FINRA barred Joseph C. Farah, formerly of Gold Coast Securities in Irvine, California, for excessive and unsuitable trading in a customer's account, failing to notify his firm of discretionary authority he held in multiple accounts, undisclosed outside business activities, and for material misrepresentations to Gold Coast.
The disciplinary action stems from an account at TD Ameritrade Farah recommended for a Los Angeles-based customer. Farah then purportedly churned the TD Ameritrade account through abuse of discretion, resulting in losses in his customer's account, all while misrepresenting to Gold Coast that he had no discretionary authority over any accounts.
OHO Settlement Order #2014041432401
FINRA first charged Farah (CRD #2978633) with churning, excessive trading, suitability, undisclosed outside business activities, and making material misrepresentations in May 2017, writing that Farah's actions caused his client to incur excessive risk that was incompatible with the client's investment profile and risk tolerance preferences. The OHO cited high trading volume, an exorbitant turnover rate, and a poor cost-to-equity ratio as evidence that Farah's actions were unsuitable for his customer.
The May complaint alleged Farah knowingly engaged in a manipulative, deceptive, and/or fraudulent scheme with the intent to defraud and/or with reckless disregard for his client's interests.
The January 2018 settlement order concurred, noting that Farah engaged in frequent day-trading and executed more than 600 trades in the TD Ameritrade account, including 343 Apple (AAPL) trades, involving purchases and sales in excess of $32 million and resulting in a 25% loss of value in the account.
According to the findings, "Although Farah traded frequently...he did not speak with [his customer] about any of the trades or the status of her account." FINRA found that this client was unaware of the activity in her TD Ameritrade account other than the fact that its value was in decline.
Investigators discovered that when this client attempted to complain to Farah, he failed to return her call, and that Farah held discretionary authority over multiple customer accounts at TD Ameritrade in addition to the aforementioned account that prompted FINRA's investigation.
Regarding the undisclosed outside business activity, FINRA wrote that around the time Farah initially obtained discretionary authority over the TD Ameritrade accounts, he and a business partner incorporated Farah & Neal Benefits, about which he never told Gold Coast, failing to disclose Farah & Neal Benefits' existence on multiple compliance questionnaires.
Gold Coast Securities discharged Farah in September 2015 based on FINRA's allegations that Farah partially owned an undisclosed and unapproved outside business, and that Farah held discretionary authority over a customer's account at another firm without notifying Gold Coast of this affiliation.
If you have invested with Joseph C Farah, formerly of Irvine, CA's Gold Coast Securities, or with any broker or financial adviser who has excessively traded or churned your account through abuse of discretion or has otherwise executed transactions that were unsuitable given your investment objectives or risk tolerance level, resulting in losses or other damages such as excessive fees or commissions, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.