Churning Lands Firm, Broker in Hot Water
An arbitration panel of the Financial Industry Regulatory Authority (FINRA) has awarded an investor $1.9 million in a case involving “churning” and JHS Capital Advisors (formerly named Pointe Capital) and former broker Enver R. Alijaj.
Churning is a fraudulent practice in which stockbrokers or firms increase their commissions by excessively trading in a client’s account.
As reported July 17 by Investment News, the investor’s complaint included allegations of churning and common law fraud, among other claims.
JHS Capital Advisors is owned by a holding company controlled by John Sykes, who became part of the broker/dealer industry by purchasing preferred shares of GunnAllen Holdings in 2008. He later resigned from the board of GunnAllen. Sykes’ firm, JHS Capital Holdings Ltd., then bought Pointe Capital in 2009 and renamed it JHS Capital Advisors.
Alijaj worked for Pointe Capital from May 2007 to December 2008, according to FINRA’s BrokerCheck system. He left the firm for another independent brokerage, John Thomas Financial, but later returned to Pointe Capital in June 2009.
According to BrokerCheck, Alijaj was ordered by a FINRA arbitration panel in July 2009 to pay $500,000 as part of a $1.6 million churning settlement with a client he worked with at Pointe Capital and John Thomas Financial. Alijaj denied allegations in that settlement. Alijaj left JHS Capital in April 2010 and is currently affiliated with Legend Securities.
Incidences of churning are on the rise. As of June 2012, churning is one of the most common claims filed by investors against stockbrokers and firms with FINRA.