Joseph Cotter from Charlotte, North Carolina, Suspended for Excessive Trading

We are currently investigating allegations made against Joseph L. Cotter, a financial advisor from Charlotte, North Carolina who previously worked with Next Financial Group.  FINRA (the Financial Industry Regulatory Authority) brought a regulatory action against Mr. Cotter making various allegations, including that Cotter engaged in excessive trading or churning.

According the FINRA complaint, from January 2014 to December 2015, Joseph Cotter excessively traded his customers’ accounts.  It was alleged that one account had a turnover ratio of 9.84, and another had a turnover rate of 5.3.  FINRA also alleged that the cost to equity ratio in these accounts were 23.2% and 20.02%, respectively.  To settle these allegations, Cotter agreed to a nine-month suspension, a fine of $15,000, and disgorgement of over $100,000 in commissions.  However, brokers who are suspended this long rarely pay the fine and disgorgement.

Excessive Trading or Churning

One of the most common ways to determine whether the account was excessively traded or churned is to determine the annual turnover ratio.  This ratio shows how often the securities in the account are bought or sold within a year.  Authority has held that an annual turnover of 4 or more is a “presumption” of churning, and an annual turnover of 6 or more is a “conclusion” of churning.  Thus, if the accounts had turnovers over 6, then there would be a conclusion that there was churning or excessive trading.

Another way to determine whether there was excessive trading is the cost equity ratio.  This ratio takes the commissions generated by the trading, divided by the average value of the account.  This ratio essentially determines the returns that an account needs to make just to break even. Thus, an account with a cost-equity ratio of 15% would need to earn 15% just to break even from all the costs of trading.

Joseph Cotter was a registered representative and financial advisor of Next Financial Group from June 2008 to March 2016.  He worked at a branch office in Charlotte, North Carolina.  According to Cotter’s BrokerCheck report, he has been the subject of at least two customer complaints as well.

Broker-dealers like Next Financial Group have a responsibility to adequately supervise all representatives who are registered through their firm, including investments sold by their registered representatives.  Broker-dealers also must take steps to ensure that their financial advisors follow all securities rules and regulations, such as to refrain from excessively trading a customer’s account.  When broker-dealers fail to adequately supervise their registered representatives, they may be liable for investment losses sustained by customers.

Israels & Neuman PLC is a securities and investment fraud law firm with offices in Denver, Colorado and the Seattle area.  We represent investors in FINRA arbitration proceedings in all 50 states, including investors in North Carolina and in Charlotte.  Our attorneys have represented over one thousand investors against many brokerage firms in the past, including Next Financial Group.

Click to view:  Cotter, Joseph FINRA AWC

Click to view:  Cotter, Joseph BrokerCheck 10.18.17

If you lost money with Joseph Cotter or Next Financial Group, please Contact Us at 720-599-3505 for a free evaluation of your case.

Israels & Neuman, PLC is a private law firm and is not affiliated with any government or law enforcement agency.  Any investigation referenced in this blog is independent in nature and is being conducted by our law firm privately, not in conjunction with any government or law enforcement agency.  All information contained in this blog should be deemed statements of opinion derived from the author’s review of public records, not statements of fact.  This blog is advertising material and does not create an attorney client relationship, nor does it constitute legal advice.  Everyone’s situation is different and the question of whether or not you have a claim will vary on a case-by-case basis.  In contingent representation, clients may still be liable for costs.