The US Securities and Exchange Commission has filed civil charges against former Alexander Capital brokers who are accused of making unsuitable recommendations that garnered them commissions while causing investors to sustain significant losses. All three men, Rocco Roveccio, William Gennity, and Laurence Torres, are based in New York.
Because there are costs associated with each transaction for the customer, the security’s price has to go up significantly during the short time it is in an account for even the smallest profit to be made. Instead, eleven customers lost $683K while the NY brokers made $280K and $206K, respectively, in fees and commissions. Some of the investors they bilked had little education and/or were inexperienced investors. In the SEC’s complaint against Gennity and Roveccio, the brokers are accused of recommending investments that required the “frequent buying and selling of securities” despite a lack of reasonable grounds to think that this would make money for their customers.
The two men allegedly engaged in churning in customers’ accounts, unauthorized trading, and hiding material information from them, including that the transaction expenses (markups, commissions, markdowns, fees, postage, and margin interest ) for the investment recommendations would most likely exceed any possible profits.
This is not the first time the two men have been accused of securities fraud. Last year, Gennity paid $12K to resolve unauthorized trading charges. In 2014, he resolved unsuitability and churning allegations made by an Alexander Capital customer by agreeing to pay almost $10,200.
In 2002, Roveccio and others were ordered to pay one customer $216,275 plus interest to settle suitability and unauthorized trading allegations. He settled another unauthorized trading complaint in 2006 for $8K. He also resolved a FINRA arbitration case brought by another customer for $87,500.
The SEC’s litigation against the two men will go forward in federal district court in Manhattan.
Ex-Alexander Capital Broker Settles SEC Charges
In the SEC’s case against Torres, who worked at Alexander Capital from 10/2012 through 9/2014, he is accused of defrauding eight customers. He allegedly recommended a pattern of frequent trading that was costly to them even though he had no reasonable grounds to think this strategy was suitable for the investors. As a matter of fact, said the SEC’s order instituting administrative and cease-and-desist proceedings, the strategy he chose for them would have more than likely guaranteed losses in any account. The investors collectively lost $531,742.
Alexander Capital had charged each customer a $39 commission/handling fee and another $49 fee for each trade, while Torres determined how much to charge in commissions, mark-downs, and mark-ups that were usually greater than 3% for equity trades. He was paid a percentage of all these fees while what was left went to the firm.
Torres, like Roveccio and Gennety, is accused of engaging in churning and unauthorized trading. He has settled the SEC charges against him without denying or admitting to the findings. He also consented to penny stock and securities industry bars. As part of his settlement with the regulator, Torres is required to pay over $225K in disgorgement, more than $25,700 in interest, and a $160K penalty.
Our broker fraud lawyers work with investors to try and help them recoup their investment losses. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.
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FINRA Bars Ex-HSBC Securities Broker Over Alleged $200K Senior Financial Fraud, Stockbroker Fraud Blog, August 30, 2017
FINRA Promises To Take Tougher Stance With Rogue Brokers, Stockbroker Fraud Blog, June 14, 2017
SEC Hacking Raises Concerns That Rogue Traders Might Access Filings in EDGAR Before They Are Public, Institutional Investor Securities Blog, September 22, 2017