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Investigation of Former Key Investment Services LLC Broker Dominic Tropiano Who Was Recently Barred by FINRA

Posted on Monday, July 29th, 2019 at 2:43 pm    

Key Investment Services LLC

Erez Law is interested in speaking with investors who may have suffered losses due to investments with former Key Investment Services LLC broker Dominic Tropiano (CRD# 4761462) regarding non-traditional exchange-traded funds (ETF) losses. Tropiano was registered with America Northcoast Securities, Inc. in Cleveland, Ohio from May to June 2016 and previously with Key Investment Services LLC in Chagrin Falls, Ohio from 2008 to 2015.

In September 2020, the Securities and Exchange Commission (SEC) barred Tropiano for his participation in any offering of a penny stock. According to his BrokerCheck profile, “The Commission’s complaint in that matter alleged that, between April 20, 2015 and June 5, 2016, in connection with the purchase and sale of securities, Tropiano executed trades without obtaining the customers’ prior authorization. The complaint also alleged that Tropiano made unsuitable transactions in customers’ accounts.”

In August 2020, the SEC opened an investigation into Tropiano, alleging that he fraudulently engaged in unsuitable and unauthorized trading in the accounts of retail brokerage customers. According to the complaint, “Tropiano’s fraud involved placing more than 500 trades involving complex securities called leveraged exchange traded funds (“ETFs”). The leveraged ETFs Tropiano purchased were high-risk securities intended to be traded daily by sophisticated investors and not held for periods longer than one day. However, Tropiano’s customers were retail investors, including elderly ones, who had only moderate risk profiles and long-term investment objectives. Although the investments were unsuitable for his customers, Tropiano recommended and purchased leveraged ETFs for at least 40 retail customer accounts and held the leveraged ETFs in those accounts for weeks and, in some cases, months. Tropiano also fraudulently traded leveraged ETFs for certain customers without their authorization. As a result of Tropiano’s fraudulent trading in leveraged ETFs, his customers sustained combined losses of more than $1 million. While his customers suffered, Tropiano profited by receiving at least $115,000 in “bonuses” and commissions generated from his trading.”

In May 2019, FINRA barred Tropiano after he “consented to the sanction and to the entry of findings that he recommended transactions involving non-traditional exchange-traded funds (ETFs) to customers, without having a reasonable basis to believe those transactions were suitable for anyone, due to his lack of understanding of the unique risks, terms and features of the products. The findings stated that Tropiano’s recommendations involving non-traditional ETFs were also unsuitable for those customers in light of their investment profiles, which included conservative investment objectives. The findings also stated that Tropiano caused non-traditional ETF transactions to be placed in customers’ securities accounts without the customers’ knowledge or consent, and in the absence of written or oral authorization for him to place such trades. The findings also included that Tropiano was not properly registered with FINRA while engaging in the securities business of a firm by soliciting the purchase and sale of non-traditional ETFs in the accounts of firm customers.” There was no restitution ordered, because Tropiano’s member firm paid a total of $1,526,500 to its customers for losses suffered as a result of the non-traditional ETF transactions solicited by Tropiano while at the firm.

Tropiano has been the subject of eight customer complaints between 2014 and 2017, one of which was denied, according to his CRD report. More recent complaints are regarding: 

May 2017. “Claimants asserted numerous claims in connection with their 2015 and 2016 investments in leveraged ETFs made by another individual, including negligence, violations of FINRA rules, breach of fiduciary duty, unsuitability, unauthorized trading, and failure to supervise.” The customer is seeking $250,000 in damages and the case is currently pending. 

April 2017. “Claimants asserted numerous claims in connection with their 2015 and 2016 investments in leveraged ETFs, including violations of the Ohio Securities Act and FINRA rules, negligence, unsuitability, failure to supervise, unauthorized trading, breach of fiduciary duty, and breach of contract.” The customer is seeking $150,000 in damages and the case is currently pending. 

January 2017. “Claimants asserted numerous claims in connection with their 2015 and 2016 investments in leveraged ETFs, including violations of FINRA rules and recommendations, negligence, unsuitability, failure to supervise, and unauthorized trading.” The customer is seeking $100,000 in damages and the case is currently pending. 

November 2016. “Client alleges the RR’s recommendations to purchase various mutual funds totaling $446,740 from 2014 to March 2015 were unsuitable.” The customer sought $120,000 in damages and the case was settled for $85,000.

August 2016. “Claimants asserted numerous claims in connection with their 2015 and 2016 investments in leveraged ETFs, including violations of the Ohio Securities Act and FINRA rules, negligence, unsuitability, failure to supervise, unauthorized trading, breach of fiduciary duty, fraud, and breach of contract.” The customer is seeking $800,000 in damages and the case is currently pending. 

August 2016. “Claimants asserted numerous claims in connection with their 2015 and 2016 investments in leveraged ETFs, including negligence, violations of FINRA rules, breach of fiduciary duty, unsuitability, unauthorized trading, and failure to supervise.” The customer is seeking $330,000 in damages and the case is currently pending. 

August 2016. “Claimants asserted numerous claims in connection with their 2015 and 2016 investments in leveraged ETFs, including violations of the Ohio Securities Act and FINRA rules, negligence, unsuitability, failure to supervise, unauthorized trading, breach of fiduciary duty, and breach of contract.” The customer is seeking $400,000 in damages and the case is currently pending. 

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Key Investment Services LLC may be liable for investment or other losses suffered by Tropiano’s customers.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.