Ex-Advisor Accused of Churning Retired Couple’s Portfolio

A retired Connecticut couple has accused their former investment advisor of negligence, breach of fiduciary duty and unfair practices, alleging he made excessive and inappropriate trades that cost them more than $800,000 over 18 months.

Terry and Nancy Chabot, Glastonbury residents, contend in a lawsuit that Samir Shehu, managing principal at Shehu Asset Management, an RIA in Southbury, Connecticut, lost the “alarming” amount while serving as their advisor from October 2020 until April 2022, a time when  traditional stock and bond investments generated positive returns.

In the lawsuit, filed this month in Connecticut Superior Court in Hartford against Shehu, his firm and Interactive Brokers Group Inc., the brokerage he used to make trades, the Chabots contend Shehu “churned and turned over” their accounts about 50 times the reasonable level.

Among their allegations, the Chabots say Shehu lost considerable principal money by:

• Trading about $1.5 million of their money weekly on average; in 2021 he executed more than $75 million in trades in a $3.2 million portfolio
• Inappropriately investing in stocks when the allocation should have favored bonds, mutual funds or other assets more suited to the couple’s needs
• Investing in unsuitable stocks, including penny stocks
• Causing direct investment losses and missed opportunities for gains they might have had in a reasonably invested portfolio. Shehu also made thousands of dollars in commissions buying and selling stocks that were unsuitable for the Chabots as retirees, the couple contends.
• Failing to advise the couple of the true nature of proposed and executed transactions to give them an opportunity to weight the possible benefits and disadvantages.

The couple contend their securities included a reasonably diversified portfolio before they invested with Shehu. They learned in April 2022 that their account had been mismanaged, which caused the couple emotional distress, according to the lawsuit.

In addition to negligence and breach of fiduciary duty, the Chabots accuse Shehu and his firm of negligent misrepresentation and violating the Connecticut Unfair Trade Practices Act. The lawsuit describes his practices regarding their investments as unethical and unscrupulous.

The complaint accuses Greenwich, Conn.-based Interactive Brokers of negligence, saying the broker-dealer breached its duty of care to the Chabots by not inquiring about the suitability of trades or reaching out to the couple to ensure they understood the significant trading going on in their names and in trusts they had established.

Interactive’s conduct resulted in the couple’s assets being depleted, the complaint contends.

Shehu didn’t immediately respond to an email seeking comment on the case. A representative of Interactive Brokers didn’t have an immediate comment.

The Financial Industry Regulatory Authority last year reported that Shehu, also known as Sam Shehu, submitted a letter of acceptance, waiver and consent to settle rule violations, without admitting or denying them, in an unrelated matter.

In that case, FINRA alleged Shehu, as a general securities representative with LPL Financial from February 2019 to August 2020, electronically signed his registered representative partner’s signature on multiple forms, including new account applications and discretionary authorization agreements, violating FINRA rules and LPL policy.

On Sept. 25, 2020, LPL filed a Form U5 with FINRA terminating Shehu’s registration for submitting an account application “without obtaining proper authorization from his firm joint representative,” according to FINRA. “Shehu’s misconduct is aggravated by his effort to conceal the falsifications from LPL,” according to FINRA.

Shehu was fined $7,500 and given a two-month suspension in that case.

Image: Shutterstock