10.0David P Neuman
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Rasheed “Richard” Adams, and Excessive Trading


We are currently investigating allegations made against Rasheed “Richard” Adams, a financial advisor from New York City who previously worked with Caldwell International Securities.  FINRA (the Financial Industry Regulatory Authority) brought a regulatory action against Mr. Adams making various allegations, including that Adams engaged in excessive trading or churning; and b) that he failed to provide adequate documentation in response to FINRA’s investigation.  FINRA barred Adams for this conduct.


According the FINRA complaint, from July 2013 to June 2014, Rasheed Adams excessively traded at least two of his customers’ accounts.  FINRA alleged that one customer had an annual turnover ratio of 16.14, and a cost-to-equity ratio of 71%.  A second customer was alleged to have an annual turnover of 19.16 and a cost-to-equity ratio of 92%.


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.

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 some of Rasheed Adams’s customers had a cost-equity ratio of over 70% on an annualized basis.  As such, these customers’ accounts had to make more than 70% in returns just to break even from the costs of trading.

Rasheed “Richard” Adams was a registered representative and financial advisor of Caldwell International Securities from June 2011 to May 2015.  Adams worked at a branch office in New York, New York.  In addition to this regulatory investigation, Adams was also the subject of at least five previous customer complaints, as well as at least 13 liens or judgments against him.

Broker-dealers like Caldwell International Securities 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.  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 Rasheed “Richard” Adams or Caldwell International Securities, please Contact Us at 720-599-3505 for a free evaluation of your case.


Click to view:  Adams FINRA AWC

Click to view:  Adams BrokerCheck 8.6.15

Israels & Neuman, PLC is a private law firm and is not affiliated with any government or law enforcement agency. Any investigation referenced in this blog is independent in nature and is being conducted by our law firm privately, not in conjunction with any government or law enforcement agency. All information contained in this blog should be deemed statements of opinion derived from the author’s review of public records, not statements of fact. This blog is advertising material and does not create an attorney client relationship, nor does it constitute legal advice. Everyone’s situation is different and the question of whether or not you have a claim will vary on a case-by-case basis. In contingent representation, clients may still be liable for costs.
10.0David P Neuman


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