Three former brokers at the independent broker-dealer J.P. Turner & Co. LLC churned client accounts and racked up more than three-quarters of a million dollars in commissions and fees for themselves and the brokerage, the Securities and Exchange Commission has alleged.
The brokers generated commissions, fees and margin interest totaling $845,000, while the customers caught in the scheme lost $2.7 million, according to an SEC administrative complaint filed last Monday.
The SEC alleged that registered representatives Ralph Calabro, who worked at a Parlin, N.J., branch of the broker-dealer, and Jason Konner and Dimitrios Koutsoubos, both working in a Brooklyn, N.Y., office, disregarded the conservative investment objectives and low risk tolerances of seven customers and traded excessively in their accounts between January 2008 and December 2009.
The annual turnover rates in the affected accounts were so high during the two-year period that investment returns would have had to have been 73.3% for the accounts to break even, the SEC complaint said..
Also named was Michael Bresner, an executive vice president and head of supervision at J.P. Turner's Atlanta headquarters, who allegedly failed to supervise two of the brokers. He ignored red flags that pointed to the brokers' tactics, the complaint said.
The firm and its former president, William Mello, also were charged but agreed to settle without admitting to or denying the charges.
J.P. Turner will pay penalties and return ill-gotten gains totaling about $416,000, and Mr. Mello will pay a $45,000 penalty, according to the SEC. Mr. Mello, who helped found the firm in 1997, also is suspended from associating with a firm in a supervisory capacity for five months.
“Broker-dealers' supervisory systems must provide customers with reasonable protection from churning and similar abuses,” said William Hicks, associate director of the SEC's Atlanta office. “J.P. Turner's supervisory systems failed to do that.”
In a statement, the firm said it terminated the registered representatives involved in the misconduct “long ago” and its executive leadership team is “committed to making J.P. Turner a market leader” in client service.
“The firm enhanced its procedures and cooperated fully with the SEC during both the commission's comprehensive routine examination of our firm, as well as the resolution of this matter,” the statement said.
Calls to Ted Poretz, a New York attorney for Mr. Konner and Mr. Koutsoubos, and to J. Christopher Albanese of New York, a lawyer for Mr. Calabro, were not returned.
Mr. Calabro now works as a rep at National Securities Corp. Mr. Konner is a rep at DPEC Capital Inc. and Mr. Koutsoubos is working at Caldwell International Securities.
Peter Anderson, an Atlanta-based attorney for Mr. Bresner, said he was “completely surprised” by the action because he and his client hadn't heard from the SEC staff for almost a year.
“We believe the charges against Mr. Bresner are unwarranted given his efforts to continually upgrade the supervisory processes within J.P. Turner,” the lawyer wrote in an e-mail.
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