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Representing Individual, High Net Worth & Institutional Investors

Office in Indiana




Maddox Hargett & Caruso, P.C., based in Indianapolis, is looking into financial advisors and brokers that trade excessively in client accounts. One of the most common securities industry abuses is “churning,” or trading excessively to generate broker commissions. Due to these methods, investors have lost millions of dollars.

The Securities and Exchange Commission of the United States has ordered Aegis Capital Corp. of New York City to pay “approximately $2.8 million, including $1.7 million in restitution to 68 customers whose accounts were potentially excessively and unsuitably traded by the firm’s representatives,” according to FINRA. According to, FINRA also fined Aegis $1.1 million for supervisory violations.

“Aegis supervisors failed to detect or act on information that eight Aegis reps traded customer accounts excessively and unsuitably over a four-year period, generating $2.9 million in trading costs that would have required investments to generate more than 71 percent returns to offset costs,” according to FINRA. “Aegis failed to create a supervisory system reasonably tailored to comply with FINRA’s suitability rule from July 2014 to December 2018,” according to FINRA. As a result, Aegis failed to detect and resolve possibly excessive and unsuitable trading in customer accounts by its representatives, including trading by eight Aegis representatives who unduly traded 31 customers’ accounts, according to the regulator.

According to FINRA, Aegis had information of broker churning reports. “The firm failed to act on more than 900 ‘exception reports’ provided by its clearing firm that highlighted possibly unsuitable trading, as well as more than 50 client complaints alleging excessive, unsuitable, or unlawful trading in their accounts,” according to FINRA. According to fa-mag, Aegis, which was founded in 1984, has 37 compliance and enforcement declarations for sales and best execution violations in the BrokerCheck database.

“The hallmark of appropriate supervision is recognizing and responding to red signals, and it’s a vital component in preventing excessive and improper trading in customer accounts,” said Jessica Hopper, executive vice president and head of FINRA’s Department of Enforcement. According to the regulator, Aegis and two of its supervisors agreed to “accept and consent to the entry of FINRA’s findings without acknowledging or disputing them.”

Excessive trading in one’s account should be avoided by all investors. Churning is traditionally measured using two metrics. The “2-4-6” rule is the first of these. This statistic has been utilized by courts and regulators for many years. There is a “inference” of churning if your account is turned-over (meaning total trades equal total equity in the account being traded or turned-over one time) two times every year. There is a “presumption” of churning if the account is turned over four times each year; and if the account is turned over six times or more per year, it is “conclusive” of churning. The cost-to-equity ratio is also taken into account by courts and regulators. Simply put, the S&P 500 has historically returned around 13% every year. You’re being ripped off if your account has to earn 13% just to pay the cost of trading.

Maddox Hargett & Caruso, P.C. represents investors nationwide who are trying to recover their losses. You can call or email our senior partner Mark Maddox to have your potential case evaluated at no charge. Please call 317-598-2043 or email him at

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