Murillo recommended and effected excessive transactions in a customer’s account that were unsuitable in light of the customer’s financial situation, needs and investment objectives.
Murillo controlled and directed the trading in the customer’s account by recommending and executing all the transactions in the account. The customer was unable to evaluate Murillo’s recommendations, did not understand the meaning of “margin,” and was unable to exercise independent judgment concerning the transactions in the account due to his lack of investment knowledge and limited English skills; the customer trusted Murillo completely to make and execute recommendations in his account.
Murillo did not have a reasonable basis for believing that the volume of trading he recommended was suitable for the customer in light of information he knew about the customer’s financial circumstances and needs, and given the amount of commissions and fees the customer was charged; and as a result, the transactions Murillo recommended and executed were unsuitable, even if the investment objectives were speculative as reflected on the customer’s new account form. The customer told Murillo that he wanted a conservative retirement account set up because he was nearing retirement age and could not risk any losses with his funds; nevertheless, the new account forms listed the customer’s investment objective as speculation and his risk tolerance as aggressive.
The trades were excessive in number and resulted in excessive costs to the customer’s account, and the vast majority of the transactions in the customer’s account were effected through the use of margin and resulted in the customer incurring additional costs in the form of margin interest. In addition, Although the customer signed a pre-completed margin agreement, along with other pre-completed new account forms Murillo sent to him, the customer did not understand margin and did not realize that Murillo was effecting trades on his account on margin. Moreover, owing to the customer’s lack of investment knowledge and inability to decipher his monthly account statements, the customer was unaware that he had a margin balance and did not understand the risk of the margin exposure in his account; at one point, the customer’s account had a margin balance of approximately $106,818.52 while the account’s equity was approximately $67,479.98. The transactions on margin Murillo effected in the customer’s account were unsuitable for the customer in view of the size and nature of the account and the customer’s financial situation and needs.