James Alexander Torres, a registered representative with Global Arena Capital Corp., was permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member after consenting to FINRA findings that Torres made material misrepresentations and omitted material facts in connection with securities transactions, excessively traded and churned customer accounts, and engaged in unsuitable recommendations of securities. Letter of Acceptance, Waiver, and Consent No. 2014043542405 (Sept. 14, 2015).
According to the AWC, from November, 2013 – June, 2015, Torres had made material misrepresentations and omissions of material facts to customers concerning securities sales. Specifically, the AWC noted that Torres would fraudulently tell his clients that investing in junk bonds, which were trading at considerable discounts to par value, would be bought back at par or called. Torres, according to the AWC, would also make meritless predictions about securities he sold without any basis.
Torres reportedly would direct junior brokers to cold call prospects in order to recommend the junk bonds by utilizing a faulty sales script provided by the firm that contained misleading omissions and statements. The AWC stated that Torres would also encourage the brokers to utilize scripts containing high pressure and misleading tactics to sell securities to customers that were uncertain or reluctant to move forward with the brokers’ recommendations.
In addition the aforementioned conduct, Torres also was found by FINRA to have excessively traded and churned a number of client accounts, in effect making substantial commissions and markups. The AWC indicated that Torres made misleading and unsuitable recommendations to the customers, especially considering the likelihood of customer loss over time given Torres’ excessive trading and substantial amount of charges customers would bear. The AWC noted that most customers did actually lose money. Torres’ improper recommendations to clients also included unsuitable option purchases, margin trading, and trading of certain U.S. Treasury securities and zero-coupon Puerto Rican bonds, notwithstanding Torres’ inability to understand how the securities worked or would benefit his clients. FINRA ultimately found that Torres had willfully violated Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, as well as FINRA Rules 2010, 2020, and 2111.
Section 10(b) of the Exchange Act makes it unlawful “to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”
Four elements are necessary to show in finding a violation of Section 10(b) of the Exchange Act, Rule 10b-5: 1) misrepresentations and/or omissions were made; 2) misrepresentations and/or omissions were material; 3) representations and/or omissions were made with requisite intent (e.g. scienter), and 4) misrepresentations and/or omissions were made in connection with the purchase or sale of securities.
Material misstatements in connection with the sale or purchase of any security violate FINRA Rules 2010 and 2020 in addition to Section 10(b). Churning violates 10(b) and FINRA Rules 2010 and 2010. According to the FINRA, churning occurs when a broker purchases and sells securities for a customer’s account, without regard to the customer’s investment interests, for the purposes of generating commissions.
Finally, FINRA Rule 2111 requires that associated persons have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer. FINRA will generally find this rule to be violated, as is the case with Torres, when the individual does not have a basis to believe that the recommendation is suitable for at least some investors, that the recommendation is suitable for a particular customer considering the customer’s investment objectives and financial profile, and (for the accounts where the individual is exercising discretion) that a series of recommended transactions are not excessive and unsuitable even if each transaction alone would be deemed suitable.
Public disclosure records via FINRA’s BrokerCheck reveal that Torres has been subject to a pending customer dispute from November 18, 2014, where the customer is requesting $26,000.00 after alleging negligence and breach of fiduciary duty.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
