SEC charges two Brokers using In and Out Trading Strategy


The US SEC charges two brokers for using in-and-out trading strategy. What is this strategy and what should you do to protect yourself?

11 January, AtoZForex – The US Securities and Exchange Commission SEC charges two brokers that are based in New York. The watchdog stated that the two brokers fraudulently used an in-and-out trading strategy that is not suitable for customers. Additionally, the regulator states that they did that to generate huge commission for themselves.

SEC charges two brokers

The regulator’s complaint states that Gregory T. Dean and Donald J. Fowler did not do any reasonable effort to ensure their customers’ profit. Also, the brokers did not determine if their strategy, involving frequent buying and selling of securities, could deliver even a minimal profit for their customers.

Additionally, their strategy involved selling the securities within a week or two of purchase and charging customers a commission for each transaction. Hence, that resulted in substantial losses for as much as 27 customers.

SEC’s Director statement

The Director of the SEC’s New York Regional Office and Co-Chair of the Enforcement Division’s Broker Dealer Task Force Andrew M. Calamari stated:

“This case marks another chapter in the SEC’s pursuit of brokers who deploy excessive trading. As a strategy in customer accounts to enrich themselves at customers’ expense.”

He added that the SEC’s accusations are based on the regulator’s examination of trading patterns across over 24 customer accounts. Also, he stated that this trading data showed that the brokers only aimed to profit from this cost-laden in-and-out strategy.

SEC’s Investor Alert warning 

Yesterday, the watchdog issued an Investor Alert warning about extreme trading and churning that can happen in brokerage accounts. Also, the Director of the SEC’s Offices of Investor Education and Advocacy Lori J. Schock stated that investors should be cautious of trading with no authority. He added:

“If you do not know why a trade was made or why a fee was charged, ask your broker to explain it to you.”

Also, Lori J. Schock stated that investors should be aware of unauthorized frequent sales and purchases, and excessive fees in their brokerage accounts.

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