Churning

Antonio Costanzo Permanently Barred by FINRA After Alleged Churning in Customer Accounts

October 9, 2015 | Silver Law Group

Broker failed to respond to FINRA information requests after allegations of excessive trading in numerous customer accounts

After 19 years in the securities industry, Antonio Costanzo has received a permanent bar from FINRA from acting in the capacity of a broker or other financial adviser, according to the FINRA website. The sanction, levied in May, came after a 2014 allegation that Costanzo was involved in churning, or excessive trading, in several customers’ accounts while employed at Newport Coast Securities.

Churning is, unfortunately, a common form of stockbroker misconduct in which a financial adviser makes excessive trades in an account in an effort to generate greater commissions without actually benefiting the customer. In fact, the buying and selling activity involved in churning is unsuitable to the investor’s goals and serves no practical purpose to the investor but generates substantial commission for the stockbroker.

SEC Reiterates Oil and Gas Fraud Investor Alert

October 9, 2015 | Silver Law Group

Alert lists red flags and best practices for avoiding fraud

A relatively recent increase in fraud schemes involving oil and gas ventures has caused the Securities and Exchange Commission to issue an investor alert that educates investors by bringing to their attention the possibility of fraudulent endeavors and the warning signs they should be aware of.

The alert, originally posted in May 2013, is still relevant today, as the SEC recently announced charges in regards to an oil and gas scheme in California involving upwards of $12 million from more than 300 investors nationwide. <This would be a good place for an internal link to the other blog on Schumacher>

Florida Broker Peter Gouzos Banned by FINRA

September 18, 2015 | Silver Law Group

His most recent employing firm was expelled by FINRA in October

After 22 years in the securities industry, FINRA permanently barred Peter Gouzos in February from acting as a broker or selling securities to the public. The final straw in a career full of customer dispute disclosures was his alleged failure to respond to FINRA requests for information, according to FINRA reports.

Gouzos most recently worked for Hunter Scott Financial in Delray Beach, Florida, which FINRA expelled in October. Before that, he worked for Dawson James Securities in Boca Raton and Emerson Bennett & Associates in Fort Lauderdale. Earlier in his career, he worked at various firms in New York, New Jersey, Georgia and Missouri.

Broker Focus: Patrick Teutonico in the Spotlight for Unauthorized Transactions

July 22, 2015 | Silver Law Group

According to FINRA Teutonico failed to observe high standards of commercial honor.

According to the Financial Industry Regulatory Authority (FINRA) Broker Check website, broker Patrick Teutonico is once again in the spotlight. Over the course of 17 years in the securities industry, Teutonico has 10 disclosures to report.

To provide some background, brokers are required by FINRA – known as the industry watchdog – to disclose different types of events, from customer complaints to IRS tax liens, judgments and even criminal matters. As such, Teutonico has 10 on his record, many of which involve allegations of unsuitable and unauthorized transactions. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. Therefore, it would seem the number of disclosures by Teutonico is relatively high.

Silver Law Group Files Securities Arbitration Case Against Dawson James

May 29, 2015 | Silver Law Group

The Silver Law Group has filed a securities arbitration claim before the Financial Industry Regulatory Authority (“FINRA”) on behalf of a family and a family business from South America alleging, among other things, that Dawson James failed to properly supervise one of its registered representatives, permitted an unsuitable investment strategy to be utilized and permitted the family’s investment accounts to be excessively traded for the purposes of generating huge commissions for itself and its registered representatives while wiping out most of their customers’ investment capital in a very short period of time.

Excessive trading or “churning,” as it is known in the industry, is the act of a broker who excessively and needlessly engages in trading in a client’s account primarily to generate commissions for the broker on each trade without regard for the client’s financial well-being. Churning is an illegal and unethical practice that violates SEC rules and securities laws.

Dawson James Securities markets itself as a full service investment firm specializing in complex healthcare, biotechnology, technology, and clean-tech sectors. Headquartered in Boca Raton, Florida, the firm has been in operation since 2002. Dawson James has been the subject of several regulatory investigations, some which resulted in disciplinary actions by regulators. For example, FINRA recently censured and fined Dawson James $75,000 for failing to provide adequate supervisory procedures. FINRA found that during the review period the firm failed to investigate numerous “red flags” relating to the activities of one registered representative. Dawson James also failed to enforce its written supervisory procedures which specified that all electronic correspondence is reviewed on a daily basis. The firm has also been the subject of several customer FINRA arbitration claims.

