Richard Calabrese of New York New York the President and Chief Compliance Officer of Corinthian Partners LLC has been identified in a customer initiated investment related arbitration claim which was resolved for $11,500.00 in damages founded on accusations that the customer had been placed into unsuitable private placements by Calabrese which led the Corinthian Partners customer to experience investment losses. Financial Industry Regulatory Authority (FINRA) Arbitration No. 20-00248 (July 6, 2020).
This is the first complaint to appear on FINRA Public Disclosure since Calabrese was sanctioned for supervisory failures relating to alternative investments. Calabrese has been fined $10,000.00 and suspended from associating with any FINRA member in any capacity supported by findings that he neglected to create or implement reasonable supervisory procedures relating to non-traditional exchange traded products. Letter of Acceptance Waiver and Consent No. 2016047621801 (Mar. 18, 2019).
According to the AWC, between January of 2013 and May of 2016, during the time that Calabrese was President and Chief Compliance Officer of Corinthian Partners, he neglected to supervise sales of non-traditional exchange traded products with a view towards ensuring compliance with the securities broker dealer’s own written supervisory procedures.
In as little as a single trading session, these alternative investments can return multiples of underlying benchmarks or indexes or possibly the inverse of the benchmarks. The AWC stated that non-traditional exchange traded products generally are not appropriate for investors with longer investment horizons than a trading session.
FINRA indicated that customers had been advised by a Corinthian stockbroker VV to place the near entirety of their investment portfolios in the non-traditional exchange traded products. The AWC stated that VV executed 1,910 purchases and 1,663 in sales of the alternative investments. These transactions included at least 60 different inverse or leveraged products. The investments were bought and sold by VV for no less than seven of the securities broker dealer’s customers. The regular indicated that $890,000.00 in commissions had been accumulated by Corinthian as a result of $279,000,000 in alternative investment purchases and $275,000,000.00 in sales.
The securities broker dealer and Calabrese did not make sure that the non-traditional exchange traded products had been appropriate for customers who were exposed to VV’s recommendations. Calabrese neglected to ensure that it was suitable for these products to be held for extended periods by the customers. Also, VV’s unsuitable trades had been evidenced by customers’ prolonged holding periods and the large amount of their portfolios invested in these products. Calabrese and the securities broker dealer failed to notice this wrongdoing and put a stop to it.
Calabrese’s failure to supervise constituted the violation of FINRA Rules 2010 and 3110.