Securities Arbitration Lawyer Blog
FINRA has suspended financial advisor Trevor B. Rahn from the securities industry for 18 months and fined him $10,000.
FINRA alleged that Mr. Rahn engaged in a pattern of breaking up customer orders for execution in violation of FINRA Rules. Specifically, from January 2014 to September 2018, Mr. Rahn recommended an “average pricing” investment strategy to his customers in which he executed orders by breaking them into multiple small trades, each generating a separate commission. Mr. Rahn lacked a reasonable basis to believe this strategy was suitable for his customers. Connected with this strategy, Mr. Rahn exercised time and price discretion on over 7,500 trades without the required authorization.
FINRA also alleged that Mr. Rhan executed 577 unauthorized trades in a customer’s account and that he mismarked 4,714 solicited trades in three customer accounts as “unsolicited” in violation of FINRA Rules.
The alleged conduct occurred while Mr. Rahn was employed by J.P. Morgan Securities LLC in Los Angles, California. J.P. Morgan terminated his employment in September 2018. According to the New York Times, Mr. Rahn was fired after he was accused of unauthorized trading, excessive trading, and excessive fees in an elderly customer’s account. A forensic analysis on the account at issue, which was worth approximately $1.3 million, revealed that the customer was charged $128,000 in commissions, which is ten times the typical amount for an account that size.
If you have suffered financial losses investing with Trevor Rahn, or suspect that Mr. Rahn did not have your best interest in mind when recommending investments or investment strategies, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account or annuity contract.
Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as J.P. Morgan Securities.
FINRA Letter of Acceptance, Waiver, and Consent No. 2018059251701
FINRA and Mr. Rahn entered into a Letter of Acceptance, Waiver, and Consent No. 2018059251701 on March 19, 2021, after FINRA alleged that Mr. Rahn made a series of unsuitable investment strategy recommendations, unauthorized trades, and mismarked orders.
Mr. Rahn’s Unsuitable “Average Pricing” Investment Strategy
Between January 2014 and September 2018, Mr. Rahn made recommended an “average pricing” investment strategy to his customers in which he executed orders by breaking them into multiple small trades, each generating a separate commission. Specifically, FINRA alleged:
- Rahn recommended an “average pricing” investment strategy to customers in which he executed orders in 32 accounts by breaking them into multiple smaller trades that he entered at different times on the same day.
- When entering the smaller trades, Mr. Rahn often entered a separate commission on each trade that was greater than the amount that would be charged under the firm’s standard commission schedule.
- Rahn relied on the firm’s system to automatically assign commissions in accordance with the firm’s commission schedule without taking steps to confirm it actually did so.
- Because Mr. Rahn failed to conduct the necessary reasonable diligence to understand the cost implications of his recommended strategy, he lacked a reasonable basis to recommend his “average pricing” strategy to his customers.
- Therefore, Rahn violated FINRA Rules 2111(a) and 2010.
- Also, to implement his “average pricing” strategy, Mr. Rahn exercised time and price discretion by breaking up 1.106 customer orders into over 7.500 smaller trades.
- NASD Rule 2510(b) generally prohibits a registered representative from exercising discretionary power in a customer’s account without prior written authorization from the customer and written acceptance from the member firm. While NASD Rule 2510(d)(1) provides an exception for same-day time and price discretion, “[a]lny exercise of time and price discretion must be reflected on the order ticket.”
- Rahn did not have written authority from any of his customers, or written acceptance from his firm, to exercise discretion in any customer accounts. None of the tickets for the over 7,500 trades reflected an exercise of time and price discretion. Instead, Mr. Rahn entered all of these trades as “held” orders, meaning that each order was intended to be promptly placed. Therefore, Rahn violated NASD Rule 2510(b) and FINRA Rule 2010.
Mr. Rahn’s Unauthorized Trades
FINRA alleged that Mr. Rahn executed 577 unauthorized trades in a customer’s account.
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.
Unauthorized trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.
Mr. Rahn’s Mismarked Orders
FINRA alleged that Mr. Rahn mismarked 4,714 solicited trades in three customer accounts as “unsolicited.”
A “solicited” trade is a trade that was the broker’s idea. It is a trade where the financial advisor initiated and recommended the buy or sell transaction to the client.
An “unsolicited” trade is a trade that the customer initiated. It is a trade made by the client on their own initiative, without recommendations, suggestions, or prompting from the broker.
A financial advisor who marks order tickets as “unsolicited” even though the trades were the financial advisor’s idea violates FINRA Rule 2010. To read more about solicited and unsolicited trades, click here.
Financial Advisor Trevor Bradner Rahn (CRD No. 2196155)
Trevor Rahn had 26 years of experience in the securities industry and has been associated with the following firms:
- P. Morgan Securities LLC in Los Angeles, CA, from July 2010 to September 2018.
- Deutsche Bank Securities Inc. in Los Angeles, CA, from March 2008 to September 2010.
- Morgan Stanley & Co., Incorporated in Beverly Hills, CA, from April 2007 to March 2008.
- Morgan Stanley DW Inc. in Beverly Hills, CA, from October 1999 to April 2007.
- Merrill Lynch, Pierce, Fenner & Smith Incorporated in New York, NY, from January 1992 to October 1999.
J.P. Morgan terminated Mr. Rahn’s employment in September 2018. In connection with the discharge, J.P. Morgan alleged that Mr. Rahn engaged in unacceptable practices relating to the timing and size of orders entered, resulting in transaction charges and marking of certain orders for an account as unsolicited.
According to his public disclosure report with FINRA, Mr. Rahn is the subject of an unsatisfied lien in the amount of $763,425 by DB Bank Securities.
Also, according to his BrokerCheck Report, Mr. Rahn has been the subject of five customer disputes:
- Customer Dispute (April 2020): A customer alleged $125,000 in damages arising out of a private placement investment that was sold away from J.P. Morgan Securities LLC. The customer filed a complaint directly with the firm, and the firm denied the customer any compensation. The customer did not file a securities arbitration complaint.
- Customer Dispute (June 2019): A customer filed a complaint with J.P. Morgan Securities LLC, alleging $854,410 in damages. The customer alleged excessive trading and unauthorized trading and margin use. The firm settled the matter in October 2019 for nearly $550,000.
- Customer Dispute (November 2018): A customer filed a written complaint with J.P. Morgan Securities LLC in November 2018, alleging over $1.1 million in damages. The customer alleged that a number of transactions in the account were unauthorized. The firm settled the matter for $114,000.
- Customer Dispute (November 2017): A customer filed a written complaint, alleging that Mr. Rhan made unauthorized trades of closed-end funds. The matter was settled by J.P. Morgan Securities LLC for $64,590.
- Customer Dispute (October 2016): A written complaint was filed with J.P. Morgan Securities LLC in October 2016, alleging $57,847 in damages. The complaint alleged that in October 2015, the administrators of a client’s estate were not made aware of fees in connection with the liquidation of securities, which were excessive. The firm settled the matter for $57,847.
J.P. Morgan Securities LLC – A Duty to Supervise
Financial institutions like J.P. Morgan Securities LLC must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as annuity switches, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.
How to Recover Financial Losses or Obtain a Free Consultation
If you were an investor of Trevor B. Rahn and have suffered investment losses, or suspect that Mr. Rahn did not have your best interest in mind when recommending investments or investment strategies, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account or annuity contract.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.