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WARNING! Impending Investigation–WILLIAM HORBATUK JR. and PHX FINANCIAL INC.

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04
Nov

WARNING! Impending Investigation–WILLIAM HORBATUK JR. and PHX FINANCIAL INC.

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William Horbatuk Jr. and PHX Financial, Inc.

 

Have you lost money with financial advisor William Horbatuk Jr. from New York?  We are currently investigating allegations made by the Montana Commissioner of Securities and Insurance (CSI) made against William Horbatuk and PHX Financial Inc., the brokerage firm that Horbatuk worked for.  The Montana CSI brought a regulatory complaint against Horbatuk, PHX Financial, and three executives for PHX.

 

The Montana CSI alleges that William Horbatuk excessively traded (otherwise known as “churning”) the accounts of several customers of PHX Financial.  The Montana CSI also alleged that PHX Financial and the executives failed to adequately supervise Horbatuk’s activities, despite his past troubles.  In May 2013, the Montana CSI contacted PHX Financial and advised them that Mr. Horbatuk needed to be under heightened supervision because Horbatuk had eight disclosable events on his CRD report.  It was alleged that PHX Financial failed to implement any heightened supervision over Horbatuk’s activities.

 

Despite the request for heightened supervision, PHX was alleged to have failed to adequately supervise William Horbatuk while he excessively traded several accounts.  Some of these include the following allegations:

 

  1. One customer had invested $147,443 in his account. Over the span of 18 months, the turnover rate in the account was over 33, and the client lost $147,078;
  2. A second customer had a 7.78 turnover rate;
  3. A third customer had a 6.74 turnover rate; and
  4. A fourth customer had a turnover rate over 2.

 

Because of this conduct, the Montana CSI seeks to revoke PHX Financial’s broker-dealer license in Montana, and it seeks to deny Horbatuk’s application to affiliate with another broker-dealer, Legend Securities.

 

Turnover rates like this are troubling. The litmus test for excessive trading cases has traditionally been the “annual turnover ratio” (“ATR”) or the turnover rate. This refers to the ratio of the total cost of purchases made for an account during a specified period of time to amount invested.  Investopedia defines “portfolio turnover” as:

 

A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by taking either the total amount of new securities purchased or the amount of securities sold – whichever is less – over a particular period, divided by the total net asset value (NAV) of the fund. The measurement is usually reported for a 12-month time period.

 

See http://www.investopedia.com/terms/p/portfolioturnover.asp (last visited Feb. 18, 2014) (emphasis added).

 

It has long been said that an annualized turnover ratio of 4 is presumptive of churning; and annual turnover ratio of 6 is conclusive.  In his 1991 article, “Quantitative Measures and Standards of Excessive Trading Activity,” Securities Arbitration 1991 (PLI) Ch. 17, Professor Stewart L. Brown notes that the origin of the churning formulation set forth above is a 1967 Harvard Law Review Note (“Churning by Securities Dealers,”), which states that, “[i]t is possible to generalize from SEC cases that a complete turnover more than once every two months (i.e., an annual turnover rate of 6) is likely to be labeled excessive, and this conclusion appears reasonable.” Id. at 876.

 

William Horbatuk Jr. was a registered representative of PHX Financial Inc. from April 2013 to May 2014.  He is now currently registered with Legend Securities.  Horbatuk was suspended from the securities industry in 2009 for failure to abide by an arbitration award.  He also was fired from First Midwest Securities in 2007 for unauthorized outside business activities.

 

Broker-dealers like PHX Financial 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, as well as internal firm policies.  When broker-dealers fail to adequately supervise their registered representatives, they may be liable for investment losses sustained by customers.

 

Our attorneys have previously represented investors all over the country, including investors in Montana.  Our firm has offices in Denver and the Seattle-area, but we continue to represent investors throughout the U.S.  We have also represented investors who lost money because of excessive trading and churning.  If you have lost money through William Horbatuk and PHX Financial and want to hear about ALL legal options, please visit https://www.israelsneuman.com or call us at 720-599-3505.

 

Click here to view Complaint regarding William Horbatuk Jr.:  Horbatuk MT Complaint

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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