Erez Law Investigating Excessive Trading Claims Involving Newport Coast Securities, Inc.
Posted on Thursday, October 9th, 2014 at 8:18 am
Erez Law is investigating claims regarding Newport Coast Securities, Inc. (CRD #16944, New York, New York), Marc Anthony Arena (CRD #2754309, Hicksville, New York), Donald Andrew Bartelt (CRD #1377935, Cave Creek, Arizona), Antonio Costanzo (CRD #2580765, Chesapeake, Virginia), Andre Vincent LaBarbera (CRD #2072370, Dix Hills, New York), Douglas Anthony Leone (CRD #2453784, Sandy Hook, Connecticut), David Michael Levy (CRD #2255938, Wellington, Florida) and Roman Tyler Luckey (CRD #2977054, Long Beach, California). The complaint alleges that the firm and five of its registered representatives, Bartelt, Constanzo, LaBarbera, Leona and Levy, excessive traded and churned the accounts of 24 customers, and that the firm’s direct supervisors, Arena and Luckey, failed to take meaningful measures to stop the misconduct, according to the complaint. See FINRA Case #2012030564701.
The complaint alleges that the misconduct should have drawn immediate scrutiny and been halted because of numerous red flags including:
- cost-to-equity ratios were often over 100 percent;
- turnover rates were often over 100;
- there were extraordinary amounts of in-and-out trading;
- customer accounts were highly margined and often concentrated in one security;
- there were large numbers of transactions in which the total commission/markup per trade exceeded 3 percent and, in many instances, exceeded 4 percent;
- there was a deceptive mix of riskless principal and agency trading in numerous accounts, namely, higher cost trades in which markups almost always exceeded 3 percent (and generally exceeded $1,000 per trade) were executed on a riskless principal basis whereas lower cost trades, typically involving sales of the same securities, were executed on an agency basis;
- inverse and/or leveraged exchange-traded funds (ETFs) and exchange traded notes (ETNs) remained in accounts for multiple trading sessions;
- solicited trades were inaccurately characterized as unsolicited; and
- nearly all of the customer accounts at issue exhibited large losses.
The complaint alleges that the trading was excessive in light of, and inconsistent with, the customers’ investment objectives and financial situation. The complaint also alleges that Constanzo, LaBarbera and Levy recommended transactions involving leveraged and/or inverse exchange-traded products (ETPs) to customers. Constanzo, LaBarbera and Levy allegedly lacked reasonable grounds for believing that these risky and speculative securities were suitable for the customers and that the customers understood and were willing to assume the risks particular to these securities. The complaint further alleges that LaBarbera mischaracterized solicited trades as “unsolicited,” and that Leone received emails from a customer inquiring about his account balance, to which Leona responded with a false value overstating the true value of the account.
FINRA also alleges that the firm, Arena and Luckey failed to adequately supervise Constazo, LaBarbera, Leone and Levy. The firm, Arena and Luckey did not address multiple red flags suggesting that Constazo, LaBarbera, Leone and Levy were excessively trading, churning and generally making unsuitable recommendations, according to the complaint. The firm, Arena and Luckey also allegedly failed to take any meaningful measure to address the misconduct and to ensure that the firm’s representatives acted in a manner that was compliant with applicable laws, regulations and rules.
Further, the complaint alleges that Constanzo and Levy violated their obligation to conduct their activities in accordance with ethical standards by conditioning restitution offers upon customers’ refusal to cooperate with a FINRA investigation and by attempting to dissuade customers from testifying in an anticipated disciplinary hearing. The complaint also alleges that the firm offered and sold structured products and inverse/leveraged ETPs, but neither offered nor provided any training on these complex products. The firm also allegedly lacked procedures and policies to address the supervision of the sales of ETPs, and had no system or procedure to flag, for supervisory review, customer accounts that were potentially unsuitably concentrated in structured products or inverse/leveraged ETPs.
If you were a client of Newport Securities, Bartelt, Constanzo, LaBarbera, Leona, or Levy, and have suffered investment losses or financial irregularities, please contact Erez Law to explore your legal options. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 888-840-1571 or complete our “contact form.”