Windsor Street Capital (formerly Meyers Associates, L.P.), a brokerage firm headquartered in New York, New York, as well as its stockbrokers, Nas Adel Allan and Gregory J. Anastos, were charged by Financial Industry Regulatory Authority (FINRA) Department of Enforcement in a Complaint alleging, inter alia, that customers’ investment accounts were traded on an excessive and unsuitable basis. Department of Enforcement v. Windsor Street Capital, LP, et al., No. 2015046971701 (Aug. 15, 2017).
According to the Complaint, customers IR and DR were victim to Anastos’ and Allan’s short-term trading of one security in the customers’ accounts over sixteen months, wherein the customers sustained substantial losses and tax consequences even though Anastos and Allan accumulated commissions, markdowns and markups totaling $98,000.00.
The Complaint revealed that IR and DR were contacted by Allan in September of 2014, where Allan suggested that the customers’ equity holdings in Huntington Bancshares, Inc. (HBAN) be liquidated from the customer’s trust, which led to a $191,000.00 sale and $15,000.00 tax liability. Yet, Allan allegedly made recommendations for the shares to be reacquired within approximately one week. Subsequently, in October of 2014, Allan again recommended for the trust to sell the HBAN shares – this time for less than what they were required for. Approximately fourteen days later, Allan recommended that the trust reacquire the shares for less than what the shares were sold for.
The Complaint alleged that Allan’s investment recommendations were not suitable given the customers’ investment profile. Allan’s trading scheme allegedly failed to add up from a financial standpoint given the tax liabilities and losses that customers were exposed, as well as the markdowns and markups that were accumulated by Allan via the four transactions in question. FINRA Department of Enforcement alleged that Allan’s recommendations were unsuitable; conduct violative of FINRA Rules 2010 and 2111.
Apparently, Anastos took over the customers’ accounts when Allan departed from the firm, where between December of 2014 and December of 2015, short term trading of the HBAN shares continued to be recommended. Anastos reportedly recommended that the customers utilize margin to effect trades, and suggested that HBAN call options be bought and sold. The customers funds were allegedly traded on an excessive basis, which led the customers to incur losses exceeding $69,622.00. Yet, the markdowns, markups and commissions charged by Anastos exceeded $76,000.00. FINRA Department of Enforcement alleged that Anastos’ conduct was violative of FINRA Rules 2010 and 2111.
Moreover, trades were apparently placed by Anastos in the customers’ accounts without the customers’ permission. FINRA alleged that Anastos’ exercise of discretion in the customers’ accounts constituted violations of FINRA Rule 2010 and NASD Conduct Rule 2510(b).
The Complaint further stated that between September of 2014 and December of 2015, the firm never created or implemented supervision systems or written procedures aimed at ensuring that investment transactions were suitable for customers; conduct which FINRA Department of Enforcement alleged to be violative of FINRA Rules 2010, 3110 and NASD Conduct Rule 3010. Further, FINRA stated that the firm inadequately supervised Anastos and Allan and overlooked signs that the stockbrokers had possibly traded on an excessive and unsuitable basis. FINRA alleged that the firm’s supervisory failures in that regard were violative of FINRA Rules 2010, 3110 and NASD Conduct Rule 3010.
FINRA Public Disclosure reveals that on June 16, 2004, a customer initiated investment related written complaint involving Allan’s conduct was settled for $10,066.00 in damages based upon allegations that he failed to execute the customer’s stop loss order. On April 18, 2017, a customer filed an investment related arbitration claim involving Anastos’ conduct, in which the customer requested $88,671.00 in damages based upon allegations that he effected unsuitable and excessive over-the-counter equity transactions in the customer’s account. The firm was also accused by the customer of failing to supervise Anastos’ activities.
On December 9, 2015, Allan became associated with Merrill Lynch, Pierce, Fenner & Smith Incorporated. Since July 23, 2002, he has been associated with thirteen different broker dealers, three of which have been expelled by securities regulators for violation of federal securities laws or are otherwise defunct. Since June 8, 2010, Anastos has been associated with three different broker dealers, two of which have been expelled from FINRA membership.
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