This week the SEC Charged J.P. Turner & Co. with the failure to supervise and three brokers for Churning.
The Securities and Exchange Commission charged three brokers Ralph Calabro, Jason Konner, and Dimitrios Koutsoubos with the churning of customer accounts while they were associated as registered representatives of JP Turner.
JP Turner has approximately 513 independent contractor registered representatives working out of over 203 branch offices that are located throughout the United States.
Churning or Excessive Activity
Churning or excessive activity is a fraudulent practice whereby a broker engages in trading for the purpose of generating commissions and other revenue for themselves at the customer’s expense and in disregard the customer’s investment objectives.
During the relevant period, Konner and Koutsoubos both worked as registered representatives in JP Turner’s Brooklyn, New York branch, and between January 1, 2008 and December 31, 2009 Calabro, Konner, and Koutsoubos collectively “churned” the accounts of customers by engaging in excessive trading for their own gains in disregard of the customers’ conservative investment objectives and low or moderate risk tolerances for the purpose of generating commission business. Their misconduct generated commissions, fees and margin interest totaling approximately $845,000 while the defrauded customers suffered aggregate losses of approximately $2,700,000.
The annualized turnover ratiosin the accounts ranged from 8 to 13, and the annualized break-even rates of return ranged from 22.9 percent to 31.8 percent. The trading in these accounts was excessive in light of Calabro’s customers’ investment objectives and experiences, ages and financial needs.
Calabro’s customers suffered approximate losses of $2,300,000.
It also appears from the SEC Complaint that these individuals fabricated the customers new account forms, which were signed in blank, to include inaccurate investment objectives, risk tolerance, and investment experience levels.
Not surprisingly, each of the brokers have a sordid past prior to being hired by JP Turner. Ralph, who is presenty associated with National Financial was previously associated with Myers Pollack & Robbins and Greenway Capital Corp., both of which are “rogue” firms expelled from FINRA membership for violation of the federal securities laws. Calabro is the subject of six customer initiated, investment related investment complaints alleging fraud in connection with the sale of securities.
Jason I. Konner was previously associated with 12 different firms in the last ten years, including Barron Chase Securities and Duke & Co., also firms expelled from FINRA membership for violation of the federal securities laws, and is the subject of numerous customer initiated investment related complaints and at least one termination, predating his association with JP Turner.
One of the Registered Representatives was ranked as the firm’s top revenue generator in 2008 and 2009. This registered representative generated more than $3,000,000 during that period. During the relevant period, he was also the sole or joint registered representative for over 100 customer accounts. Over 37 and 42 accounts were identified on the exception reports ignored by JP Turner during 2008 and 2009, respectively.
The SEC Complaint
JP Turner appears to have sent these customer’s “happy letters,” or a suitability supplement, suitability questionnaire, and associated cover letter which omitted information that could have been important for obtaining meaningful customer approval of the active trading in the customer’s account and excluded any details concerning the commissions, margin interest and fees associated with the excessive trading and paid by the customer.
Additional SEC Charges
The SEC also charged the head supervisor at JP Turner & Company, Michael Bresner, as well as the firm’s president William Mello and the firm itself for compliance failures. JP Turner and Mello agreed to settle the SEC’s charges, and agreed to a five month suspension, disgorgement of $200,000, prejudgment interest of $16,051, and a civil money penalty in the amount of $200,000 for a total of $416,051, which of course is less than a half of $845,000 the alleged misconduct generated in commissions, fees and margin interest, and is less apoproximately 15% of the $2,700,000 in aggregate losses suffered by the defrauded customers.
Guiliano Law Group
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