Douglas Anthony Leone, of Melville, New York, a stockbroker formerly registered with Salomon Whitney Financial, has been charged by Financial Industry Regulatory Authority (FINRA) in a Complaint alleging that he failed to provide testimony in a FINRA investigation into his potentially unsuitable investment recommendations. Department of Enforcement v. Douglas Anthony Leone, No. 2016052560002 (Jan. 9, 2018).
According to the Complaint, Leone was contacted by FINRA on April 4, 2017, in which he was asked to provide testimony to FINRA staff on April 24, 2017, in regard to his business activities. Yet, Leone reportedly never appeared to testify. Leone was then sent a letter by FINRA on May 30, 2017, which informed him that he had been suspended in all capacities, and that FINRA would bar him on August 7, 2017, absent Leone’s response and compliance with FINRA’s requests.
The Complaint stated that Leone then requested that FINRA terminate his suspension, declining to state whether he would testify for FINRA staff. Leone reportedly failed to respond to FINRA or appear after the third time that his testimony was requested. FINRA alleged that Leone’s conduct was violative of FINRA Rules 2010 and 8210.
This is not the first time that Leone has been sanctioned by FINRA. In particular, on October 17, 2016, he was barred by FINRA and ordered to pay a $400,000.00 fine and restitution to customers RER, PH, MJ, LC, JB and DG after being found by FINRA to have churned the customers’ investment portfolios, and recommending investments that were not suitable for customers while misstating their accounts values during the time that Leone was associated with Newport Coast Securities. Department of Enforcement v. Douglas A. Leone, No. 2012030564701 (Oct. 17, 2016).
For example, Leone traded in the accounts of a retired disabled veteran, LJC, who held $100,000.00 in an individual retirement account and another $40,000.00 in a brokerage account invested in approximately five equities. Leone reportedly convinced LJC to invest by telling LJC that Leone traded stocks of companies that were not well known, enabling him to quickly earn money with stock price movement. The Decision stated that LJC and his spouse set up an account with Newport Coast Securities. Apparently, LJC’s investment profile referenced him having in excess of $1,000,000.00 in assets, with annual income of at least $125,000.00, with high risk tolerance and objectives for investing in the short term; however, these representations were not accurate.
Apparently, LJC was never called before trades were placed in LJC’s account. The Decision stated that the decisions to purchase and sell securities were made by Leone, and he ended up effecting $1,700,000.00 total purchases and $1,600,000.00 in sales by the end of December of 2010, at which time LJC’s margin balance equaled $150,000.00. Apparently, $82,000.00 had been invested by LJC between October of 2010 and April of 2011, during which period the sales and purchases of securities were about $5,000,000.00 each. LJC’s account reportedly suffered from a 129.32 turnover rate and 173.92 annual cost-to-equity percentage. Consequently, the Decision stated that LJC sustained losses of at least $55,000.00, incurring $66,000.00 in total costs.
The Decision stated that Leone effected quantitatively unsuitable transactions by excessively trading in customers’ accounts; conduct violative of FINRA Rules 2010, 2111, IM-2310-2, as well as National Association of Securities Dealers (NASD) Rules 2110 and 2310. The Decision further stated that Leone’s churning of customer accounts was violative of NASD Rules 2110 and 2120, FINRA Rules 2010 and 2020, Securities Exchange Act of 1934 Section 10(b), and Securities and Exchange Commission (SEC) Rule 10b-5.
FINRA Public Disclosure confirms that a customer initiated investment related arbitration claim regarding Leone’s activities was resolved for $70,000.00 in damages founded on accusations of breach of contract, negligence and breach of fiduciary duty pertaining to equity transactions placed in the customer’s account. FINRA Arbitration No. 12-00995 (Mar. 14, 2013). Then, a customer initiated investment related arbitration claim involving Leone’s conduct was settled for $9,999.00 in damages based upon allegations that Leone churned the customer’s account, breached his fiduciary duties, and made misrepresentations to the customer with regard to over-the-counter equities. FINRA Arbitration No. 11-04698 (July 3, 2013).
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