← Broker database 2024-06-20
Michael Richard Rosalia Charged with Refusing to Testify About Alleged Excessive Trading
According to FINRA, Michael Richard Rosalia was named as a respondent in a FINRA complaint alleging that he failed to appear and provide on-the-record testimony requested by FINRA in connection with its investigation into whether he engaged in excessive and unsuitable trading in his customers' accounts.
This matter involves a formal complaint, which means findings have not yet been made and the allegations have not been proven. Unlike cases resolved through settlement, complained cases will proceed to a hearing where evidence will be presented and findings will be made by a hearing officer. Rosalia is entitled to defend against the allegations and no conclusions should be drawn about his guilt or innocence at this stage.
The complaint alleges that FINRA requested Rosalia's on-the-record testimony as part of an investigation into potential excessive and unsuitable trading—serious allegations that can result in significant customer harm. Excessive trading, also known as churning, occurs when a broker engages in frequent trading to generate commissions rather than to serve customer investment objectives. Such trading can result in substantial losses to customers who pay excessive commissions and trading costs while their accounts are exposed to unnecessary risks.
FINRA Rule 8210 requires associated persons to provide testimony when requested in connection with investigations. This rule is fundamental to FINRA's ability to investigate potential misconduct and protect investors. When individuals refuse to appear for testimony, it prevents FINRA from gathering facts necessary to determine whether violations occurred and whether customers were harmed.
Refusing to testify is typically treated as a separate and serious violation, regardless of the underlying allegations being investigated. Even if Rosalia ultimately defends successfully against allegations of excessive and unsuitable trading, refusing to appear for testimony could result in a bar from the industry.
For investors, this case illustrates FINRA's investigation process and the seriousness with which it treats uncooperative witnesses. When FINRA investigates potential excessive trading, it typically examines trading patterns, commission levels, customer profiles, and the rationale for trading activity. Testimony from the broker is often essential to understanding the broker's thinking and whether the trading served legitimate investment purposes.
Investors who have concerns about excessive trading in their accounts should watch for warning signs including very frequent trading, buying and selling the same securities in short time periods, high commissions relative to account value, and trading that seems inconsistent with stated investment objectives. If you observe these patterns, review account statements carefully and consider consulting with a securities attorney.
Because this matter is in the complaint stage, it would be inappropriate to draw conclusions about whether Rosalia engaged in excessive or unsuitable trading. However, the allegation that he refused to testify about these matters is itself a serious charge that could result in a bar from the industry if proven.