Zachary S. Berkey and Daniel T. Fischer, of Melville, New York, stockbrokers registered with Four Points Capital Partners LLC, were subject of a Complaint brought by the Securities and Exchange Commission containing accusations that Berkey and Fischer made unsuitable investment recommendations to customers, misrepresentations, and churned customers’ accounts. Securities and Exchange Commission v. Zachary S. Berkey et al., No. 1:17-cv-09552 (Dec. 6, 2017).
According to the Complaint, customers were advised on all their trades by Fischer and Berkey. However, Fischer and Berkey failed to take into account the risks of the investments they recommended as well as the costs of their in-and-out trading scheme. Apparently, Fischer and Berkey were reckless in failing to understand that their investment strategy would very likely cause customers to sustain investment losses. SEC alleged that Fischer and Berkey had no adequate basis to conclude that their recommendations were suitable for the customers.
The Complaint stated that the amount of commissions assessed to customers was controlled by Fischer and Berkey, and the two also assessed fixed, $75.00 fees on transactions. Most of those commissions that Fischer and Berkey assessed were paid to them. SEC alleged that Fischer and Berkey knew that the investment strategy utilized by them was not in their customers’ best interests, particularly due to the costs of transactions having been larger than the gains earned by the investments.
The Complaint revealed that seven customers were affected by Berkey and four were effected by Fischer. Positions in customers’ accounts were held by Berkey for about thirty days on average, while each position was held by Fischer for about fourteen days. Customers of Berkey paid $288,792.00 and customers of Fischer paid $386,844.00. Customers of Berkey reportedly had 58.19 percent cost-to-equity ratios, while Fischer’s customers incurred a 70.26 percent cost-to-equity ratio. The SEC indicated that Joseph’s recommendations to customers were unsuitable considering the extreme rates of returns required of customers to break even.
SEC additionally that Fischer and Berkey concealed the costs customers would incur in pursuing Fischer’s and Berkey’s recommendations, failing to tell them that high volume buying and selling, trading costs and commissions that Fischer and Berkey tacked on would, in all likelihood, erode all customers’ gains. Yet, Fischer and Berkey represented to customers that the trading in their account would produce profits for them.
SEC alleged that Fischer’s and Berkey’s activities constituted violations of Securities Act of 1933 Section 17(a), Securities Act of 1934 10(b), and SEC Rule 10b-5.
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that Berkey has been identified in four customer initiated investment related disputes concerning allegations of his wrongdoing while employed with Woodstock Financial Group and Raike Financial Group, Inc. Particularly, on June 16, 2009, a customer initiated investment related written complaint involving Berkey’s conduct was settled for $30,000.00 in damages founded on allegations that Berkey effected unauthorized equity transactions on the customer’s account, and churned the customer’s equity investment portfolio.
Then, on January 9, 2014, a customer filed an investment related written complaint regarding Berkey’s activities, in which the customer requested $95,000.00 in damages supported by accusations of churning of the customer’s funds, and inappropriate transactions having been effected in the customer’s account.
Berkey’s registration with Four Point Capital Partners was terminated on January 16, 2015. Fischer’s registration with Four Points Capital Partners was terminated as of July 31, 2017.
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