Galvin moves to boot ex-Stratton Oakmont broker from business in Mass.

State regulator charges rep with engaging in abusive sales practices

Jan 15, 2014 @ 12:19 pm

By Bruce Kelly

The infamous Wolf of Wall Street Jordan Belfort is long gone from the securities industry, but some of his disciples continue to capture the attention of regulators.

One such broker, Christopher Veale, was charged Wednesday by Massachusetts Secretary of the Commonwealth William F. Galvin with engaging in abusive sales practices, churning a client's account and the use of markups to conceal commissions in the account of an 81-year-old investor.

Mr. Veale began his career in the securities industry in 1995 with Stratton Oakmont, whose extremely aggressive brokers raised more than $1 billion in initial public offering cash in the early 1990s, mostly for stocks that turned out to be worthless. Mr. Belfort's illegal activities at the firm is the basis for the film, “The Wolf of Wall Street.”

Mr. Veale has worked with 18 broker-dealers since then, including now-defunct John Thomas Financial, according to his BrokerCheck report.

Mr. Veale currently works for Legend Securities Inc.

“Rogue brokers have long been a plague on the investing public,” Mr. Galvin said in a statement. “My office, along with other state and federal regulators, is determined to move aggressively against them, as well as the firms that hire them.”

The securities industry's self-regulator, the Financial Industry Regulatory Authority Inc., last year said that it was intensifying its focus on brokers with long histories of problems with regulators.

Mr. Veale said that he had no comment except to deny the allegations in the Massachusetts complaint.

He noted that he wasn't registered to sell securities in Massachusetts but was registered in Rhode Island.

Mr. Galvin's complaint also included another broker, Ali Habib Mayar, and a Long Island, N.Y., broker-dealer, Brookville Capital Partners LLC.

The complaint seeks to revoke the registration of the two representatives and firm and permanently bar them from the securities industry in Massachusetts. Rhode Island Wednesday also filed a similar action against the two brokers and Brookville.

From August 2010 through June 2012, the two brokers, while working at Brookville, induced the elderly client to put $874,000 into his account to meet margin calls and purchase securities, according to the complaint.

The client's turnover ratio was 200% and he incurred $320,000 in commissions and hidden markups, according to the Massachusetts complaint.

The client was a Rhode Island resident who owned a business in Massachusetts.

Overall, the client suffered out-of-pocket losses of almost $1.6 million as a result of the brokers' alleged actions and Brookville Capital's alleged failure to supervise their actions, according to the complaint.

A receptionist at Brookville Capital said that the firm's chief executive, Anthony Lodati, would not comment.

Mr. Habib, who remains registered with Brookville Capital, wasn't available to comment, according to the receptionist.

Mr. Belfort spent 22 months in prison and then penned a memoir in 2007 about the rise and fall of Stratton Oakmont. This winter, director Martin Scorsese transformed the book into a hit movie that features the drug and sex-fueled exploits of Mr. Belfort and the firm's brokers, who celebrate ripping off clients through pump-and-dump stock scams.

John Thomas shut down last summer. Its founder, Anastasios “Tommy” Belesis, in December was barred from the securities industry by the Securities and Exchange Commission for negligence.

0
Comments

What do you think?

View comments

Recommended for you

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Featured video

INTV

The biggest obstacles young baby boomers face in retirement

Deputy editor Bob Hordt and senior columnist John Waggoner discuss how pensions, college expense and aging parents are uniquely challenging for younger baby boomers as they prepare for retirement.

Video Spotlight

Help Clients Be Prepared, Not Surprised

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

Brace for steepest rate hikes since 2006 in new year

Citigroup, JPMorgan Chase predict average interest rates across advanced economies will climb to at least 1 percent in 2018.

Why private equity wants a piece of the RIA market

Several factors, including consolidation in the independent advice industry and PE's own growing mountain of cash, are fueling the zeal to invest.

Finra bars former UBS rep for private securities transactions

Regulator says Kenneth Tyrrell engaged in undisclosed trades worth $13 million.

Stripped of fat commissions, nontraded REIT sales tank

The "income, diversify and interest rate" pitch was never the main draw for brokers.

Morgan Stanley fires former Congressman Harold Ford for misconduct

Allegations against the wirehouse's former managing director include sexual harassment, which Ford denies.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print