PHX Financial Inc., a New York City and Fort Lauderdale-based broker-dealer, has had its $347,989.04 Fair Fund distribution plan approved by the Securities and Exchange Commission following a finding that one of its registered representatives, Baris Cabalar, ran a churning scheme in eight retail customer accounts from January 2019 through October 2021, generating over $400,000 in commissions and fees for himself and the firm while all eight customers lost money. Total customer losses across the eight accounts reached $1,069,898.22. The single largest account loss was $209,052.25. PHX and Cabalar together collected $403,915.34. PHX settled with the SEC on October 16, 2024, paying $142,995.19 in disgorgement, $24,993.85 in prejudgment interest, and a $180,000 civil penalty, totaling $347,989.04, without admitting or denying the findings. The SEC simultaneously filed a separate civil suit against Cabalar in the Eastern District of New York. The Fair Fund distribution plan was approved on May 12, 2026, directing the full $347,989.04 to the eight harmed retail customers.
Cabalar Recommended a High-Volume Strategy That Made Positive Returns Virtually Impossible
Churning is the practice of recommending excessive trading in a customer’s account primarily to generate commissions rather than serve the customer’s financial interests. The SEC found that Cabalar recommended a short-term, high-volume trading strategy to eight retail customers without a reasonable basis to believe the strategy was in their interest. The commission and fee structure at PHX was such that the volume of trading Cabalar recommended made it virtually impossible for those customers to achieve positive returns. The trades did not need to lose money on their individual merits to damage clients: the cost structure alone was sufficient to ensure net losses over time.
The SEC charged PHX with violating Regulation Best Interest, the investor protection standard that took effect in June 2020 and requires broker-dealers to act in retail customers’ best interest when making investment recommendations. Specifically, PHX violated the Reg BI Care Obligation by recommending transactions that, even if each one appeared reasonable in isolation, were excessive and not in customers’ best interests when viewed together in light of each customer’s investment profile. PHX also violated the Reg BI Compliance Obligation by failing to establish, maintain, and enforce policies and procedures reasonably designed to achieve compliance with Reg BI. The SEC’s order found that PHX failed reasonably to supervise Cabalar with the view to preventing and detecting his violations.
PHX Also Faced a Separate Montana Enforcement Action for the Same Supervision Failures
The SEC’s action was not the only regulatory proceeding arising from PHX’s supervision failures. The Montana Commissioner of Securities and Insurance also brought a pending action against PHX for failure to supervise, charging excessive commissions, and failure to comply with a heightened supervision program the Commissioner had already imposed on the firm. In that action, a single Montana customer lost virtually his entire investment of approximately $150,000 and was charged over $75,000 in commissions by a broker who was supposed to be under heightened oversight at the time. The Montana proceeding reflects a pattern of supervision failures at PHX that predated and paralleled the conduct Cabalar engaged in across eight accounts over nearly three years.
Cabalar, 42, of Wellington, Florida, has been in the brokerage industry for 16 years. His BrokerCheck record includes a history of customer disputes, judgments, and liens prior to the SEC action. The SEC filed a separate civil complaint against Cabalar in the Eastern District of New York on October 16, 2024, the same day PHX settled. That case remains ongoing.
The PHX Case Is Among the First Major Reg BI Churning Enforcement Actions by the SEC
Regulation Best Interest replaced the prior suitability standard for broker-dealer recommendations when it took effect in June 2020. The suitability standard required only that a recommendation be suitable for a customer; Reg BI requires that it be in the customer’s best interest. The shift was intended in part to address churning, a practice that had often survived suitability challenges because individual trades could be characterized as suitable even when the cumulative volume was designed to enrich the broker at the customer’s expense. The PHX case, which covers conduct spanning both the pre-Reg BI period (January to June 2020) and the Reg BI period (July 2020 to October 2021), is among the first SEC enforcement actions to hold a broker-dealer liable for churning under the Reg BI Care Obligation standard.
The Fair Fund distribution plan approved May 12, 2026 provides for the $347,989.04 collected from PHX, plus any accrued interest, less taxes and administrative costs, to be distributed to the eight retail customers who lost money in their accounts during the relevant period. The distribution plan was proposed on March 19, 2026 and drew no public comments during the 30-day comment period.
Conclusion
The PHX Financial case reduces to a simple arithmetic: eight customers lost over $1M while the broker and his firm collected over $400K. The strategy was never designed to make money for the people whose accounts it was applied to. PHX was censured, paid $347,989.04, and is now subject to a distribution plan returning that amount to harmed investors. Cabalar faces a separate civil suit. PHX’s supervision failures stretched across two regulatory regimes, triggered Montana enforcement as well as federal action, and affected clients whose losses in some cases were total. The Fair Fund approval on May 12, 2026 closes the SEC’s portion of a case that has been building since 2019.
