FINRA Fines Houston Firm and Registered Principal
The Financial Industry Regulatory Authority (FINRA) has announced that it has fined Bluechip Securities Incorporated out of Houston, Texas and its registered principal, Muhammad Akram Khan for excessive trading (churning) of public customer accounts. The firm and Khan submitted a Letter of Acceptance, Waiver and Consent whereby the firm was fined $15,000 and Khan was fined $385,000, in addition to being suspended from associating with any FINRA firm in any capacity for eighteen (18) months, beginning July 5, 2011 and ending January 4, 2013 (FINRA Case# 2009016264301). According to the FINRA notice, Mr. Khan will have to pay the $385,000 fine as soon as he goes with another FINRA firm following his suspension or before he files any application requesting relief from statutory disqualification, whichever comes first. By submitting a Letter of Acceptance, Waiver and Consent, the firm and Khan are consenting to the charges without admitting or denying them.
According to the investigation, Mr. Khan made some $380,296 in commissions off of the trades he made, while at the same time generating losses in the customer accounts of roughly $399,000. In one account the commission-equity ratio was 22,131%. In another public customer account the commission-equity ratio was roughly 450%. The FINRA investigation revealed that Khan made recommendations to his customers to engage in options trading, when the customers’ investment objectives and tolerance for risk made such recommendations unsuitable for them. Furthermore, Khan allegedly used his own discretion in trading options in customers’ accounts without having authority to do so.
Additional delinquencies were found for the firm. Some of them included the failure to have an independent test of its AML Compliance Program, the failure to maintain books and records for its net capital requirements and omitting various liabilities when calculating the firms’ net capital. It was also discovered that Khan would frequently communicate electronically with public customers without maintaining documentation of the communications, as required by the SEC. Finally, Mr. Khan submitted quarterly Financial and Operational Combined Uniform Single (FOCUS) Reports that did not contain accurate net capital computations. Accordingly, FINRA declared that Bluechip Securities had failed to maintain the minimum net capital as required by the SEC and that the firm had not notified the SEC of its net capital deficiency.
According to the FINRA BrokerCheck report on Khan, he had one other regulatory event for failing to comply with an arbitration award or settlement agreement, which resulted in a suspension on April 7, 2011. That apparently was related to a FINRA arbitration award against him in October 2010 for $97,030 in compensatory damages also related to churning a customer’s account. The BorkerCheck Report indicates that Khan attempted to have the award vacated but that request was denied. He had a total of four (4) customer complaints, with one pending.
If you were a customer of Muhammad Akram Khan and your account was churned, please contact our securities law firm for a confidential consultation at 1-800-259-9010.