Charles B. Rowley III, a stockbroker with Boston-based Detwiler Fenton & Co., has been sanctioned by the Financial Industry Regulatory Authority, or FINRA, for engaging in churning and unsuitable trading in the accounts of two customers.
Letter of Acceptance, Waiver and Consent
Charles B. Rowley agreed to pay restitution of roughly $24,000 plus interest to one of the customers pursuant to a Letter of Acceptance, Waiver and Consent, or AWC, that settled the alleged violations without Rowley either admitting or denying the findings.
In addition, Rowley agreed to disgorge commissions of about $80,000 and pay a $5,000 fine. He was also suspended for six months from association with any FINRA member firm in any capacity. FINRA accepted the AWC on Nov. 30.
According to the AWC, Charles B. Rowley recommended unsuitable trades as well as engaged in excessive trading, also called churning, in the accounts of two customers in violation of rules regarding customer transactions and standards of commercial honor and principles of trade.
One of the customers, identified in the AWC as JB, filed a complaint with FINRA in October 2009 and pursued arbitration. JB settled with Rowley and his firm for $176,000, of which Rowley contributed $26,000.
Charles B. Rowley’s Fraudulent Activities
From October 2007 through September 2008, Rowley recommended unsuitable trades and engaged in churning in JB’s Individual Retirement Account. Rowley did not have reasonable grounds to believe the type and volume of trades were suitable for JB. The trading was not suited to JB’s age, investment objectives, financial situation, and needs. Rowley’s BrokerCheck Report show the customer’s complaint involved trades in common and preferred stock and in master limited partnerships.
The trades over the period in question resulted in a turnover rate of 9.04 and a cost-to-equity ratio of 12.1 percent in JB’s account. The trades generated gross commissions of almost $50,000, the AWC said.
During the same time, JB’s account lost about $177,000, or 44 percent of its average equity.
Rowley’s trading pattern also financially harmed a customer identified in the AWC as ED. From January 2008 through December 2008, Rowley recommended and engaged in churning and unsuitable trading in ED’s account without reasonable grounds to believe that the recommended trades were suitable for ED. The trades were inconsistent with ED’s age, investment objectives, financial situation and needs.
The trading in ED’s account resulted in a turnover rate of 7.01 and a cost-to-equity ratio of 8.8 percent, and generated gross commissions of about $30,000.
At the same time, ED’s account lost almost $150,000, or 40 percent of the average equity in the account.
Charles B. Rowley’s History
First registered with FINRA as a general securities representative in 1977, Rowley was registered with Detwiler from 2002 to 2009. He also became registered as a general securities principal while with Detwiler. Rowley was last associated with a FINRA member firm in January 2010. His BrokerCheck Report indicates he now works for Moors & Cabot Inc. in Boston.
While Rowley had never been previously involved in a FINRA regulatory action, his BrokerCheck Report shows several customer disputes in addition to the dispute with JB. He was accused of churning, unsuitable trading and of misrepresentation by a customer in 2008, also while he was employed by Detwiler.
The customer sought damages of $103,000. The matter sought settled for $24,500 in 2009. Rowley personally paid about $6,000.
In 2000, while he was working for PaineWebber Inc., a customer alleged that Rowley engaged in unauthorized, excessive and unsuitable short selling in his account and sought damages of $400,000. The matter settled for $105,000 and Rowley personally paid $35,000.
In 1996, Rowley was charged with churning and unauthorized trading starting in 1995 until the activity was discovered by a trustee. Rowley worked for PaineWebber at the time, which settled the matter for $60,000 with a personal contribution from Rowley of $30,000.
Finally, in 1985 while he worked for Kidder Peabody & Co. Inc., a customer accused Rowley of unauthorized trading in her account. The matter settled for $17,500. Rowley did not contribute anything to the settlement.
Guiliano Law Group
If you have been the victim of securities fraud you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.