Stockbroker Thomas Tedeschi and Broker-Dealer Aegis Capital Corp. are the Subject of Multiple Securities Arbitration Claims Against Them for Churning

May 14, 2015 | Silver Law Group

According to FINRA, Thomas Tedeschi has recently been named in a securities arbitration lawsuit against him and his former employer, Aegis Capital Corp., for making unsuitable investments, unauthorized trades, misrepresentations and excessive trading (churning), among other claims. The assertions against him involve speculative securities that include penny stocks and Exchange Traded Notes. Mr. Tedeschi is required by law to only recommend or engage in transactions that are suitable to their individual client, and not to excessively trade in their accounts. This type of trading may be considered stockbroker misconduct called churning. The excessive buying and selling is done for the purpose of generating commissions for the broker, and not to benefit the client. In fact, it almost always results in enormous losses to the client.

Thomas Tedeschi began his stockbroker career in 1994 and has been employed by 17 different brokerage firms since then, seven of which have been expelled from the brokerage industry by FINRA for violations of the law and misconduct. It is quite a shocking record. Additionally, Aegis Capital Corp. has many claims against it, including 17 final regulatory violations that were filed by FINRA, NASDAQ Stock Market, and other regulatory bodies, for such violations as market manipulation, excessive buying and selling of illicit microcap stocks, failure to supervise and failure to disclose, late trade reporting, and other violations of NASD Rules and Texas Securities Acts as well. There is one regulatory violation claim currently pending. Aegis Capital Corp has also been fined on numerous occasions and has been suspended in the past from acting as a market maker.

If you invested money with Thomas Tedeschi or Aegis Capital Corp. and suffered losses, you may be entitled to recover some or all of those investment losses. Please call our securities law firm toll free at (800) 975-4345 to speak with an experienced attorney and to find out how we may be able to help you regain some or all of your investment losses. Most cases are handled on a contingent fee basis, meaning that you do not pay legal fees unless we are successful in your lawsuit.

FINRA Bars Herbert Kaye for Executing Trades without Prior Authorization

February 3, 2015 | Silver Law Group

Herbert Leonard Kaye, of Delray Beach, Florida, submitted an AWC in which he was assessed a deferred fine of $25,000, which includes disgorgement of $11,000 of commissions received, and suspended from association with any FINRA member in any capacity for four months. Kaye was registered with First Allied Securities in Boca Raton, Florida from 2008-2013. Without admitting or denying the findings, Kaye consented to the sanctions and to the entry of findings that he entered discretionary trades in equities and ETFs in a customer’s account without the customer’s prior written authorization. Kaye’s member firm’s written policies and procedures prohibited registered representatives from exercising discretion in customer accounts except in certain, limited circumstances that did not apply to the customer’s account. The trades generated almost $175,000 in gross commissions and fees. Accordingly, it appears that Kaye may have executed some trades simply to generate additional fees or commissions. This is typically referred to as churning.

The findings also stated that Kaye recommended his customer invest $1.1 million in a gold and precious minerals fund that was not suitable for her in light of her moderate risk tolerance, investment objective of growth and income, desire to avoid market fluctuations, the concentrated nature of the investment and her age. Kaye received $11,000 in gross commissions for the investment. Cases involving precious metals have become prevalent as advisors recommend gold and other metals to their clients.

If you invested money with Herbert Leonard Kaye, you may be entitled to recover some of you investment losses. Please call our securities law firm toll free at (800) 975-4345 to speak to an attorney to find out how we may be able to help you recover some of your investment losses.

Stephen Eldridge Ridgely, II Barred from Securities Industry

January 16, 2015 | Silver Law Group

Silver Law Group is investigating Stephen Eldridge Ridgely, II who was suspended by FINRA for failing to respond to FINRA requests for information.

