Ex-Advisor Accused of Churning Retired Couple's Portfolio
What You Need to Know
The suit claims the advisor executed over $75M in trades in a $3.2M portfolio in 2021.
The retirees say they lost over $800,000 in 18 months while the market overall did well.
A retired Connecticut couple has accused their former investment advisor of negligence, breach of fiduciary duty and unfair practices, alleging he made excessive and inappropriate trades that cost them more than $800,000 over 18 months.
Terry and Nancy Chabot, Glastonbury residents, contend in a lawsuit that Samir Shehu, managing principal at Shehu Asset Management, an RIA in Southbury, Connecticut, lost the “alarming” amount while serving as their advisor from October 2020 until April 2022, a time when traditional stock and bond investments generated positive returns.
In the lawsuit, filed this month in Connecticut Superior Court in Hartford against Shehu, his firm and Interactive Brokers Group Inc., the brokerage he used to make trades, the Chabots contend Shehu “churned and turned over” their accounts about 50 times the reasonable level.
Among their allegations, the Chabots say Shehu lost considerable principal money by:
Trading about $1.5 million of their money weekly on average; in 2021 he executed more than $75 million in trades in a $3.2 million portfolio
Inappropriately investing in stocks when the allocation should have favored bonds, mutual funds or other assets more suited to the couple’s needs
Investing in unsuitable stocks, including penny stocks
Causing direct investment losses and missed opportunities for gains they might have had in a reasonably invested portfolio. Shehu also made thousands of dollars in commissions buying and selling stocks that were unsuitable for the Chabots as retirees, the couple contends.
Failing to advise the couple of the true nature of proposed and executed transactions to give them an opportunity to weight the possible benefits and disadvantages.
The couple contend their securities included a reasonably diversified portfolio before they invested with Shehu. They learned in April 2022 that their account had been mismanaged, which caused the couple emotional distress, according to the lawsuit.
In addition to negligence and breach of fiduciary duty, the Chabots accuse Shehu and his firm of negligent misrepresentation and violating the Connecticut Unfair Trade Practices Act. The lawsuit describes his practices regarding their investments as unethical and unscrupulous.
The complaint accuses Greenwich, Conn.-based Interactive Brokers of negligence, saying the broker-dealer breached its duty of care to the Chabots by not inquiring about the suitability of trades or reaching out to the couple to ensure they understood the significant trading going on in their names and in trusts they had established.
Interactive’s conduct resulted in the couple’s assets being depleted, the complaint contends.
