JHS Capital Advisors Inc. and a former broker were hit with a $1.9 million Finra arbitration award last week stemming from allegations that the broker traded in a client's account excessively to generate commissions.
“This is the most egregious case of churning I've ever seen,” said Timothy Feil, attorney for John Sisk, who filed his arbitration claim last year against JHS Capital Advisors, which was formerly named Pointe Capital Inc.
The broker, Enver R. Alijaj, who was forced to pay $500,000 to settle a previous charge of churning, was also named in the award, which was dated July 13.
The alleged excessive trading, which occurred from July 2009 to April 2010, required the client to generate returns of 160% “just to break even,” Mr. Feil said.
JHS Capital Advisors is owned by a holding company controlled by John Sykes, who made his fortune investing in call centers before entering the independent broker-dealer industry with the purchase of preferred shares of GunnAllen Holdings Inc. in 2008.
He later resigned from the board of GunnAllen Holdings. Mr. Sykes' firm, JHS Capital Holdings Ltd., then bought Pointe Capital Inc. in 2009 and renamed the broker-dealer JHS Capital Advisors.
The award is about five times the net capital JHS Capital Advisors held at the end of last year — $473,805 — according to a company filing with the Securities and Exchange Commission this year. JHS Capital Advisors reported a loss of $6.6 million last year, according to that filing.
According to the arbitration award, which was decided by a three-person Financial Industry Regulatory Authority Inc. panel, Mr. Sisk originally claimed $3.1 million in compensatory damages.
“We are extremely disappointed in this panel's award related to this legacy acquisition item,” said Eileen Canady, a spokeswoman for JHS Capital Holdings. “The firm is currently reviewing all options and alternatives available to it associated with this matter.”
Mr. Alijaj declined to comment about the recent arbitration award.
bkelly@investmentnews.com Twitter: @bdnewsguy
