Laurence M. Torres of West Mifflin, Pennsylvania, a stockbroker formerly registered with Alexander Capital, L.P., has been barred from working as a broker or investment advisor or affiliating with brokerage firms or investment advisories based on a Securities and Exchange Commission Order containing findings that Torres committed securities fraud by effecting unsuitable and misrepresented transactions, as well as churning customers’ investment portfolios. In the Matter of Laurence M. Torres, Administrative Proceeding No. 3-18233 (Sept. 28, 2017).
According to the Order, the antifraud provisions of federal securities laws had been violated by Torres between August of 2012 and September of 2014, during which time he was associated with Alexander Capital. The Order stated that Torres made recommendations for customers to effect trades on a frequent and high cost basis, yet he had no legitimate reason to conclude that those transactions were suitable for eight affected customers or anyone else for that matter. Apparently, the fees pertaining to Torres’ trading coupled with his short-term trading strategy placed customers in a position in which they were nearly certain to sustain losses; the customers did in fact generate losses as a result of Torres’ activities.
The Order revealed that customers were charged a commission ranging from $39.00 to $49.00 per trade. In addition, Torres would reportedly conclude how much the mark-ups and mark-downs would be on principal trades as well as the commissions relating to agency trades. Evidently, customers commonly paid Alexander Capital more than three percent for equity transactions. SEC found that Torres’ activities were geared towards benefiting himself financially at the cost of the firm’s eight customers affected by his frequent trading.
Moreover, SEC confirmed that nearly every trade effected in the eight customer accounts had been solicited by Torres, where customers routinely pursued recommendations he made. The SEC revealed that those transactions primarily involved the same securities having been purchased and sold several times, which caused customers to sustain losses while Torres enriched himself with commissions. Apparently, customers sustained losses ranging from $3,203.00 to $199,530.00; customers lost $640,904.00 in the aggregate.
SEC found that Torres either knew, or had been reckless in failing to know, that recommendations he made were the reason behind customers’ investment losses. Torres seemingly disregarded that high costs pertaining to his investment strategy would be nearly certain to result in a loss for customers. SEC additionally found that Torres made omissions and misrepresentations to customers about the likelihood that they would lose money by following his recommendations.
Furthermore, SEC found that three customer accounts had been churned, where Torres’ trading was excessive based upon customers’ objectives for investing as well as through high turnover rates and cost-to-equity ratios. Particularly, the customers’ turnover rates ranged from eighteen and thirty-seven, while cost-to-equity ratios ranged from sixty-three percent to one hundred and thirteen percent. Additionally, the Order stated that trades were executed by Torres without procuring consent from four customers. Torres was evidently required to gain permission from customers before executing trades considering that the accounts were not approved for discretionary trading, yet he failed to do so.
SEC found that Torres’ conduct to be violative of Securities Act Section 17(a), Securities and Exchange Act of 1934 Section 10(b), and Rule 10b-5.
Torres was also barred by Financial Industry Regulatory Authority (FINRA) on March 31, 2017, for his failure to comply with FINRA Arbitration No. 16-00673 (Dec. 22, 2016), in which he was ordered to pay $46,500.00 in damages to a customer based upon being found liable for suitability, breach of fiduciary duty, and churning.
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