SEC Fines Alexander Capital LP $798,537 and Charges with Failure to Supervise Brokers
Posted on Wednesday, July 11th, 2018 at 8:09 am
In June 2018, the Securities and Exchange Commission charged Alexander Capital L.P. and two of its managers, Philip A. Noto II and Barry T. Eisenberg, for failing to supervise three brokers, William Gennity (CRD# 4913490), Rocco Roveccio (CRD# 2713144), and Laurence Torres (CRD# 2821373), 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.
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. Eisenberg agreed to a five-year supervisory bar and to pay a $15,000 penalty. These penalties will be paid to harmed retail customers.
The SEC found that the firm failed to reasonably supervise Gennity, Roveccio, and Torres, who were previously charged with fraud in September 2017. According to the SEC 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 ignored red flags indicating excessive trading and failed to supervise Gennity, Roveccio, and Torres with a view to preventing and detecting their securities-law violations.
Gennity has been registered with First Standard Financial Company LLC in Staten Island, New York since 2014. Previously, he was registered with Alexander Capital, L.P. in New York, New York from 2012 to 2014.
In September 2017, the Securities and Exchange Commission alleged that Gennity and another registered representative violated the antifraud provisions of the federal securities laws. According to the complaint, “First, the Defendants had a duty to have a reasonable basis for recommendations that they made to their customers. In violation of this duty, Gennity recommended to four customers, and the other defendant recommended to seven customers, a pattern of high cost, in-and-out trading without any reasonable basis to believe that their recommendations were suitable for anyone. These recommendations resulted in losses for the customers and ill-gotten gains for Gennity and the other defendant. Defendants knew or recklessly disregarded that their recommendations, for which they had no reasonable basis, were not suitable for anyone. The Defendant’s recommendations were unsuitable for certain of their customers in light of those customers’ financial needs, investment objectives and circumstances. Third, the defendants made material misrepresentations and omissions to customers. Fourth, they churned customer accounts. Finally, the defendants engaged in unauthorized trading. As a result of these violations, Gennity and the other defendant received approximately $280,000 and $206,000, respectively, in commissions. The eleven customers suffered losses totaling $683,038.”
In February 2017, the United States Securities and Exchange Commission (SEC) opened an investigation against Gennity regarding fraud or deceit in connection with the purchase or sale of any security.
In August 2016, the state of Montana opened an investigation into Gennity alleging, “Excessive trading; unauthorized trading; unauthorized use of margin; discretionary trading without authorization; unsuitable recommendation; charging excessive fees; fraud.” This is currently pending.
Gennity has been the subject of seven customer complaints between 2014 and 2017, one of which was withdrawn and one was closed without action, according to his CRD report:
April 2018. “6/2017 to 3/2018, [redacted] us claiming excessive trading, high fees and commissions.” The customer is seeking $2.4 million in damages and the case is currently pending.
August 2017. “Unauthorized trading and mis-information.” The customer is seeking $435,000 in damages and the case is currently pending.
July 2017. “Churning, breach of fiduciary duty.” The customer is seeking $200,000 in damages and the case is currently pending.
November 2016. “Client spoke to compliance on 11/08/2016 regarding an allegation of unauthorized trades that occurred on 10/26/2016 and 11/01/2016. Client alleges that he informed the rep on 11/1 that he did not wish to own the additional 6000 shares of the security he already owned that was purchased on his behalf on 11/26. He further alleges that instead of cancelling the trade on 11/1, the rep sold the position against his wishes resulting in a loss. He requested that both trades be cancelled and that he not be liable for any incurred losses. Total transactional loss was approximately $12,000.” The case was settled for $12,029.52.
August 2014. “Churned & unsuitable concentrated position.” The customer sought $28,627.46 in damages and the case was settled for $14,900.
Roveccio has been registered with First Standard Financial Company LLC in Red Bank, New Jersey since 2014. Previously, Roveccio was registered with Alexander Capital, L.P. in Staten Island, New York from 2012 to 2014. Roveccio has been the subject of five customer complaints between 2000 and 2018. Recent complaints include:
May 2018. “Client is alleging unauthorized trading and unsuitable investments.” The customer is seeking $1.5 million in damages and the case is currently pending.
January 2018. “Churning- unauthorized trading.” The customer is seeking $115,995.25 in damages and the case is currently pending.
Torres was registered with First Standard Financial Company LLC in Staten Island, New York from 2014 to September 2016 and with Alexander Capital, L.P. in Staten Island, New York from 2014 to 2016.
In September 2017, the Securities and Exchange Commission (SEC) barred Torres and sanctioned him to $160,000 in civil and administrative penalties and fines, $225,359.36 in disgorgement and $25,748.02 in a monetary penalty other than fines for participating in any offering of a penny stock. The SEC found that between August 2012 through September 2014, Torres violated the antifraud provisions of the federal securities laws by recommending a high-cost pattern of frequent trading that he had no reasonable basis to believe would be suitable for eight of his customers or for anyone, by making material misrepresentations and omissions regarding the high-cost pattern of frequent trading that he recommended to those customers, by churning those customer accounts and by engaging in unauthorized trading therein. Torres failed to disclose to the eight customers that the pattern of frequent trading that he recommended, combined with the high per-trade transaction costs, was extremely likely to cause losses. Torres also executed trades in non-discretionary accounts without customer approvals.
In March 2017, Torres was suspended by FINRA after he failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.
Torres has been the subject of six customer complaints between 2015 and 2018, according to his CRD report:
February 2018. “High pressure sales techniques – unsuitable investments.” The customer is seeking $692,102.20 in damages and the case is currently pending.
April 2017. “During April of 2014 the Claimant [CUSTOMER NAME] opened an account [ACCOUNT NUMBER] with Laurence Torres, broker previously with Alexander Capital L.P. The account was closed in October of 2014. The Claimant deposited $232,451 into the account, the entire amount lost due to the following infractions committed by Mr. Torres. Over concentration in one Security Excessive use of margin High speculative Investment.” The customer is seeking $232,451 in damages and the case is currently pending.
March 2016. “Churning, unsuitability, breach of fiduciary duty, fraud.” The customer sought $99,999 in damages and the case was settled for $50,000.
March 2016. “Suitability, churning, and breach of fiduciary duty.” The customer sought $50,000 in damages and the case was settled for $46,500 in compensatory damages plus $600 in filing fees.
November 2015. “Unsuitability-breach of fiduciary common law fraud-breach of contract.” The customer sought $400,000 in damages and the case was settled for $95,000.
October 2015. “Failure to follow instruction. Customer did not understand the use of margin. Unsuitable investments.” The customer sought $25,000 in damages and the case was settled for $20,000.
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, First Standard Financial Company LLC may be liable for investment or other losses suffered by Gennity, Roveccio, and Torres’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.