The allegations read: Orlando was named a respondent in a finra complaint alleging that he willfully violated section 10(b) of the securities exchange act of 1934 and rule 10b-5 thereunder, and violated finra rule 2020. The complaint alleges that orlando churned and excessively traded in a customer's account. Orlando exercised de facto control over the customer's account, controlling the volume and frequency of trading, deciding what securities to buy and sell, the quantities, the price, and when each transaction would occur. The customer relied on orlando to make securities recommendations and consistently followed his recommendations. Orlando's trading in the customer's account was excessive and quantitatively unsuitable, as evidenced by the annualized turnover rate of 9.65 and cost-to-equity ratio of nearly 74 percent, the size and frequency of the transactions, the transaction costs incurred, and in-and-out trading. Orlando's trading in the customer's account generated more than $650,000 in commissions and concessions for himself and his member firm and more than $770,000 in additional costs that was paid to the underwriters of the offerings. The customer experienced approximately $1,245,000 in losses. The complaint also alleges that orlando did not have reasonable basis to believe that the transactions and strategy he recommended to the customer were suitable for any customer. Orlando failed to understand or evaluate the fees and costs that his recommendations generated and their effect on the overall profitability of the customer's account. In addition, about half the offerings orlando recommended included warrants. In those instances, orlando's strategy included promptly selling the newly-purchased shares and holding the warrants. But, prior to recommending the strategy, orlando failed to conduct due diligence on the companies he was recommending or analyze the likelihood that the warrants would become profitable. The warrants were typically issued by companies that had little revenue and no income and were subject to going concern opinions from their accountants and auditors. Orlando did not consider or understand the potential risks, benefits, and likely performance of the securities and strategies he recommended. The complaint further alleges that orlando falsely characterized 87 transactions in the customer's account as unsolicited, when, in fact, orlando solicited the customer to participate in each transaction. As a result, orlando caused inaccuracies in his firm's books and records. In addition, the complaint alleges that orlando made false statements to his firm on an annual compliance questionnaire about how he communicated with the customer. Orlando denied communicating via text message with clients when, in fact, he had exchanged at least 225 text messages with the customer that were nearly all related to the customer's account.
