Douglas A. Leone, of Dix Hills, New York, a stockbroker formerly registered with Newport Coast Securities, has been permanently barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity per a FINRA Extended Hearing Panel Decision containing findings that Leone churned customer accounts and effected unsuitable trades. Department of Enforcement v. Leone, No. 2012030564701 (Oct. 17, 2016).
According to the Decision, Leone effected unsuitable trades in the account of customer DG, who held accounts with Newport Coast Securities between January of 2008 and June of 2010. Reportedly, throughout the time in which DG held assets with Newport, DG’s account had $6,000,000.00 in purchases and $6,000,000.00 in sales. The Decision indicated that due to Leone’s trading, DG’s account carried a cost/equity percentage of 166.57% as well as a 135.25 annual turnover rate. DG apparently suffered at least $75,000.00 in total costs and experienced an estimated $115,000.00 loss.
The Decision further revealed that Leone effected unsuitable transactions regarding customer RER, who held accounts with Newport Coast Securities between June of 2009 and June of 2010. According to the Decision, RER indicated that Leone told him that commission charged per trade would be between $75.00 and $100.00; however, these commissions were as much as $1,000.00 per trade. The Decision stated that purchases in RER’s account had exceeded $8,200,000.00 and sales had exceeded $8,400,000.00. RER’s account reportedly had a cost/equity percentage of 145.86% and annualized 123.85 turnover rate. FINRA reported that RER’s costs were nearly $100,000.00 in total.
Leone reportedly effected unsuitable trades in the account of customer JB, who held an account with Newport Coast Securities from March of 2010 to May of 2011. Apparently, JB’s account was subjected to purchases exceeding $4,000,000.00 as well as sales exceeding $4,000,000.00. FINRA found that JB’s account had a cost/equity percentage of 171.5% and an annual 144 turnover rate. The Decision stated that JB suffered costs estimated at $50,000.00 and incurred nearly $63,000.00 in losses.
Acccording to the Decision, Leone effected trades in customer accounts in an inconsistent and excessive manner based upon the customers’ investment objectives and financial circumstances. The Decision also revealed that customers faced cost/equity percentages which ranged from 105.22% to 280.14%. Additionally, customers suffered from turnover rates that reportedly ranged from 85.81 to 172.84.
The Decision stated that Leone’s excessive trading was not justified even though customers authorized such aggressive active trading through the signing of account documents and letters. FINRA found that Leone’s conduct was violative FINRA Rules 2010 and 2111, NASD Rules 2110 and 2310, and IM-2310-2.
FINRA additionally indicated that Leone’s churned customer accounts. Specifically, the benefits which were provided to Leone through trading came at the expenses of customers’ returns. FINRA found that Leone’s trading was geared to benefit himself without properly considering the benefits pertaining to customers. The Decision stated that Leone’s reckless disregard of the customers constituted violations of Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, FINRA Rules 2010 and 2020, and NASD Rules 2110 and 2120.
Further, FINRA found that Leone made exaggerated and false statements to a customer concerning account values. Apparently, Leone provided JB with account values that were overstated in five separate e-mails. Leone reportedly failed to explain these misrepresentations. FINRA found that Leone’s conduct was violative of FINRA Rule 2010 in this regard.
FINRA found that Leone deserved to be barred because he acted egregiously regarding eight customer accounts. Apparently, Leone never acknowledged to FINRA that he committed misconduct, and never attempted to provide affected customers with restitution.
FINRA Public Disclosure reveals that Leone has been subject to eight incidents regarding misconduct, seven of which involve customer initiated arbitration claims. Particularly, on May 4, 1998, Leone was subject to a customer initiated investment related arbitration claim, in which the customer requested $6,500.00 in damages based upon allegations against Leone of making misrepresentations and failing to obey the customer’s liquidation instructions.
On July 15, 1999, a customer initiated arbitration claim involving Leone’s conduct was settled for $125,000.00 in damages based upon allegations that Leone breached his fiduciary and contractual duties, effected unsuitable transactions, made misrepresentations to the customer concerning investments, and defrauded the customer.
On April 8, 2002, a customer initiated arbitration claim involving Leone’s conduct was settled for $4,218.00.00 in damages based upon allegations that Leone effected trades in the customer’s account without authorization. On February 17, 2006, a customer initiated investment related arbitration claim involving Leone’s conduct was settled for $21,000.00 in damages based upon allegations against Leone of generating excessive commissions, and effecting unsuitable transactions in the customer’s account.
Additionally, a customer initiated an investment related arbitration claim involving Leone’s conduct on December 15, 2011, in which the customer requested $6,400.00 in damages based upon allegations against Leone of misrepresenting investment related material to the customer. On January 3, 2012, a customer initiated investment related arbitration claim involving Leone’s conduct was settled for $9,999.00 in damages based upon allegations including breach of fiduciary duty, churning, and misrepresentation.
On March 29, 2012, another customer initiated investment related arbitration claim involving Leone’s conduct was resolved for $70,000.00 in damages based upon allegations of breach of contract, breach of fiduciary duty, and negligence.
Since 1994, Leone has been associated with eleven different broker dealers, one of which has been expelled by securities regulators for violation of federal securities laws or is otherwise defunct. Since termination from Newport Coast Securities in March of 2013, he has become registered with Salomon Whitney Financial.
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