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Investor Alert – Peter Mirenda and Joseph Stone Capital

Investor Alert – Peter Mirenda and Joseph Stone Capital

Investor Alert – Peter Mirenda and Joseph Stone Capital

Stock broker Peter Mirenda of New York has been sued by a customer who accuses Mirenda of “excessive, unsuitable and unauthorized trades.” The customer is seeking $1.5 million in damages. In 2020, another customer accused Mirenda of excessive trading. That dispute settled for $35,000. Mirenda has settled two other cases involving allegations of excessive trading. From 2013 to October 2021, Mirenda was registered with brokerage firm Joseph Stone Capital. He is currently registered with VCS Venture Securities.

Excessive trading, also known as 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. It is also actionable under the common law on the basis that it violates FINRA’s quantitative suitability requirement set forth in FINRA Rule 2111. See, e.g., Miley v. Oppenheimer & Co., Inc., 637 F.2d 318, 333 (5th Cir. 1981) (finding that “NYSE and NASD rules are excellent tools against which to assess in part the reasonableness or excessiveness of a broker’s handling of an investor’s account.”).

Churning has three basic elements: (a) the broker possessed effective control of the account; (b) the account was excessively traded; and (c) the purpose of the trading was to generate commissions rather than to pursue the legitimate and suitable investment objectives of the customer. See, e.g., M. & B. Contracting Corp. v. Dale, 795 F.2d 531, 533 (6th Cir. 1986). In regard to the first element, a broker controls a client’s account when the client lacks sophistication in financial matters and relies on the broker’s expertise and integrity in managing the account. See, e.g., Hecht v. Harris Upham & Co. (N.D. Cal. 1968) (“The requisite degree of control is met when the client routinely follows the recommendations of the broker.”). In regard to the second element, excessive trading is “‘thought to exist by courts and commentators when there is an annual turnover rate in excess of six.’” Craighead v. E.F. Hutton & Co., Inc., 899 F.2d 485, 490 (6th Cir. 1990); accord, Gautney, supra (“A turnover rate that exceeds six is presumptive of churning.”). In addition, “[t]rading practices that require an account to earn returns in excess of 20% just to break even are indicative of possible churning.” Gautney, supra. In Sullivan’s case, the trading resulted in annualized turnover rates ranging from 12.93 to 30.4, and cost-to-equity ratios ranging from 42.61 percent to 135.11 percent.

If you have think you might have a suffered losses as a result of the misconduct or malpractice of Peter Mirenda, we may be able to assist you. Call us toll free at 888-607-4819 for a free, no-obligation consultation and case evaluation.