According to the Financial Industry Regulatory Authority Inc. (FINRA), Caldwell International Securities Corp. (CISC), a Texas wealth management firm, will pay more than $2 million in fines and restitution, to settle charges that the broker-dealer’s senior management failed to supervise partner offices where brokers were allegedly churning client accounts. Caldwell International’s founder, Greg Caldwell, will pay $50,000 and was barred from acting as a principal in another securities business.
Churning is excessive trading by a broker or financial advisor in a client's account to generate commissions. Churning is illegal and unethical and violates the SEC’s rules and securities laws. Frequent buying and selling of securities that do little to meet the client's investment objectives can be construed as evidence of churning.
According to FINRA, Caldwell International Securities Corp. failed to prevent unsuitable investment methods and churning as they expanded and shifted strategies. Caldwell’s supervisory systems and procedures did not evolve with the risks that were associated with its growth.
FINRA stated that Caldwell began as a small broker-dealer operating its home office out of former president, Lennie Freiman's home in Fischer, Texas until 2011. Caldwell International Securities Corp. began to rapidly expand in 2011, and opened branches in New York and New Jersey. The new business included cold calling investors, speculative equity trading, and soliciting investors outside the U.S. Lennie Freiman also agreed to be barred and pay a $75,000 fine.
According to FINRA, Caldwell and other senior management knew about the inappropriate investment strategies but did nothing to stop them, even as clients called to complain.
If you were a client of Caldwell International Securities Corp. and experienced losses due to your broker or financial advisor’s recommendations, call Soreide Law Group for a no-cost consultation regarding the possibility of recovering your losses at: 888-760-6552.
Soreide Law Group represents clients nationwide before FINRA and we operate on a contingency basis.
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