Former Merrill Lynch brokers Charles Kenahan and Dermod Cavanaugh are currently under investigation for alleged misconduct that led to losses in the millions.
The New Hampshire Bureau of Securities Regulation has already launched an investigation into the matter after Craig Benson, the mayor of New Hampshire filed a complaint against two former Merrill Lynch brokers. Governor Benson accused Charles Kenahan and Dermod Cavanaugh of causing more than $50 million in damages from his account. He claims that the amount of losses amounts to more than $100 million if market adjustments are considered.
The probe into the matter was launched after Mr. Benson filed for an arbitration claim with the Financial Industry Regulatory Authority (FINRA) against the brokers. He claimed that the two former Merrill Lynch brokers churned his account leading to the losses. Churning is described as a situation where brokers execute too many trades using a client’s account so that they can increase their commission.
“We disagree with the claim that has been filed. This is a case that doesn’t add up: a sophisticated, high net worth investor who claims to have been unaware of activity in their account for 11 years,” stated Merrill Lynch in a statement via email to CNBC.
Benson responded by saying that he did not sign any document allowing anyone to steal from him. He further added that it was a fight he never chose and that he and Bob were wronged by Merrill Lynch. Bob refers to Robert Levine who happens to be Benson’s business partner and long-time friend.
Kenahan was also involved in Levine’s broker fraud settlement
Levine filed a similar complaint accusing Merrill Lynch of churning his account. He claimed that he lost millions through excessive trading practices. It turns out Kenahan was among the brokers that were involved in Levine’s case. Merrill Lynch had initially denied the claims in Bob’s case similar to how they have attempted to shift the blame in Benson’s complaint.
Levine and Merrill Lynch eventually agreed on a $40 million settlement in 2019. Meanwhile, Kenahan has now been involved in cases where investors have collectively lost more than $200 million. The string of losses likely had something to do with the investment bank’s decision to fire him last year.
Kenahan’s record also indicates that there have been previous complaints against him especially for excessive trading and recommending unsuitable investments. Those complaints reportedly cost Merrill Lynch $350,000 in settlements. Kenahan has been a broker in the financial investment industry for 34 years. He has previously worked for other major investment firms including Thomson McKinnon Securities, Bear Stearns, Smith Barney, and Morgan Stanley. His fellow banker who was also fired by Merrill Lynch has been a broker at the company from 2007 to 2017. He has been employed by the investment banking industry for 17 years and he also had previous experience with Morgan Stanley.
Benson believes he has a watertight argument against Merrill Lynch
Merrill Lynch argues that Benson is a seasoned trader that was aware of the transactions taking place on his account and that he approved every trade. Benson retaliated by stating that he did not pay the investment bank $26 million so he could day trade his own account. He argues that if he was a seasoned trader then he would have traded himself, thus not needing to go through an investment banker.
Mr. Benson is confident that his case against Merrill Lynch has merit and he expects to get compensated for the losses that he has suffered. He also believes that he wrongly trusted Cavanaugh who happens to be his friend. The New Hampshire mayor hopes that FINRA will give his filling the seriousness that it deserves so that it can get him justice.