The Financial Industry Regulatory Authority’s Department of Enforcement has filed a disciplinary proceeding complaint against broker Kishan Parikh, who also goes by the name Sean Parikh. The complaint alleges that from August 2014 through 2016, while employed by Aegis Capital Corp. (“Aegis Capital”), Mr. Parikh made unsuitable recommendations and excessively traded the accounts of five of his customers.
A few weeks ago, Aegis Capital was fined $80,000 and censured by FINRA over multiple FINRA and MSRB Rules violations. The firm was also ordered to pay restitution of $43,912 to customers.
Aegis Capital has a long history of sanctions. In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure.
If you were a customer of broker Kishan (Sean) Parikh or Aegis Capital Corp., contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
FINRA Disciplinary Proceeding No. 2021070337401
On March 17, 2021, FINRA Department of Enforcement filed a complaint against broker Kishan Parikh. The complaint includes four causes of action: (1) Excessive Trading / Quantitative Unsuitability (FINRA Rules 2111 and 2010); (2) Unauthorized Trading (FINRA Rule 2010). The FINRA complaint includes the following specific factual allegations:
- Parikh controlled the trading in his customers’ accounts and executed 442 trades with a principal value of approximately $31.1 million.
- Parikh’s excessive and unsuitable trading in the customers’ accounts resulted in annualized turnover rates ranging from 10.9 to 199.8 and annualized cost-to-equity ratios (or break-even points) ranging from 27.5% to 59.7% and caused combined losses of more than $33,000.
- At the same time, Mr. Parikh’s trading generated gross sales credits and commissions of $179,112, of which Mr. Parikh received at least $89,000.
- Also, Mr. Parikh executed 53 trades with a total principal value of approximately $4.2 million in the accounts of two without their prior authorization.
Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.
There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. FINRA’s Department of Enforcement alleged that trading in the subject accounts had turnover ratios from 10.9 to 199.8.
The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break-even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. The accounts at issue had cost-to-equity ratios of 27.5% to 59.7%.
Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.
Excessive trading and unauthorized trading are unethical and illegal practices. They are all also violations of securities rules and regulations and can cause enormous harm to customers.
According to the complaint, by engaging in excessive and unsuitable trading in the Customers’ accounts, Parikh violated FINRA Rules 2111 and 2010. By engaging in unauthorized trading, Mr. Parikh violated FINRA Rule 2010.
Financial Advisor Kishan Parikh (CRD No. 5506554)
Mr. Parikh had ten years of experience in the securities industry and has been associated with the following firms:
- Aegis Capital Corp. in New York, NY, from May 2012 to April 2019.
- Max International Broker/Dealer Corp. in New York, NY, from April 2008 to May 2012.
Mr. Parikh, who has not been registered with a broker-dealer since April 2019, has also been the subject of two customer disputes.
In 2017, a customer filed a securities arbitration complaint alleging that Mr. Parikh engaged in excessive trading and made unsuitable investment recommendations. The complaint alleged $350,000 in damages. Aegis Capital settled the matter for $499,999.
In February 2021, a customer filed a securities arbitration complaint alleging unsuitable investment recommendations. The dispute is still pending.
Aegis Capital Corp. – Supervisory Duties
Brokerage firms like Aegis Capital must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise their financial advisors or the investment account activity, they may be liable for investment losses sustained by customers.
How to Recover Financial Losses or Obtain a Free Consultation
If you or a loved one were a customer of Kishan Parikh or Aegis Capital and either sustained financial losses or suspect that Mr. Parikh did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at email@example.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.