Chris Palkowitsh, and Excessive Trading
We are currently investigating allegations made against Chris L. Palkowitsh, a financial advisor from Redlands, California who previously worked with Equinox Securities. FINRA (the Financial Industry Regulatory Authority) brought a regulatory action against Mr. Palkowitsh and Equinox Securities making various allegations, including that a) Palkowitsh engaged in excessive trading or churning; b) that he made unsuitable investment recommendations by having some of customers concentrated in one security; and c) that Equinox Securities failed to adequately supervise Palkowitsh.
According the FINRA complaint, from November 2008 to June 2012, Chris Palkowitsh excessively traded his customers’ accounts, some of which were IRAs. He generated huge commissions and annualized cost-to-equity ratios, which led to over $800,000 in losses for his customers. FINRA also alleged to Equinox Securities failed to adequately supervise Palkowitsh.
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.
FINRA alleged that some of Chris Palkowitsh’s customers had a cost-equity ratio of 100% on an annualized basis. As such, these customers’ accounts had to more than double in returns just to break even from the costs of trading.
Chris Palkowitsh was a registered representative and financial advisor of Equinox Securities from May 2008 to August 2013. He worked at a branch office in Redlands, California. While at Equinox, Palkowitsh became the subject of at least three federal tax liens that totaled over $300,000. According to Palkowitsh’s BrokerCheck report, he has been the subject of at least two customer complaints as well.
Broker-dealers like Equinox Securities 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 California. Our attorneys have represented over one thousand investors against many brokerage firms in the past, including LPL Financial, Merrill Lynch, Morgan Stanley, Smith Barney, Stifel Nicolaus & Company, UBS Financial Services, Oppenheimer, Charles Schwab, Wells Fargo Advisors, Ameriprise Financial Services, Raymond James Financial Services, ProEquities, Securities America, National Securities Corp., and many others.
If you lost money with Chris Palkowitsh or Equinox Securiteis, please Contact Us at 720-599-3505 for a free evaluation of your case.
Click to view: Palkowitsh FINRA Comp
Click to view: Palkowitsh BrokerCheck 7.28.15