A broker with a track record of churning accusations is the focus of a Finra disciplinary proceeding that seeks to reclaim $1.6 million in commissions and fees that were allegedly generated from seven customers, the regulator said.
Between December 2014 and April 2020, William Nicholas Athas allegedly churned and excessively traded nine accounts belonging to seven customers at two New York firms, K.C. Ward Financial and Worden Capital Management, the complaint said.
That second firm, Worden Capital, has a recent history of its founder and other brokers being barred for churning or excessive fees, according to BrokerCheck. On Oct. 14, 2021, Worden Capital President Jaime Worden was permanently barred. The phone number for the firm is now disconnected. Last year, two other former Worden Capital brokers, John LoPinto and Emil Botvinnik, were also fined and suspended or barred for excessive trading.
According to Finra, Athas routinely executed short-term equities trades in nine accounts, holding stocks for an average of about 20 days. “When combined with his customary high commissions on each trade—2% to 3% on both buy and sells—and the use of margin in some accounts, Athas’ trading resulted in cost-to-equity ratios ranging from approximately 56% to 246%, and turnover rates ranging from approximately 17 to 75,” the filing said. “Athas’ churning and excessive trading caused these customers to pay approximately $1.6 million in commissions and other trading costs and to suffer approximately $1.1 million in losses. Conversely, Athas generated commissions of approximately $1.5 million for himself and his firms.”
Athas could not be reached for comment by press time. Finra’s enforcement department requested that a panel confirm that Athas committed the violations charged, sanction Athas and require him to disgorge any and all ill-gotten gains and make full restitution, including interest, and bear all costs of the proceedings, the complaint said.
According to the complaint, while associated first with K.C. Ward and then with Worden Capital, Athas opened accounts by cold-calling primarily small business owners or building contractors, nearly all inexperienced investors.
“Athas recommended and executed the same active in-and-out trading strategy in the nine accounts,” the filing said. “Athas recommended that each customer purchase a stock, and soon thereafter he recommended that the customer sell that stock and use the proceeds to purchase a different stock.”
The frequent trading, combined with the high commissions and other trading costs, made it virtually impossible for the affected customers to earn sufficient returns to cover account costs, much less earn a profit, the complaint said.
For example, one of the customers held three accounts with Athas, one in his own name and two in the name of two restaurants he owned, all of which, he told Athas, represented his retirement savings, according to the complaint.
From June 2015 to April 2016, the client’s personal account had an average monthly balance of just over $50,000. During that period, Athas allegedly made 102 short-term trades totaling close to $3,790,000 in principal value, holding the stocks shares for an average of 11 days, the complaint said. The trades generated transaction costs of about $111,500, and represented a turnover rate of about 75 and a cost-to-equity ratio of about 220%, the filing stated, adding that the account suffered at least $59,000 is realized losses.