Birmingham-based investment firm Aura Financial Services and six of its employees face lawsuits by the U.S. Securities and Exchange Commission (SEC) and the Alabama Securities Commission (ASC) on charges of “rampant churning” of customer accounts,  supervisory failures and other securities violations.

The agencies allege that Aura Financial and its brokers used fraudulent and high-pressure sales tactics as a way to entice clients to open and invest money in brokerage accounts that were later churned by Aura brokers for their personal profit. 

Churning refers to when a broker engages in excessive trading of a customer’s account for the purpose of generating commissions or fees. 

According to a statement issued by the SEC, Aura and the brokers charged pocketed about $1 million in commissions and other fees while largely depleting the account balances of customers through trading losses and excessive transaction costs. 

In addition to the churning charges, the SEC and the ASC say Aura failed to properly supervise its brokers, several of whom had criminal or disciplinary backgrounds and multiple prior customer complaints. 

Aura has 28 days to prove to the ASC why its registration as a broker-dealer and agent in the state of Alabama should not be suspended or revoked.

On June 21, 2009, the Securities and Exchange (SEC) and the Alabama Securities Commission filed fraud charges against Birmingham brokerage firm Aura Financial Services for rampant churning of customer accounts, widespread supervisory failures and other securities violations.

The SEC’s charges are somewhat unusual - and a possible indication of the severity of the problem facing Aura Financial - in that they apply to an entire firm versus and individual broker.

According to the SEC’s complaint, Aura Financial Services and six registered representatives used fraudulent sales practices and high-pressure tactics to convince customers to open and invest money in Aura’s brokerage accounts, which the brokers then subsequently churned. In doing so, Aura and the brokers made off with approximately $1 million in commissions and other fees from clients while largely depleting those same clients’ accounts through trading losses and excessive transaction costs.

“Aura and the six brokers treated the accounts of certain customers as their personal gravy train,” said Katherine S. Addleman, Director of the SEC’s Atlanta Regional Office. “These six brokers bought and sold securities in these accounts solely to generate commissions for themselves, with a total disregard for their customers’ investment goals. Despite numerous red flags, Aura allowed the improper churning to continue in order to profit from a share of the commissions, markups and other fees.”

What is your recourse if you are a client of Aura Financial Services? The best option may be to contact a qualified securities arbitration attorney who can review your account statements and recommend the next steps for possible recovery.