Business Litigation - Wednesday, July 1, 2009 7:54 - 0 Comments

SEC and Alabama regulators sue Aura Financial Services

The Securities and Exchange Commission and the Alabama Securities Commission have sued Aura Financial Services Inc., a Birmingham-based firm, and six of its employees over what was described as “rampant churning” of customer accounts. ASC Director Joe Borg gave Aura 28 days to show why its registration should not be revoked. The agencies allege that Aura and its brokers used fraudulent sales practices and high-pressure sales tactics to convince customers to open and invest money in brokerage accounts, which the brokers subsequently churned.

The SEC alleges that Aura Financial Services, Inc., and six registered representatives used fraudulent sales practices and high-pressure sales tactics to convince customers to open and invest money in Aura brokerage accounts, which the brokers subsequently churned. Aura and the brokers enriched themselves with approximately $1 million in commissions and other fees paid by the customers while largely depleting the customers’ account balances through trading losses and excessive transaction costs.

Churning is a fraudulent practice that occurs when a broker engages in excessive trading without regard to the customer’s investment objectives for the purpose of generating commissions and other revenue.

Source: Birmingham News