(The Weekly Newspaper for Financial Advisors Vol. 5 No. 17, April 30, 2001)
Tips, trends & Observations
Affinity for trouble
By Bruce kelly
Two brokers in a New York branch of UBS PaineWebber Inc. recently quit the firm under a cloud. Following them out the door of the Flushing, Queens, office was an arbitration complaint alleging they took advantage of almost a dozen clients because of their shared ethnicity.
Christine M. Bae, the lawyer for the investors filing the complaint with NASD regulation Inc., claims that her clients, who are Koreans, are victims of affinity fraud. According to the Securities and Exchange commission, affinity fraud refers to investment scams that prey upon members of identifiable groups, including religious, elderly, ethnic and professional groups.
The investors’ complaint alleges that the brokers, Joon Ho Chun and James Kwak, were churning the accounts, charging excessive fees and making trades without the clients’ knowledge. In one account, Mr. Kwak racked up fees that were more than one-third the size of the account, according to the complaint.
A spokesman for PaineWebber declined to comment.