FINRA barred broker Daniel Gordon Maughan of Financial West Group's Brentwood (Los Angeles, CA) office for churning and excessive trading a customer's trust account, generating commissions and costs of $841,000 through the sales of options and non-traditional exchange-traded funds (ETFs) and an exchange traded note (ETN, or collectively, exchange-traded products [ETPs]), causing the account to incur losses of $812,000.
For instance, the ETPs transacted by stockbroker Maughan that yielded losses and which FINRA deemed were unsuitable included leveraged and inverse leveraged ETFs such as Proshares Ultra S&P 500 ETF (ticker SSO), ProShares UltraShort 20+ Year Treasury ETF (TBT), and Direxion Daily Large Cap Bear 3x Shares ETF (BGZ), now known as Direxion Daily S&P 500 Bear 3x Shares (SPXS).
In Disciplinary Proceeding #20170547552016, FINRA found that Maughan's misconduct, such as the manipulative and deceptive conduct known as churning, began with his management of a California client's account when this customer inherited securities and cash from an elderly customer of Maughan's who had passed away.
The findings state that when Maughan opened a new account for this customer at Financial West, he incorrectly listed investment objectives of "trading profits" and "speculation" ahead of capital preservation, and also inaccurately listed the risk tolerance as "aggressive" when it should have been listed as "conservative."
Maughan purportedly exercised de facto control over the account and traded securities on margin, executing 1,143 trades—including options trades—consisting of $33.4 million in purchases and $34.0 million in sales, which racked up commissions and costs of approximately $841,000.
FINRA deemed Maughan's options trades unsuitable, given that his customer had no prior experience in nor understanding of options trades (e.g., an unsophisticated investor), the trades were short-term, and that the customer furthermore didn't understand the speculative nature of the options trades—recall that Maughan incorrectly included "speculation" on the Financial West new account form.
Between the unsuitable and excessive options trades and ETF/ETN recommendations, Maughan's misconduct purportedly caused the account to experience realized and unrealized losses of $812,000.
Dan Maughan (CRD #2561363)'s BrokerCheck most recently reported a settled customer dispute in 2015 (a $550,000 settlement) with allegations of breach of fiduciary duty, negligence, breach of contract, and misrepresentation. Prior to this, three other customer disputes against Maughan resulted in settlements, and included allegations ranging from fraud and conversion to negligent misrepresentation, unauthorized trading, unsuitability, and lack of supervision.
If you have invested with former Financial West Group (Brentwood/Los Angeles) broker Daniel Gordon Maughan or with any registered representative or financial adviser who excessively traded or churned your account, or whose incorrect categorization of your investment objectives—such as falsely substituting "aggressive" for "moderate" or "conservative" on a risk tolerance preference form—has proven harmful to your investments or interests as a result of the broker's misconduct, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.