Antonio Costanzo, of West Palm Beach, Florida, a stockbroker formerly registered with Newport Coast Securities, has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity based upon a Default Decision containing findings that Costanzo made unsuitable investment recommendations to customers, effected unsuitable trades, churned customer accounts, and failed to cooperate in a FINRA investigation into his misconduct. Department of Enforcement v. Antonio Costanzo, No. 2012030564701 (Oct. 17, 2016).
According to the Decision, Costanzo made unsuitable trades in the account of customer DS, who held an account with Newport Coast Securities between February and November of 2011. Apparently, DS did not comprehend the nature of short sales, markups and other commissions that DS was subjected to. Apparently, purchases in the accounts of DS had totaled $1,600,000.00, and sales totaled more than $1,500,000.00. FINRA indicated that DS suffered from a cost/equity percentage of 104.725, and an annualized turnover rate of 27.41. In sum, DS experienced at least $60,000.00 in costs, and suffered from $43,000.00 in investment losses.
The Decision additionally revealed that Costanzo serviced and managed the account of RS, who was another customer that held an investment account with Newport Coast Securities from March of 2011 through February of 2012. The Decision indicated that RS never discussed with Costanzo the charges and fees that RS would be subject to. Apparently, RS also did not know that margin was being utilized by Costanzo in his account. The Decision stated that over $210,000.00 in purchase were made in RS’s account, and approximately $200,000.00 in sales. FINRA stated that RS’s account was subject to a cost/equity percentage of a 110.38%, and an annual 23.18 turnover rate. RS reportedly suffered $10,000.00 in total costs, and experienced an estimated $14,600.00 in investment losses.
Costanzo also serviced the account of customer AB, and made investment recommendations to AB to purchase equities which included buying stock on margin. AB reportedly complained to Newport Coast Securities personnel after Costanzo effected unauthorized trades in AB’s margin account, even after AB told Costanzo to stop trading in such account. Apparently, AB was never informed about markups, short sales or riskless principal trades which had been effected in his account.
The Decision stated that throughout the time that AB held his accounts with Newport Coast Securities, $600,000.00 in purchases were made, as well as $590,000.00 in sales. FINRA determined that AB’s account was subject to a cost/equity percentage of 100.02%, and a 24.66 annual turnover rate. AB reportedly incurred at least $24,000.00 in costs, and sustained $20,000.00 in investment losses.
According to the Decision, Costanzo additionally made faulty investment decisions in the account of MZ, an inexperienced investor who held an account with Newport Coast Securities between January of 2010 and August of 2011. During this time, MZ, an eighty-one-year-old retiree, was never informed by Costanzo regarding riskless principal trades, or the nature of markups and markdowns. MZ’s account was reportedly subject to $437,000.00 in purchases, and $427,000.00 in sales; a cost/equity percentage of 120.71%, and 26.9 annual turnover rate. MZ reportedly incurred investment losses of $19,000.00. Apparently, MZ lost a substantial portion of his liquid net worth in connection with Costanzo’s trading.
FINRA stated that Costanzo traded in customer accounts inconsistently and excessively based upon the customers’ investment objectives and financial circumstances. The Decision stated that a cost/equity percentage of twenty-percent has been deemed by the Securities and Exchange Commission and National Adjudicatory Council as excessive. In Costanzo’s case, customers reportedly incurred cost/equity percentages ranging from 100.2% to 120.71%. Further, the Decision stated that turnover rates exceeding six have been typically demonstrative of excessive trading, and in Costanzo’s case, customers experienced turnover rates ranging from 23.18 to 27.41.
FINRA declared that Costanzo’s trading was unsuitable, regardless of any customer’s financial circumstances. The Decision stated that customers did not authorize the depletion of their accounts through margin charges, markups and other commissions. FINRA concluded that Costanzo’s conduct was violative of FINRA Rules 2010 and 2111, NASD Rule 2110 and 2310, and IM-2310-2.
The Decision additionally revealed that Costanzo churned the affected customer’s accounts. FINRA indicated that Costanzo’s trading was designed to promote his financial benefit without considering his customers’ financial wellbeing. FINRA found that Costanzo’s willful disregard of his customers was conduct violative of Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, FINRA Rules 2010 and 2020, and NASD Rules 2110 and 2120.
FINRA found that Costanzo made qualitatively unsuitable investment recommendations to customers MZ and AB regarding the investment of complex exchange traded products, some of which were inverse and leveraged. Costanzo reportedly admitted to FINRA that the products he recommended to MZ were not suitable for retail investors – which included AB and MZ. Constanzo’s conduct in this regard was found by FINRA to be violative of FINRA Rule 2010, as well as NASD Rules 2110 and 2310.
FINRA also found that Costanzo obstructed a FINRA investigation into his misconduct. Apparently, Costanzo was issued a Wells notice in January 2014, which informed Constanzo that FINRA would be recommending disciplinary action against him due to his unsuitable trading and churning in MZ’s account. Costanzo apparently contacted MZ in February of 2014, where Costanzo tried to persuade MZ not to testify before FINRA in return for providing MZ with compensation. FINRA found that Levy’s conduct in this regard was violative of FINRA Rule 2010.
FINRA Public Disclosure reveals that Costanzo has been subject to eleven incidents regarding misconduct, eight of which involve customer initiated arbitration claims. Costanzo has settled numerous customer disputes based upon allegations against Costanzo including churning, unauthorized trading, misrepresentation, unsuitable investment recommendations, and breach of contractual and fiduciary duties, and fraud.
Since 1995, Costanzo has been associated with nine different broker dealers, two of which have been expelled by securities regulators for violation of federal securities laws or are otherwise defunct. After termination from Newport Coast Securities in August of 2012, he became registered with IFS Securities from July of 2012 through December of 2012, and later Titus Rockefeller, LLC, from January 2013 through March of 2015.
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