Regulators are taking action against a broker accused of implementing an aggressive trading strategy. This strategy allegedly earned the broker over $2 million in commissions, while leaving five clients with equal losses.
Stewart Ginn, a registered representative of Independent Financial Group based in the San Diego area, is at the center of this controversy. From July 2020 to December 2022, he executed frequent “in-and-out trades,” charging exorbitant commissions on both the buying and selling orders.
Ginn and Independent Financial Group have yet to respond to requests for comment.
According to Finra, Ginn acquired the book of business from an Independent Financial Group representative who had recently passed away in 2019. This book of business included the five clients who were targeted in this alleged trading scheme. Among these clients were four retail investors and a small dental practice’s profit-sharing plan.
Finra points out that none of these five customers had any prior experience with short-term stock trading or fully understood the associated costs. Furthermore, none of them had an aggressive investment objective, as stated in Finra’s complaint.
Ginn often advised his clients to purchase large positions in equities, only to quickly sell them off even when the stock hadn’t experienced significant movement. With a 3% commission on buy trades and a 2% commission on sales, Ginn ensured that his clients would routinely incur losses on these trades. Consequently, this created a cost-to-equity ratio that made it nearly impossible for them to make any profit, as highlighted by Finra.
Overall, regulators are taking swift action to address this broker’s alleged misconduct and protect the interests of affected clients.
Allegations and Losses
Finra has made serious allegations against Ginn, claiming that his trading activities resulted in over $2.22 million in losses for clients, while he generated commissions totaling $2.24 million. Among the affected clients were three retirees and an elderly Alzheimer’s patient in her late 80s. It is worth noting that none of these clients were described as aggressive investors.
Improper Trading Practices
Customer Complaints
BrokerCheck, an online database, reveals that there are currently two pending customer complaints against Ginn. In one complaint, the client alleges that the investments made or recommended by Ginn were unsuitable considering the client’s age. The client is seeking $1.4 million in damages as a result.
The second complaint, which seeks $120,000 in damages, accuses Ginn of subjecting the client to excessive commission charges. However, Ginn disputes this allegation and states in his broker comment on BrokerCheck that a preliminary review of the facts has not found any supporting information for the claim. He claims that the issue is without merit and fails to state a claim on which relief can be granted.
