The Securities and Exchange Commission has ordered PHX Financial Inc., a broker-dealer based in New York, to pay nearly $350,000 for violating Regulation Best Interest via excessive trading in eight customer accounts.
From January 2019 to October 2021, a PHX registered representative, Baris Cabalar, recommended a short-term, high-volume investment strategy to at least eight of PHX's retail customers without a reasonable basis, according to the SEC's order.
"As a result of the high volume of recommended transactions and their attendant commissions and fees, it would have been virtually impossible for these customers to achieve positive returns," the SEC states.
The customers suffered aggregated losses exceeding $1 million in their PHX brokerage accounts, while PHX and Cabalar "together made over $400,000 in commissions and fees," the SEC said.
The SEC's complaint against Cabalar, filed in the U.S. District Court for the Eastern District of New York, states that he recommended frequent purchases and sales of securities in the customers' accounts, "sometimes including a purchase and sale of the same security in the same day or week. When making the trading recommendations to the Affected Customers for their Accounts, Defendant did not disclose that the commissions and fees he and PHX Financial charged made it likely that these customers would lose money through such trading."
PHX was ordered to pay the SEC disgorgement of $142,995, prejudgment interest of $24,994, and a civil penalty of $180,000.
