In an interview, Cao said Le claimed to be poor, but said he decided to day-trade her account anyway because he thought he could help her. Cao claimed that he handled her money for only two weeks and turned a $2,000 profit.
Le's losses came from another trader who later took over her account, Cao said. Cao acknowledged that he did not warn Le of the risks of day trading, but only because she claimed to be knowledgeable about the stock market, he said.
"I'm not the kind of person who would mislead anybody," Cao said.
Nevertheless, a National Assn. of Securities Dealers arbitration panel awarded Le nearly $38,000 in a claim against Cao, Providential and others.
Senate investigators found that when opening new accounts, Providential frequently did not ask customers for basic financial information to determine whether day trading was suitable for them. Of 234 Providential day-trading accounts studied, 61 contained no information on either annual income, net worth or both.
At the Los Angeles branch, three of four accounts lacked that information. That office's branch manager told Senate investigators that none of his day-trading customers were profitable.
"How in God's name are you going to do a suitability analysis of a prospective day trader if you don't know what they make in income, you don't know what their net worth is and you don't even know how much money they're going to deposit in the account?" said one source familiar with the document.
Henry Fahman, Providential's president and chief executive, denied the charges in the Senate staff study.
The firm made sure that customers were suited to day trading, he said. If there were any accounts with insufficient documentation, they may have been opened by a rival firm and later transferred to Providential, he said.
"We have one of the most comprehensive risk-disclosure documents on the Street," Fahman said.
