SEC Charges Alabama Broker-Dealer Aura Financial for Churning and Other Violations

According to a Securities and Exchange Commission (SEC) press release, the SEC and the Alabama Securities Commission (ASC) have charged Aura Financial Services, Inc. (Aura), a Birmingham, Alabama based broker-dealer, with churning of custormer accounts, “widespread supervisory failures” and other securities violations. The SEC and ASC believe that the actions of Aura, including several senior officers and registered representatives, caused signifcant harm to clients, while significantly enriching the profits of the firm.

Specifically, the SEC alleges that several of Aura’s registered representatives used “fraudulent practices and high-pressure sales tactics to convince customers to open and invest money in Aura brokerage accounts, which the brokers subsequently churned.” Churning is where a broker excessively trades a customers’ account to generate commissions for the broker, disregarding the investment objectives of the customer. It is said by the SEC that Aura made approximately $1 million in commissions and other fees as a result of their fraudulent practices. Unfortunately, Aura profited while many of the customer’s accounts were depleted as a result of trading losses and excessive transaction costs. It is believed by the SEC that this scheme began in 2005 and continued until at least April of 2009.

The ASC alleges that Aura and three managers failed to adequately supervise their brokers and violated compliance responsibilities outlined by Alabama securities laws. The ASC believes that Aura and these managers “failed to adopt appropriate procedures, failed to enforce rules, failed to conduct branch office inspections, and failed to maintain files of and follow up on consumer complaints.” These responsibilities were even more critical since many of the firm’s representatives allegedly had criminal or disciplinary backgrounds and many prior customer complaints.

Katherine Addleman, Director of the SEC’s Atlanta Regional Office says that Aura and six brokers “bought and sold securities in these accounts solely to generate commissions for themselves, with a total disregard for their customers’ investment goals.” Director of the ASC, Joseph P. Borg, is proud of the collaborative effort of the ASC and SEC in stoping investor harm and discipling those who engage in or allow fraud to occur.

Aura is required by the ASC, within 28 days, to show cause to the ASC why its registration as a broker dealer and agent in Alabama should not be revoked or suspended.

The SEC seeks preliminary injunctions against 4 of the 6 brokers associated with Aura and has requested expedited discovery period and a hearing within 30 days. The SEC also seeks court orders which permanently prohibit all of the defendants from violating the antifraud provisions of the federal securities laws in the future and seeks to have the defendants disgorge their ill-gotten gains and pay fines.

If you believe that you may be a victim of investment fraud, our firm may be able to help. Please do not hesitate to contact our office. For further information, you may visit our website www.dossfirm.com.