the added costs of commissions and sales charges.
Galvin's group wrote that after recommending the UITs, Cunningham disregarded the UITs' stated maturity dates and recommended selling the UITs just weeks or months after the initial purchase—often months or years before the UITs' stated dates of maturity—and then used the proceeds of these sales to fund purchases of other UITs, whereupon, in some cases, the short-term trading cycle continued, resulting in added commissions for the firm at the expense of investors, who often bore the brunt of additional expenses and fees, such as sales charges.
For example, Cunningham allegedly recommended an investor buy nearly 10,000 units of the Market Strength Allocation Select Portfolio Series 10 UIT, generating $2,223 in commissions, only to recommend the customer sell the UIT just one month later, despite a maturity date over 18 months away.
Cunningham also purportedly recommended this investor purchase another UIT sponsored by First Trust called the Core Holdings Growth Trust 2014 Fall Series, similarly recommending that the customer sell this new UIT barely one month after purchasing it. The Core Holdings Growth Trust UIT's maturity date was approximately five years in the future, such that the Core Holdings Growth Trust UIT was sold 1,757 days before the date of maturity.
The report states that funds credited to the investor's account from the Core Holdings Growth Trust sale and similar UIT sales were used to buy five different, additional UITs.
The complaint named StockCross Financial representative Ronald James Roberts as a related party responsible for supervising Cunningham, but did not charge Roberts with any wrongdoing.
As for Cunningham, his BrokerCheck file indicates a series of customer complaints, including several settled disputes alleging negligence, unsuitable recommendations, misrepresentation, and omission of material facts.
In addition to his registration with StockCross Financial Services of Beverly Hills, Cunningham also holds a registration with Muriel, Siebert & Co., also of Beverly Hills.
In 2001, then-employer TD Waterhouse Investment Services discharged Cunningham due to "multiple customer complaints," including a suitability dispute that evolved into arbitration, resulting in a $40,000 award over charges that included breach of fiduciary duty, unsuitable investments, and recommendations contrary to investment objectives, relating to OTC equity and UIT products.
If you have invested with Los Angeles broker Peter Edward Cunningham, StockCross Financial Services, or with any broker or financial adviser whose unsuitable recommendation that you purchase a Unit Investment Trust (UIT) only to sell the UIT in the short-term and ahead of its maturity date has proven harmful to your investments or interests as a result of excessive commissions and fees or sales charges, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.