Former stockbroker Dennis Mehringer is involved in legal disputes with multiple customers who allege that he made unsuitable investment recommendations. The customers, who are seeking an aggregate amount of more than $2 million in damages, also allege breach of fiduciary duty, misrepresentation, fraud, and unauthorized trading.
Mehringer has a history of customer disputes involving allegations of unsuitable investment recommendations. In 2016, FINRA barred Mehringer from the securities brokerage industry based on findings that he made unsuitable recommendations that resulted in excessive trading in mutual fund Class A shares. The self-regulator’s findings stated that Mehringer engaged in a pattern of buying and selling Class A shares that demonstrated his true objective was to maximize commissions. The findings also stated that Mehringer exercised discretion without authority and made false and misleading statements to his firm, Western International Securities, Inc.
Stockbrokers have a duty to recommend suitable investments and investment strategies to their clients. A recommendation is only suitable if it comports with the client’s investment objectives, risk tolerance, investment experience, investment time horizon, liquidity needs, and income needs. Together these considerations form the investor’s unique “investment profile.” The duty to recommend suitable investments cannot be disclaimed through risk disclosures or waivers.
It is a violation of securities regulations for a broker to engage in discretionary trading in a customer’s account unless the broker has obtained written permission to do so from both the customer and the broker’s firm. See FINRA Rule 2510(b) (“[n]o member or registered representative shall exercise any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member.”). In the absence of discretionary trading authority, a broker’s discretion is strictly limited to “time and price” discretion within a single trading day, see FINRA Rule 2510(d)(1), meaning that the broker has no discretion over which securities to trade or in what quantities they should be traded.
Breach of Fiduciary Duty
Fiduciaries have a duty to act in a manner that they reasonably believe is in the best interest of their clients. They also have duties of honesty, loyalty, care, and disclosure. A breach of fiduciary duty occurs when the fiduciary violates the trust and confidence reposed in him or her by the client.
“Churning is the excessive buying and selling of securities in a customer’s account by a broker, for the purpose of generating commissions and without regard to the customer’s investment objectives or interest or with the intent to defraud.” In the Matter of Timothy Gautney, Exchange Act Release No. 65151 (Aug. 17, 2011). It is actionable under the common law (negligence or fraud) and under securities laws, including Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5.
Misrepresentations and Omissions
There are a multitude of state and federal statutes that make it unlawful to mislead and defraud investors in connection with the purchase or sale of securities. The best known of these laws is Section 10(b) of the Securities Exchange Act of 1934, which is a federal statute. Each of the 50 States has its own set of securities laws, known as “blue sky” laws. Many States have modeled their blue sky laws on the Uniform Securities Act, which contains a variety of different civil liability provisions relating to misrepresentations and omissions.
If you have suffered investment losses as a result of the malpractice or misconduct of Dennis Mehringer, our experienced team of securities attorneys may be able to assist you in recovering some or all of your losses. Call us toll-free at 888-607-4819 for a free consultation or email us through our “Contact” page to schedule a free consultation.