Corporate & Securities Law

SEC Charges Aura Financial With Excessive Churning

By Keith Griffin

Birmingham-based investment firm Aura Financial Services and six of its employees face lawsuits by the U.S. Securities and Exchange Commission (SEC) and the Alabama Securities Commission (ASC) on charges of ?rampant churning? of customer accounts,  supervisory failures and other securities violations.

The agencies allege that Aura Financial and its brokers used fraudulent and high-pressure sales tactics as a way to entice clients to open and invest money in brokerage accounts that were later churned by Aura brokers for their personal profit. 

Churning refers to when a broker engages in excessive trading of a customer?s account for the purpose of generating commissions or fees. 

According to a statement issued by the SEC, Aura and the brokers charged pocketed about $1 million in commissions and other fees while largely depleting the account balances of customers through trading losses and excessive transaction costs. 

In addition to the churning charges, the SEC and the ASC say Aura failed to properly supervise its brokers, several of whom had criminal or disciplinary backgrounds and multiple prior customer complaints. 

Aura has 28 days to prove to the ASC why its registration as a broker-dealer and agent in the state of Alabama should not be suspended or revoked.

Full post as published by Representing Investors on July 10, 2009 (boomark / email).