Articles Tagged with broker-dealers

The SEC charged New York-based FINRA regulated brokerage firm Alexander Capital L.P. (CRD # 40077)as well as two of its managers for failing to supervise three registered brokers, William C.  Gennity, Rocco Roveccio, and Laurence M. Torres last Friday. The alleged supervisory failures are concerning charges against the brokers for unsuitable recommendations, churning accounts, and executing unauthorized trades in September 2017. While the brokers profited from commissions, investors lost their hard-earned savings over violations of the antifraud provisions of the federal securities laws. According to the SEC, Alexander Capital L.P lacked reasonable supervisory policies and procedures that could have helped detect fraudulent practices by three brokers. In a separate order, the SEC also charged Alexander Capital managers, Philip A. Noto II and Barry T. Eisenberg for missing red flags and failing to adequately supervise to detect the alleged broker committed fraud. Consequently, investors lost substantial money over fraud that could have been prevented with reasonable policies and procedures to detect broker wrongdoings.

The parties agreed to settle the charges without admitting or denying the SEC’s findings. Alexander Capital has agreed to pay $193,775 of allegedly ill-gotten gains, $23,437 in interest, and a $193,775 penalty, which will be placed in a fund to be returned to harmed retail customers.  Philip A. Noto II agreed to a permanent supervisory bar and a $20,000 penalty.  Barry T. Eisenberg agreed to a five-year supervisory bar and a $15,000 penalty. Alexander Capital has agreed to hire an independent consultant to review its policies and procedures, according to the press release. Will Alexander Capital enforce the many reminders that the SEC released for brokerage firms to supervise account activities and protect consumers adequately? It remains to be seen, as old habits die hard.

The Securities and Exchange Commission’s recent charges against a New York-broker dealer Alexander Capital illustrates the agency’s crackdown on broker supervisory failures within the financial services industry. Our FINRA arbitration attorneys applaud the SEC’s commitment to holding securities firms accountable, but still think more needs to be done. After all, SEC has no tolerance for unscrupulous brokers, according to Andrew M. Calamari, Director of the SEC’s New York Regional Office and Co-Chair of the Enforcement Division’s Broker-Dealer Taskforce. Nevertheless, FINRA arbitration attorneys continue to file numerous claims involving churning, unauthorized trading, and other types of securities fraud, which the SEC has never detected.

The SEC settlement indicates that Merrill Lynch sent millions of dollars in customer orders to other broker-dealers for execution while purposely concealing their activity as part of their so-called “masking.” practice. For five years, Merrill Lynch had routed some orders to broker-dealers referred to as “ELP”s, or “Electronic Liquidity Partners.” Merrill Lynch was routing their customer orders into smaller “child orders” for execution at ELPs and other external entities. Meanwhile, Merrill Lynch hid the involvement of ELPs and informed customers that all transactions occurred within the firm. The SEC alleged that Merrill Lynch created false reports; altered code to reconfigure FIX messaging systems; modified Transaction Cost Analysis reports and more to Merrill Lynch as the execution venue incorrectly. Did customers experience bad executions? Why create false reports?

Bank of America’s Merrill Lynch, Pierce, Fenner and Smith Incorporated has agreed to pay a $42 million-dollar settlement Securities and Exchange Commission for federal securities laws violations according to an Order Instituting Administrative and Cease-and-Desist Proceedings. According to the SEC’s order released Tuesday, Merrill Lynch admitted to fraudulently deceiving clients about the handling of their millions of orders to buy and trade stock. The Securities and Exchange Commission finds that Merrill Lynch “willfully violated” Sections 17(a)(2) and 17(a)(3) of the Securities Act. The case is an unfortunate reminder of the risks that even the most careful investors deal with when trusting financial institutions.

Merrill Lynch Pierce, Fenner and Smith Incorporated is a FINRA registered brokerage firm and investment advisor with 1559 total disclosures according to (CRD #7691) records on BrokerCheck. Although a Delaware corporation, Merrill Lynch’s principal offices are in Bryant Park, New York. Merrill Lynch’s business conduct includes mutual fund retail, investment advisory services; retailing corporate equity securities; selling variable life insurance or annuities, along with other securities and non-securities transactions.

Investors who have been watching the recent financial news know that securities markets have become very volatile over the past month.  Increased volatility in the markets makes leveraged products like Exchange Traded Funds (EFTs) and Exchange Traded Notes particularly risky for most individuals investors, as noted in a recent Wall Street Journal article published on September 4, 2015.

These securities products incorporate borrowed money (termed leverage in the securities industry), which has the effect of amplifying gains and losses tied to baskets of securities that are often concentrated in one industry or commodity.

Malecki Law has written about these products in the past, noting that broker-dealer firms such as Stifel, Nicolaus & Co., Inc. and Century Securities Associates Inc. were fined by the Financial Industry Regulatory Authority (FINRA) for making unsuitable recommendations to investors.