Mr. Ridgely was registered with Ameriprise Financial Services, Inc.’s Plantation, Florida office from September 2012 through March 2014. Prior to that time, he was registered with Merrill Lynch’s Coral Springs, Florida office.

According to Mr. Ridgely’s BrokerCheck Report, he was the subject of a FINRA arbitration claim alleging unauthorized transactions which settled in August 2014. In November 2013, Merrill Lynch settled another claim involving Mr. Ridgely for $745,000 relating to claims alleging unauthorized trading, unsuitable investments and excessive trading.

Silver Law Group is Investigating NSM Securities, Inc.

December 3, 2014 | Silver Law Group

NSM Securities, Inc. (CRD #134357, West Palm Beach, Florida) and Niyukt Raghu Bhasin (CRD #2282048, Wellington, Florida) submitted an Offer of Settlement to FINRA in which NSM Securities (“NSM”) was expelled from FINRA membership. Bhasin was barred from association with any FINRA member in any capacity. NSM and Bhasin consented to the FINRA sanctions and that the firm, acting through and at the direction of its founder, owner, President and Chief Executive Officer (CEO) Bhasin, derived most of its revenue from actively and aggressively trading stocks in the commission-based accounts of its retail customers. This practice is frequently referred to as churning. Bhasin allegedly put his firm’s profits over the duties owed to its customers and chose not to enforce a supervisory system effective for the firm’s business. NSM, through Bhasin, failed to establish, maintain and enforce a system, including written supervisory procedures (WSPs), to supervise its core activity, an active and aggressive investment strategy. The firm, through Bhasin, failed to monitor for, detect and prevent churning, excessive trading, related violations of Regulation T, and unsuitable investment recommendations, and failed to adequately review e-mail, adequately handle customer complaints or place questionable brokers who were the subjects of multiple FINRA arbitrations or customer complaints and arbitrations on heightened supervision.

FINRA also stated that in implementing Bhasin’s active and aggressive trading strategy, and in order to generate commissions, the firm committed multiple margin violations and the related FINRA rules governing the extension of credit or margin. Specifically, the firm, acting through its brokers, made a practice of allowing customers to buy securities in cash accounts where the cost to buy the securities was met by the sale of the same securities, known as free-riding. All of these actions ultimately led to an environment which allowed brokers to churn customer accounts to make a profit for the firm. NSM specifically targeted Indian investors preying on sharing cultural similarities. This is frequently referred to as affinity fraud.

FINRA also found that the firm, through Bhasin, failed to institute adequate procedures for cold-calling prospective customers. As a result, the firm, through its brokers and other representatives, initiated telephone solicitations to persons whose numbers were on the firm’s do-not-call list and/or the national do-not-call list. (FINRA Case #2011027667402)

FINRA Hits Newport Coast Securities and Its Representatives with Churning Charges

August 14, 2014 | Silver Law Group

Last week, the Financial Industry Regulatory Authority (FINRA) filed charges against Newport Coast Securities, Inc. (“Newport Coast”) and some of its current and former registered representatives, accusing them of using margin and risky securities to artificially generate huge commissions for themselves while wiping out most of their customers’ investment capital.

Newport Coast, a New York-based broker-dealer, by and through brokers Douglas Leone, Andre LaBarbera, David Levy, Antontio Costanzo, and Donald Bartlet, allegedly churned the accounts of twenty four customers — many of whom are retirees — causing more than $1,000,000 in losses to the investor-clients. “Churning,” as it is known in the industry, is the act of a broker who excessively and needlessly engages in trading in a client’s account primarily to generate commissions for the broker on each trade without regard for the client’s financial well-being. Churning is an illegal and unethical practice that violates SEC rules and securities laws. The brokers are also purported to have created new account forms for their victimized clients that misstated the clients’ net worth, investment experience, and objectives; and two of the brokers (Levy and Costanzo) attempted to dissuade several customers from cooperating with FINRA’s investigation into the matter — all of which was done to cover up the illegality of the brokers’ excessive activity in the client accounts.

According to FINRA, former Newport Coast supervisors Marc Arena and Roman Luckey saw what was transpiring but took no meaningful steps to curtail the misconduct. To the contrary, the firm’s managers, supervisors, and the former President of the company allegedly profited through overrides on the churned accounts.