SEC Charges New York-Based Firm and Supervisors for Failing to Supervise Brokers Who Defrauded Customers
Washington, D.C.--(Newsfile Corp. - June 29, 2018) - The Securities and Exchange Commission today charged New York-based broker-dealer Alexander Capital L.P. and two of its managers for failing to supervise three brokers who made unsuitable recommendations to investors, “churned” accounts, and made unauthorized trades that resulted in substantial losses to the firm’s customers while generating large commissions for the brokers.
Today’s actions find that Alexander Capital failed to reasonably supervise William C. Gennity, Rocco Roveccio, and Laurence M. Torres, brokers who were previously charged with fraud in September 2017. According to the order, Alexander Capital lacked reasonable supervisory policies and procedures and systems to implement them, and if these systems were in place, Alexander Capital likely would have prevented and detected the brokers’ wrongdoing.
In separate orders, the SEC finds that supervisors Philip A. Noto II and Barry T. Eisenberg ignored red flags indicating excessive trading and failed to supervise brokers with a view to preventing and detecting their securities-law violations. The SEC’s order against Noto finds that he failed to supervise two brokers and its order against Eisenberg finds that he failed to supervise one broker.
“Broker-dealers must protect their customers from excessive and unauthorized trading, as well as unsuitable recommendations,” said Marc P. Berger, Director of the SEC’s New York Regional Office. “Alexander Capital’s supervisory system – and its personnel – failed its customers, and today’s actions reflect our continuing efforts to protect retail customers by holding firms and supervisors responsible for such failures.”
Alexander Capital agreed to be censured and pay $193,775 of allegedly ill-gotten gains, $23,437 in interest, and a $193,775 penalty, which will be placed in a Fair Fund to be returned to harmed retail customers. Alexander Capital also agreed to hire an independent consultant to review its policies and procedures and the systems to implement them. Noto agreed to a permanent supervisory bar and to pay a $20,000 penalty and Eisenberg agreed to a five-year supervisory bar and to pay a $15,000 penalty. These penalties will be paid to harmed retail customers. Alexander Capital, Noto and Eisenberg agreed to settle today’s charges without admitting or denying the findings in the SEC’s orders.
The SEC’s Office of Investor Education and Advocacy and Broker-Dealer Task Force previously issued an Investor Alert warning about excessive trading and churning that can occur in brokerage accounts.
The SEC’s investigation has been conducted by David Oliwenstein, David Stoelting, Roseann Daniello, and Steven G. Rawlings, and supervised by Sanjay Wadhwa. The examination that led to the investigation was conducted by Shereion Clarke, Margaret Lett, and Jennifer Grumbrecht. The SEC appreciates the assistance of the Financial Industry Regulatory Authority and the Office of the Montana State Auditor, Commissioner of Securities and Insurance.
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