FINRA barred Charles Henry Frieda and Charles Bernard Lynch, formerly of Wells Fargo Advisors and Wells Fargo Clearing Services in Irvine, California, finding that the duo unsuitably over-concentrated customer funds in speculative oil and gas securities, resulting in significant customer losses. Customers ranged from elderly or retirement-aged clients and accounts to similarly moderate or conservative-minded investors who did not consent to risky and speculative investments.
The report indicates that from 2012 through 2015, Southern California brokers Frieda and Lynch recommended an unsuitable investment strategy to over 50 customers that involved an over-concentration in energy-sector securities, a handful of which were speculative, such as oil-and-gas stock Magnum Hunter Resources, which filed for bankruptcy in 2016.
In addition to Magnum Hunter Resources, Frieda and Lynch purportedly recommended unsuitably speculative oil-and-gas exploration company Halcon Resources Corp, whose value dropped from a 2014 high of over $35-per-share to less than $1 by 2016.
Investigators found that the over-concentration in speculative energy-sector securities exceeded 50% of some customers' net worth and that the recommendations were unsuitable given the customers' experience level, investment objectives and preferences, risk tolerance, time horizon, liquidity needs, and income levels.
When we first reported on Californians Lynch and Frieda in 2016, Frieda's BrokerCheck report included 17 customer complaints, with 14 disputes filed against Lynch.
For example, one client's complaint alleging losses stemming from Lynch's recommendation to purchase securities in the energy sector netted $850,000 in a settlement; another alleged unsuitable concentration in small cap energy sector securities for a $195,000 settlement; a third wrote that she specifically told Frieda that she "was not a risk taker," was purportedly assured that her investments in energy securities were not risky, yet lost "substantial assets" (settlement: $272,777); another customer outright complained that "there was too much MHR [Magnum Hunter Resources] in his account," yet he was advised to buy additional shares of the withering product (settlement: $250,000).
Another client wrote that despite expressing capital and income objectives, and that investments in energy stocks carried too much risk, Frieda and/or Lynch still recommended unsuitable oil-and-gas securities, resulting in loss of principal and receipt of "no income" (settlement: $490,000).
Other clients that reached settlement alleged wrongdoing ranging from suitability and concentration issues to misrepresentation; excessive, unsuitable and unauthorized trading; failure to communicate; untimely liquidation; unauthorized accounts opened without client permission; devastating loss of principal; churning; and negligence.
The common theme amongst these complaints is that Frieda and Lynch allegedly invested low-to-medium risk customers in high-risk oil-and-gas related companies and over concentrated the accounts in these positions, resulting in significant damages and losses; one customer cited a 70% loss, while another suffered "unconscionable" losses.
If you have invested with former Wells Fargo Advisors brokers Charles Henry Frieda or Charles Bernard Lynch of Orange County, California, or with any broker or financial adviser who has unsuitably recommended or over concentrated your position in excessively risky or speculative energy-sector securities, or has effected unauthorized trades in your account without permission, and this investment strategy that does not conform with your investment objectives or risk tolerance preferences has proven harmful to your investments or interests due to principal loss or other damages, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.