FINRA Lawyer Blog
The SEC has accused two former Alexander Capital LP brokers, William Gennity and Rocco Roveccio of engaging in unlawful trading and deception that caused their customers to lose hundreds of thousands of dollars, while they earned a comparable amount in fees.
Gennity and Roveccio both worked at Alexander Capital from mid 2012 till October 2014.
They apparently have a long history of disciplinary action in the securities industry. In 2016, Gennity reached a settlement to resolve allegations of unauthorized trading and in 2014, he reached another settlement over churning and unsuitability. Roveccio has reached settlements over allegations of unauthorized trading and suitability in 2002, unauthorized trading in 2006, and a FINRA customer arbitration in 2013.
During their time at NYC’s Alexander Capital, Gennity and Roveccio allegedly violated the antifraud provisions of the federal securities laws. According to the SEC’s complaint, they recommended to 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 Roveccio.”
Allegedly, the brokers knowingly disregarded their customers’ “financial needs, investment objectives and circumstances.” The SEC also claimed Gennity and Roveccio “made material misrepresentations and omissions to customers… churned customer,” and “engaged in unauthorized trading.”
The SEC claims that Gennity and Roveccio had a habit of recommending customers to rapidly buy and sell stock, without any reason to believe this would be profitable for them. The brokers allegedly concealed information from customers about transaction costs, such as commissions, markups, fees, and margin interest, thus misrepresenting the true scope of the potential gains involved.
From these allegedly fraudulent activities, Gennity earned $280,000 in commissions and Roveccio received $206,000. Their customers’ losses amounted to a total of $683,038.
Registered representatives have a duty to have a reasonable basis for recommendations that they make to their customers. Among other rules and regulations, Gennity and Rovaccio allegedly violated Section 17(a) of the Securities Act of 1933, which states that,
“It shall be unlawful for any person in the offer or sale of any securities (including security-based swaps) or any security-based swap agreement (as defined in section 3(a)(78) of the Securities Exchange Act) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly
- to employ any device, scheme, or artifice to defraud, or
- to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
- to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.”
The SEC is currently seeking disgorgement of Gennity and Rovaccio’s “ill-gotten gains” (plus interest) as well as civil monetary penalties. If the SEC’s claims are proven to be true, the brokers will likely pay handsomely for their mistakes.
This story may be a cautionary tale for brokers, as it is an example of the SEC’s relentless pursuit of brokers who incur this type of violations. “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,” SEC NY Director, Andrew M. Calamari, has commented.
If the SEC targets you or your firm for unsuitability, misrprepresentation, churning or other charges call an experienced securities lawyer quickly as a proactive immediate defense can often minimize the damage to your career or finances. At HerskovitsLaw PLLC, securities law is all we do. Connect at 212.897.5410 or ONLINE.