FINRA

Maughan was named a respondent in a FINRA complaint alleging that he churned and excessively traded a customer's trust account at his member firm. The complaint alleges that by churning the customer's trust account, Maughan willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and also violated FINRA Rule 2020. Maughan exercised de facto control over the trust account and made all investment decisions in it, including what securities to buy and sell, the quantities of the securities to buy and sell, and when each transaction would occur. Maughan executed trades in the trust account with a principal value of all purchases and sales in excess of $70 million and the annualized cost-to-equity ratio-the percentage the account had to appreciate to break even-was 21.06. Maughan's churning and excessive trading was quantitatively unsuitable and generated commissions and costs totaling approximately $841,000 while causing the account to incur realized and unrealized losses of approximately $812,000. Maughan also recommended qualitatively unsuitable trades in the trust account involving options and non-traditional Exchange-Traded Funds (ETFs) and an Exchange Traded Note (ETN).

Decision & Order of Offer of Settlement

Bar (Permanent)

All Capacities

indefinite

10/15/2019

Without admitting or denying the allegations, Maughan consented to the sanction and to the entry of findings that he churned and excessively traded a customer's trust account. The findings stated that Maughan executed trades with a principal value of all purchases and sales in excess of $70 million, in the trust account. Maughan's churning and excessive trading generated commissions and costs totaling approximately $841,000 while causing the account to incur realized and unrealized losses of approximately $812,000. By churning the trust account, Maughan willfully violated Section 10(b) of the Exchange Act of 1934 and Rule 10b-5 thereunder, and violated FINRA Rule 2020. Maughan exercised de facto control over the trust account and made all investment decisions in it, including what securities to buy and sell, the quantities of the securities to buy and sell, and when each transaction would occur. The level of activity in the trust account was inconsistent with the customers', a husband and wife, objectives and financial situation. The findings also stated that moreover, the trading was excessive and quantitatively unsuitable for them-as evidenced by the annualized turnover rate (8.36) and the annualized cost-to-equity ratio (21.06 percent), as well as the size and frequency of the transactions. Through Maughan's churning of the trust account and by seeking to maximize his own financial benefit at the expense of his customers, he acted either with the intent to defraud (scienter) or with reckless disregard for the customers' interests. The findings also stated that Maughan recommended qualitatively unsuitable trades in the trust account involving options and non-traditional Exchange-Traded Funds and an Exchange Traded Note. Maughan lacked a reasonable basis to believe that his recommended transactions were suitable for the customers.

Breach of fiduciary duty, Negligence, Breach at contract, and misrepresentation

$1,500,000.00

$550,000.00

In response to this matter, I assert that I acted at the client's behest and in their best interest at all times. Unfortunately, due to the client's unrealistic expectations, negative consequences were realized and the responsibility for that was placed squarely on my shoulders. I vehemently disagree with the settlement, of which I was not a contributing party to.

STATEMENT OF CLAIM ALLEGES BREACH OF FIDIUCIARY DUTIES, NEGLIGENT MISREPRESENTATION, NEGLIGENCE, FRAUD CONVERSION UNSUITABLE ADVICE, BREACH OF CONTRACT AND LACK OF SUPERVISION. CLIENT ALSO ALLEGES FAILURE TO FOLLOW WRITTEN AND VERBAL INSTRUCTIONS AND UNAUTHORIZED PURCHASE.

$50,000.00

$10,000.00

CLIENT CLAIMED I REFUSED TO SELL HER ACCOUNT, EVEN THOUGH SHE NEVER GAVE ME A CLIENT ORDER TO LIQUIDATE. FIRM SETTLED FOR BUSINESS PURPOSES. I WAS IN NO WAY INVOLVED IN THE SETTLEMENT AND DID NOT AGREE WITH IT.

IN CONNECTION WITH STOCK PURCHASES IN FEBRUARY 2000, PLAINTIFFS ALLEGE, AMONG OTHER THINGS, CHURNING, ANAUTHORIZED TRADING AND UNSUITABILITY. NO SPECIFIC DAMAGES ALLEGED.

$46,000.00

CLIENT HELD POSITIONS IN THE ML HOLDERS DIVIDENDS PAID IN STOCK. EXPLAINED TO CLIENT BUT WIFE DID NOT UNDERSTAND. SHE CALLED TO COMPLAIN ABOUT UNAUTHORIZED PURCHASES. FIRM SETTLED FOR BUSINESS PURPOSES AFTER I WAS GONE. I WAS IN NO WAY A PART OF THE SETTLEMENT AND DID NOT AGREE WITH IT. AFTER NYSE OTR, I WAS EXONORATED OF ANY WRONG DOING.

CLIENT'S DAUGHTER CLAIMS THAT THREE PURCHASES IN HER FATHER'S ACCOUNT WERE UNAUTHORIZED. SHE ADDITIONALLY STATES THAT EVEN IF THE BROKER TALKED TO HER FATHER AND HE AGREED TO THE PURCHASES, IT WASN'T AN AUTHORIZED PURCHASE BECAUSE HE COULD NOT COMPREHEND THE CONVERSATION.

$99,000.00

$51,321.00

CLIENT'S DAUGHTER CALLED TO COMPLAIN ABOUT UNAUTHORIZED ORDERS ON FATHER'S BEHALF AS SHE CLAIMED HE WAS UNABLE TO UNDERSTAND. I WAS UNABLE TO CANCEL THE IOI AS I WAS TERMINATED ON THE SPOT. FIRM SETTLED FOR BUSINESS PURPOSES. I WAS NO PART OF THE SETTLEMENT AND DID NOT AGREE WITH IT. AFTER NYSE OTR, I WAS EXONERATED OF ANY WRONG DOING.

MERRILL LYNCH

Discharged

ENTERED ORDERS IN CLIENTS ACCOUNTS WITHOUT PRIOR CONSENT.

DURING THE MONTH OF JANUARY 2001, MERRILL LYNCH WAS OFFERING A REIT AND A PREFERRED. I BEGAN CONTACTING INCOME ORIENTED CLIENTS FROM A MONEY FUNDS LIST. I RECOVERED SERVERAL INDICATIONS OF INTEREST. THE DAY I ENTERED THE IOI'S, I WAS EXTREMELY ILL AND WENT HOME EARLY. FOUR DAYS LATER OVER A WEEKEND I CAME BACK TO LEARN I HAD MADE SEVERAL ERRORS.