Finra has filed a complaint against registered representative Stewart Ginn for aggressively churning and trading in the accounts of five mostly elderly investors, costing them nearly $4.5 million in investment losses and commissions.

Ginn’s alleged violations took place between July 2020 and December 2022 while he was registered with Independent Financial Group, LLC (IFG) in Encinitas, Calif., according to Finra’s complaint.

“Ginn engaged in frequent in-and-out trades in the five customers’ accounts, while charging high commissions on both buys and sells. Ginn’s trading caused the five customers to incur realized losses of more than $2.22 million, while generating more than $2.24 million in commissions for Ginn and IFG,” Finra said.

The regulator alleges Ginn’s churning and aggressive trading constitutes fraud and willfully violated Regulation Best Interest and numerous Finra rules.

Ginn, who settled one customer complaint for churning for $400,000 late last year, and has two other complaints pending against him, did not respond to a request for comment. But according to his BrokerCheck report, he “disputes the facts” relating to the complaint and plans to “contest the charges vigorously.”

While Ginn was allegedly churning and excessively trading their accounts, one of the customers was in her late 80s and suffering from Alzheimer’s disease, a second retired customer was in her late 70s, and a third retired customer was between 69 and 71 years old, according to Finra. 

One of the five clients was the retirement plan of a small dental practice.

Ginn, who is currently registered as a rep with Navian Securities, routinely recommended that the customers buy large equities positions, “which he then quickly sold,” even when the price of the stocks had changed only minimally, according to Finra’s complaint.

In at least four of the customers’ accounts, Ginn also “improperly traded on discretion” and, in addition, frequently engaged in buying and selling securities without obtaining customer authorization for each transaction according to the regulator.

Because of the high commissions Ginn charged—generally 3% on buy transactions and 2% on sell transactions—losses mounted for the five customers, who Ginn had bought as part of a book of business purchase from a former IFG rep who died suddenly in December 2018.

“Disregarding the cumulative impact of his excessive, high-cost trading, Ginn persisted in placing frequent trades in each of the customers’ accounts throughout the relevant period, even as each account incurred substantial realized losses,” Finra said.

Ginn’s trading resulted in annualized cost-to-equity ratios (or break-even points) of 14% to 27% in the customers’ accounts, making it unlikely they would realize a profit, Finra said.

“None of the five customers had experience with short-term stock trading or its costs, and none had an aggressive investment objective. On the contrary, each of the five customers pursued a long-term buy-and-hold investment strategy in their accounts” with their former rep,” Finra added.

Ginn settled a customer complaint in December for $400,000 from a customer seeking $1.2 million, according to his BrokerCheck report. The client alleged “commissions were excessive, that the investments in her account were unsuitable and that sales in her account resulted in significant profit which, in turn, created capital gains and a tax liability.”

Two other customer complaints are pending against Ginn. A complaint seeking $1.4 million alleges excessive commission charges. Another seeking $120,000 claims suitability violations.