Investment News

SEC charges three brokers with high-cost unsuitable trading

September 28, 2017

Mark Schoeff Jr.

SEC charges three brokers with high-cost unsuitable trading

The Securities and Exchange Commission charged three brokers on Thursday with putting their clients into unsuitable investments involving frequently traded stocks that racked up commissions for them but left their clients with losses. The agency filed a complaint against William C.

The Securities and Exchange Commission charged three brokers on Thursday with putting their clients into unsuitable investments involving frequently traded stocks that racked up commissions for them but left their clients with losses.

The agency filed a complaint against William C. Gennity and Rocco Roveccio, who worked as registered representatives from 2012 to 2014 at Alexander Capital LP, a New York City broker-dealer. It also reached a $411,107 settlement with another broker who worked at the firm during the same time period, Laurence M. Torres.

Mr. Torres, without admitting or denying the charges, also agreed to a bar from the securities industry and from penny-stock trading. The SEC will pursue its case against Mr. Gennity and Mr. Roveccio in a Manhattan federal district court.

The SEC alleges that each of the brokers recommended a pattern of high-cost frequent trading without telling clients that such a strategy was unlikely to produce profits because assets were held for short time periods. The brokers also engaged in churning, according to the SEC.

The agency said that losses totaled $683,038 for Mr. Gennity’s and Mr. Roveccio’s 11 clients, while they received approximately $280,000 and $206,000 in commissions, respectively. Mr. Torres’ eight customers suffered losses of approximately $640,904, according to the SEC order.

“We have no tolerance for unscrupulous brokers, and our examiners and enforcement investigators are working together to proactively catch insidious practices before they spread and impact even more customer accounts,” Andrew M. Calamari, director of the SEC’s New York Regional Office and co-chair of the Enforcement Division’s Broker-Dealer Task Force, said in a statement. He added: “As alleged in our complaint, [Mr.] Gennity and [Mr.] Roveccio each misled several customers by touting their ability to outperform the market while concealing that the cost to customers for this excessive in-and-out trading doomed any realistic possibility of these brokers making money for anyone other than themselves.”

The SEC complaint said that their customers ranged from blue-collar workers with high school educations to small business owners and consultants.

But the attorney for Mr. Gennity asserted that the clients were successful business people who authorized the trades and pursued aggressive investment strategies.

“It’s a very weak case,” said Anthony Varbero, an attorney at the firm Joseph Mure Jr. & Associates. “It’s highly unlikely that [the SEC] will succeed in the case.”

Richard Roth, of the Roth Law Firm, who represents Mr. Roveccio, was not immediately available for comment. An attorney for Mr. Torres did not immediately respond to a request for comment.

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