FINRA Department of Enforcement filed a Complaint against Financial West Group securities broker Daniel Maughan (CRD#: 2561363, Los Angeles, California). The Complaint, dated August 14, 2019, alleges that Maughan, who worked for Financial West Group from 2010 to 2017, violated securities laws and FINRA rules by churning and excessively trading a client’s account. Supposedly, Maughan’s excessive and unsuitable transactions caused the customer substantial losses. Read on to learn more about the troubling allegations against Maughan.
FINRA Department of Enforcement claims that Daniel Maughan violated SEC and FINRA Rules and federal securities laws from 2010 until 2015 by excessive trading and churning by making over 1,600 trades ($70,000,000 in value) in a Financial West clients’ trust account known as the IFT Account.
Daniel Maughan allegedly caused the client to lose $812,000 from Maughan’s excessive trades and churning of the IFT Account. Indeed, FINRA alleged that Maughan’s trades were “quantitatively unsuitable.” Notably, cost-to-equity ratios, which look at how much the client’s holdings have to increase in value to cover commissions, fees and expenses, can demonstrate excessive trading when 20% or higher, and therefore quantitative unsuitability. Allegedly, the client’s IFT Account contained a cost-to-equity ratio exceeding 21%. FINRA says that the client paid more than $840,000.00 in commissions and costs.
FINRA claimed that Daniel Maughan recommended qualitatively unsuitable options trades in violation of FINRA and NASD Rules. Specifically, Rule 2111 requires securities brokers to have a reasonable basis to believe an investment strategy is suitable for investors if the broker makes investment recommendations. Without knowing the client’s financial situation, current holdings, and needs, a securities broker lacks this reasonable basis. Moreover, securities brokers are not allowed to advise clients on options transactions without the client having, among other things, financial experience and financial capabilities of taking on risks of options transactions.
Daniel Maughan supposedly recommended several unsuitable options trading strategies for two IFT Account holders, RI and JAI. FINRA claimed that those strategies were not suitable because they failed to align to RI and JAI’s goals including capital appreciation and income. Not only that, but FINRA claimed Maughan’s recommendations were unsuitable because he did not have a reasonable basis to believe RI and JAI knew of options trading strategies risks at the time that he made the trades. Also, FINRA claims the entirety of Maughan’s exchange traded product (ETP) transactions were unreasonable.
Allegedly, Daniel Maughan executed unsuitable leveraged and inverse leveraged exchange traded fund trades. FINRA stated that those investments were very risky and volatile; only intended for sophisticated investors. Allegedly, RI and JAI did not know about risks of the leveraged exchange traded funds. The Complaint also alleged that the IFT Account held those investments for longer than appropriate.
A client of Financial West Group brought FINRA Arbitration #: 15-02211 on September 9, 2015. Allegedly, Daniel Maughan breached a fiduciary duty to the client, failing to put the client’s interest first. Secondly, the client claimed that Maughan breached an investment agreement. Thirdly, Maughan supposedly misrepresented investments. Apparently, the client incurred losses from OTC equities, options and penny stock trades because of Maughan. On March 29, 2017, Financial West Group opted to settle this matter by paying the client $550,000.
Apparently, Daniel Maughan worked for Wedbush Morgan Securities before joining Financial West Group. Evidently, a Wedbush client filed a dispute about him. Among other things, the claim alleged Maughan gave unsuitable advice and acted negligently. This supposedly caused the client to incur losses on OTC equities, mutual funds and ETFs. For this reason, Wedbush Morgan Securities compensated the client to settle. Also, Daniel Maughan disclosed on FINRA BrokerCheck that two Merrill Lynch clients filed a dispute about his allegedly unauthorized trading. One of those clients also claimed Maughan churned the client’s account and made unsuitable stock trades. Merrill Lynch settled both claims by collectively paying clients more than $97,000.
Have you experienced losses by investing with Daniel Maughan? If so, contact Soreide Law Group at (888) 760-6552 and speak with experienced counsel about a possible recovery of your investment losses. Soreide Law Group represents clients on a contingency fee basis and advances all costs. The law firm has recovered millions of dollars for clients who have suffered losses due to misconduct of brokers and brokerage firms.
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