Anthony Joseph Cantone (also known as A.J. Cantone), of Eatontown, New Jersey, the former Chief Executive Officer of Cantone Research Inc., has been barred by Financial Industry Regulatory Authority (FINRA) from associating with any FINRA member in any capacity because Cantone refused to provide testimony as requested by the regulator in an investigation into his potential outside business activities. Letter of Acceptance, Waiver, and Consent No. 2022073419201 (December 15, 2023).
On September 9, 2023, Cantone Research withdrew its securities registration and ceased conducting business.
The case against Cantone arose from FINRA’s investigation into his customers’ purchases of low-priced securities and potential conflicts of interest between his outside business activities and his customers. FINRA’s request for testimony, under FINRA Rule 8210, was directly related to these concerns. However, Cantone’s refusal to comply with this request, as communicated to the regulator on December 5, 2023, constituted a violation of FINRA Rules 8210 and 2010.
Cantone was also the subject of an enforcement action initiated by FINRA in which the regulator sought sanctions against Cantone based upon allegations that Cantone made negligent and fraudulent misrepresentations and omissions of material fact in connection with two municipal bond offerings. Department of Enforcement v. Cantone Research Inc. et al., Disciplinary Proceeding No. 2017055886402 (October 26, 2021).
Cantone allegedly caused losses to over 150 customers totaling more than $6,225,000.00 due to defaulted municipal bonds. The enforcement action focused on two specific bond offerings: the Quad Cities Municipal Bond Offering and the Montgomery 2015 Municipal Bond Offering, both underwritten by Cantone Research Inc., where Cantone served in a leadership role.
In the Quad Cities offering, Cantone and other representatives from Cantone Research Inc. were alleged to have rushed through the due diligence process, resulting in negligent misrepresentations and omissions in the offering materials. These misrepresentations included understatement of management fees, over-optimistic financial projections, and the failure to disclose a conflict between a dormitory, whose renovation the bonds were funding, and a local community college, the primary source of the dormitory’s residents. According to the Complaint, Cantone Research Inc. continued to sell the Quad Cities Bonds, violating MSRB Rules G-19 and G-17 by making unsuitable recommendations as well as misrepresentations and omissions of material facts.
The Montgomery 2015 offering supposedly involved fraudulent misrepresentations and omissions by Cantone and Cantone Research Inc. This allegedly included failures to disclose past failed offerings and financial struggles of the Cedars, the assisted living facility the bonds were meant to fund. Additionally, Cantone allegedly misrepresented the financial performance of the facility, failed to disclose his personal financial involvement in previous offerings, and failed to disclose the lack of necessary licensing of the facility’s new owner or that the owner had a criminal background. FINRA alleged that Cantone violated MSRB Rule G-17 by making negligent and fraudulent misrepresentations and omissions of material facts.
FINRA Public Disclosure also shows that Cantone was the subject of a customer initiated investment related FINRA securities arbitration claim in which the customer was awarded $250,000.00 in compensatory damages because Cantone and Cantone Research Inc. were held liable for sales practice violations. FINRA Arbitration No. 03-06223 (November 5, 2004). The Statement of Claim alleged that Cantone made unsuitable recommendations and breached his fiduciary duty in connection with the sale of securities during the time that Cantone was associated with Cantone Research Inc.
Additionally, Cantone was referenced in a customer initiated investment related complaint that was settled on February 14, 2019, for $42,500.00 in damages based upon allegations that Cantone sold investments that went into default, resulting in losses.
Moreover, Cantone was involved in a customer initiated investment related FINRA securities arbitration claim where the customer received $800,000.00 in compensatory damages. FINRA Arbitration No. 10-02349 (December 17, 2013). The Statement of Claim alleged that Cantone failed to supervise, breached his fiduciary duty, and was negligent in connection with a third party’s activities away from the securities broker dealer. Supposedly, over 18 years, this third party was employed by various firms and, in his last few years, at Cantone Research Inc., where he converted customer funds for his own use.
Cantone also withdrew his securities registraton on September 5, 2023, and was ultimately barred by FINRA on December 15, 2023.
