WARNING! Impending Investigation: CRAIG L. JOSEPHBERG and EXCESSIVE TRADING
Craig L. Josephberg, and Excessive Trading
We are currently investigating allegations made against Craig L. Josephberg, a financial advisor from New York City. FINRA (the Financial Industry Regulatory Authority) brought a regulatory action against Mr. Josephberg making various allegations, including that a) he introduced his brokerage firm, Halcyon Cabot Partners, to an institutional investor in a company, causing Halcyon to be a placement agent for the company which turned out to be a bogus offering and defrauded investors; b) he engage in unauthorized trading of VGHI Holdings, Inc. in his customers’ accounts; and c) he engaged in excessive trading. To settle these allegations with FINRA, Josephberg agreed to be barred from the securities industry.
This was the second regulatory investigation into Craig Josephberg within the last year, as he was also the subject of an SEC investigation in July 2014.
Excessive Trading or Churning
One of the most common ways to determine whether the account was excessively traded or churned is to determine the annual turnover ratio. This ratio shows how often the securities in the account are bought or sold within a year. Authority has held that an annual turnover of 4 or more is a “presumption” of churning, and an annual turnover of 6 or more is a “conclusion” of churning. Thus, if the accounts had turnovers over 6, then there would be a conclusion that there was churning or excessive trading.
FINRA alleged that one of Craig Josephberg’s customers had a turnover ratio of 74.78 on an annualized basis. Another customer had a turnover ratio of 66.71. Thus, FINRA concluded that Josephberg was well beyond any reasonable threshold for excessive trading.
Another way to determine whether there was excessive trading is the cost equity ratio. This ratio takes the commissions generated by the trading, divided by the average value of the account. This ratio essentially determines the returns that an account needs to make just to break even. Thus, an account with a cost-equity ratio of 15% would need to earn 15% just to break even from all the costs of trading.
FINRA alleged that one of Craig Josephberg’s customers had a cost-equity ratio of 71.74% on an annualized basis. Another customer had a cost-equity ratio of 71.11%. As such, these customers’ accounts had to earn at least 71% just to break even from the costs of trading.
Craig Josephberg was also subject to an investigation by the Securities and Exchange Commission last year. The SEC alleged that Josephberg was involved in a scheme to manipulate the stock prices of several companies, including CodeSmart, Cubed Inc., and Staffing Group Ltd.
Craig L. Josephberg was a registered representative and financial advisor of Halcyon Cabot Partners from November 2010 to October 2013. He was also registered with Meyers Associates LP from October 2013 to August 2014. He worked at branch offices in New York City. In addition to the regulatory investigations above, Josephberg has been the subject of at least 7 customer complaints, two other regulatory investigations, a $204,000 tax lien, and a misdemeanor charge related to a “controlled substance”.
Broker-dealers like Halcyon Cabot Partners and Meyers Associates have a responsibility to adequately supervise all representatives who are registered through their firm, including investments sold by their registered representatives. Broker-dealers also must take steps to ensure that their financial advisors follow all securities rules and regulations, such as to refrain from excessively trading a customer’s account. When broker-dealers fail to adequately supervise their registered representatives, they may be liable for investment losses sustained by customers.
Israels & Neuman PLC is a securities and investment fraud law firm with offices in Denver, Colorado and the Seattle area. We represent investors in FINRA arbitration proceedings in all 50 states, including investors in New York and New Jersey. Our attorneys have represented over one thousand investors against many brokerage firms in the past, including LPL Financial, Merrill Lynch, Morgan Stanley, Smith Barney, Stifel Nicolaus & Company, UBS Financial Services, Oppenheimer, Charles Schwab, Wells Fargo Advisors, Ameriprise Financial Services, Raymond James Financial Services, ProEquities, Securities America, National Securities Corp., and many others.
If you lost money with Craig Josephberg or Halcyon Cabot Partners, please Contact Us at 720-599-3505 for a free evaluation of your case.
Click to view: Josephberg FINRA AWC
Click to view: Josephberg BrokerCheck 6.23.15