Articles Posted in E1 Asset Management

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On April 3, 2024, Lax & Neville LLP won a FINRA arbitration award on behalf of a 75-year-old retiree (“Claimant”) against E1 Asset Management, Inc., Shaun Joseph Grimaldi, and Ron Yehuda Itin (“Respondents”).  Respondents, who all have checkered regulatory histories, capitalized on Claimant’s trust and friendship for a decade to conceal their fraud and exercise complete control over his accounts, by investing in options and risky triple leveraged ETFs, on margin, and relentlessly churning his accounts for the sole purpose of generating $1,604,814 in commissions, interest and fees.  They accomplished this by making more than $341 million in trades, on margin, for an annual turnover rate of 13.2 and an average cost to equity ratio of 12.4%.   Respondents at all times acted with a willful intent to defraud Claimant, breached their fiduciary duties to him, and violated FINRA Rule 2111 (Suitability), SEC Regulation Best Interest (Reg BI), and FINRA Rule 3010 (Supervision).

After considering the pleadings, testimony and evidence presented at the hearing, the FINRA Arbitration Panel rejected Respondents’ defenses and unanimously awarded Claimant $2.6 million, which includes 100% of his fraudulent churning damages totaling $1,604,814, plus $577,610.25 in accrued interest, $420,000 in attorneys’ fees, $5,285.83 in discovery sanctions, and post-award interest. To view this Award, click here.

To discuss this FINRA arbitration award, please contact Barry Lax or Sandra Lahens at (212) 696-1999.

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On June 5, 2015, E1 Asset Management, Inc. (“E1 Asset Management”), Ron Y. itin (“Itin”), and Ahsan R. Shaikh (“Shaikh”) submitted a Letter of Acceptance Waiver and Consent (“AWC”) to settle allegations by the Financial Industry Regulatory Authority (“FINRA”) that they collectively failed to maintain a reasonable supervisory system at E1 Asset Management.  Both Itin and Shakih are employed by E1 Asset Management in supervisory capacities.  A copy of the FINRA AWC may be found here.

FINRA alleged that E1 Asset Management, Itin, and Shaikah violated NASD Rules 3010, 2110 and FINRA Rule 2010 by failing to establish and maintain E1 Asset Management’s supervisory systems.  According to the AWC, from July 2008 to April 2012, Itin and Shaikh failed to establish a supervisory system reasonably designed to: 1) review registered representatives’ communications with the public; 2) review trading to detect and monitor potential churning activity; 3) review the new account opening process to ensure customer suitability profiles were properly established; 4) perform adequate suitability review for leveraged exchange traded funds (“ETFs”) in customer accounts; and 5) supervise the activities of registered representatives subject to E1 Asset Management’s heightened supervision program.

The FINRA allegations of supervisory failures came after numerous customers commenced FINRA arbitrations alleging sales practice abuses by E1 Asset Management registered representatives.  According to FINRA, many of these arbitrations concluded in settlements.  However, the form release agreements that E1 Asset Management utilized during this time contained ambiguous language that could have been interpreted by the customers as prohibiting them from cooperating with regulatory investigations.  Specifically, those agreements stated that customers must not “[c]ommence or prosecute, or assist in the filing, commencement or prosecution in any government agency, arbitral tribunal, self-regulatory body or court in any claim or charge against E1 Asset Management.”  FINRA alleged that E1 Asset Management, Itin, and Shaikah violated NASD Rule 2111 and FINRA Rule 2010 for including impermissible confidentiality provisions in its form settlement and release agreements.

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