Krasner made unsuitable recommendations to a customer who was a retiree and inexperienced investor.
Although the customer agreed to each of Krasner’s recommendations, Krasner employed a trading strategy that was not suitable for the customer’s particular financial situation. The customer had indicated in account opening documents that he had an investment objective of capital preservation and a low risk tolerance.
Krasner recommended the use of margin
to execute trades in the customer’s account and at times exposed the customer
to inappropriate financial risk. Krasner never
read the customer’s account opening documents, though they were available to
him, and was unaware of the customer’s financial situation and risk tolerance,
as stated in the account opening documents.
Krasner’s member firm’s database and computer platform that he used to place trades, as well as the account statements that were mailed to the customer each month, inaccurately indicated that the investment objective was speculation. In his conversations with the customer, Krasner never confirmed the accuracy of the investment objective. Krasner employed a short-term and speculative trading strategy of short selling stock and using margin. Since Krasner was not fully aware of the customer’s stated financial condition, he based his recommendations on the erroneous view that the customer could absorb the high risks of these transactions.
The customer frequently spoke with Krasner on the phone, gave Krasner express permission to execute the recommended trades and informed Krasner that he was willing to engage in some speculation. Furthermore, Krasner based his recommendations on his conversations with the customer and the firm’s inaccurate database, not the accurate financial information that was contained in the account opening documents.
Krasner executed solicited trades in the customer’s account, while charging the account $51,790 in commissions and fees. Although several of the individual trades were profitable, including commissions, the customer’s account lost $54,160 in net value, dropping from a net equity value of $162,571 to $108,410.