A Financial Industry Regulatory Authority extended hearing panel barred on Thursday broker Hank Mark Werner of Northport, New York, for fraudulently churning and excessively trading the accounts of his customer — a blind, elderly widow — and for making unsuitable recommendations.
The hearing panel also ordered Werner on Thursday to pay more than $155,000 in restitution to the widow, fined him $80,000 and ordered disgorgement of more than $10,000 representing commissions received for recommending the purchase of an unsuitable variable annuity.
The decision resolves charges brought by FINRA’s enforcement division last August, when FINRA had filed a complaint against Werner for fraud related to churning of the 77-year-old’s account.
Werner had been the elderly widow’s broker — and that of her blind husband until his 2012 death — since 1995.
According to the hearing panel decision, Werner “plundered” his customer’s accounts by engaging “in such an active trading strategy that, when the high commissions he charged were taken into account, it was impossible for [the customer] to make money.”
The panel found Werner frequently bought and sold a security within a week or two, and charged exorbitant commissions even though the blind widow’s financial circumstances required that Werner invest her assets with a minimum amount of risk.
The client was 77 and in ill health when Werner began churning her accounts. Werner engaged in more than 700 trades from October 2012 to December 2015, generating approximately $210,000 in commissions while the customer lost more than $175,000 as a result of his “reckless trading.”
The decision also noted that it was apparent to the hearing panel that “Werner took advantage of [the customer's] vulnerability after her husband died in September 2012. Werner’s sole motivation was to use [the customer’s] accounts to generate commissions to cover his financial liabilities, not make money for his client.”
The hearing panel concluded that "Werner engaged in egregious misconduct and is unfit to work in the securities industry."
Werner was a broker for Legend Securities Inc., which was also named in an amended disciplinary complaint. Legend failed to respond and accordingly was held in default, FINRA said.
The complaint charged that Legend failed to reasonably supervise Werner, which allowed him to engage in churning his customer’s account, and failed to establish, maintain and enforce an adequate supervisory system to ensure that Werner was subject to heightened supervision.
The hearing officer issued a default decision, censuring and fining the firm $200,000. Legend voluntarily paid $20,000 in partial restitution to the customer, according to FINRA.
Unless the FINRA hearing panel’s decision is appealed to the self-regulator’s National Adjudicatory Council, or is called for review by the NAC, the hearing panel’s decision becomes final after 45 days.
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