SEC Says NY Brokers Billed Investors For Lucrative Fees
September 29, 2017
Law360, New York (September 28, 2017, 10:00 PM EDT) — The U.S. Securities and Exchange Commission on Thursday accused two New York brokers of defrauding their clients through a pattern of unlawful trading and deception that cost clients nearly $700,000, while the brokers netted hundreds of thousands of dollars in fees.
The agency says former Alexander Capital LP brokers William Gennity, 30, of Staten Island, New York, and Rocco Roveccio, 42, of Freehold, New Jersey, engaged in a pattern of “high cost, in-and-out trading” with no basis to believe such trades would be suitable for any client.
The pair is also accused of lying to customers, churning clients’ accounts and trading without authorization. While Gennity and Roveccio took in $280,000 and $206,000, respectively, in commissions from the scheme, 11 clients lost $683,038, the SEC said.
“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, the director of the SEC’s New York office, said in a statement.
According to the SEC’s complaint, Gennity and Roveccio would make recommendations to investors that involved rapid buying and selling of stock, while having no reason to think their clients would profit.
The SEC said the duo also hid information from clients about the risky trades’ transaction costs, including commissions, markups, markdowns, fees, postage and margin interest, that would eclipse any potential client gains.
An attorney for Gennity, Anthony Varbero of Joseph Mure Jr. & Associates, told Law360 they were surprised the SEC would bring such a case, which he said “lacks credibility.” Varbero said Gennity’s clients were aware of all the transactions in their accounts and authorized the trades.
“We think their claims are unfounded and they have a very weak case,” Varbero said. “I think William Gennity will prevail.”
An attorney for Roveccio, Richard Roth of the Roth Law Firm, was not immediately available for comment. An Alexander Capital representative did not respond to a request for comment late Thursday.
Another former Alexander Capital broker, Laurence M. Torres, 39, of West Mifflin, Pennsylvania, agreed to settle the SEC’s claims and pay over $400,000 in disgorgement, fines and interest. Torres also agreed to a securities industry ban, according to a consent order.
Like the others, the SEC claims Torres made a series of high-cost and frequent trades that gave his customers virtually no chance of making money, as well as churning client accounts and making unauthorized trades.
Gennity previously got in hot water with Montana’s securities regulator, which in August of last year initiated an enforcement action against him and others tied to Alexander Capital alleging claims similar to the SEC’s, according to documents from the Office of the Montana State Auditor, Commissioner of Securities and Insurance. That case appears to be still pending.
The SEC is represented by David Oliwenstein and David Stoelting.
Roveccio is represented by Richard Roth of the Roth Law Firm. Gennity is represented by Anthony Varbero of Joseph Mure Jr. & Associates.
The case is SEC v. Gennity et al., case number 1:17-cv-07424, in the U.S. District Court for the Southern District of New York.