Massachusetts Secretary of the Commonwealth William Galvin filed complaints against two small firms and two of their brokers Thursday for allegedly deceptive and unethical conduct, marking the first results of a crackdown on rogue brokers, according to a statement from Mr. Galvin's office.
Four months ago Mr. Galvin announced an industry sweep, asking broker-dealers to hand over hiring information in order to learn about firms' hiring policies and procedures. He said the sweep would target firms with an above average number of reps with current misconduct reports on their records.
Mr. Galvin pointed to the June sweep as spurring Thursday's complaints. “While the results of the sweep are still being studied by my office, these two firms were included in that sweep,” he said in a statement.
The Massachusetts complaints filed Thursday morning were against Spartan Capital Securities and Revere Securities, both of New York. Spartan Capital CEO John Lowry did not return a call to comment. William Moreno, CEO of Revere Securities, also did not return a call to comment.
“In each case, the agents had numerous misconduct reports on their records,” he noted. “These agents went on to abuse the accounts of senior investors. Both broker-dealers knew or should have known that these agents raised risks to their clients, and if they were going to take them on they had the ethical duty and obligation to place them on special heightened supervision.”
In response to the Massachusetts Securities Division sweep, Spartan Capital indicated it had hired 60 reps with prior disciplinary records between January 2014 and June 2016, according to the statement, with the firm putting only six of those brokers on heightened supervision.
The Spartan complaint seeks to bar both the firm and the broker in question, Dean Kajouras, from the securities business in Massachusetts as well as a fine, censure and compensation to investors.
In 2011, Mr. Kajouras allegedly unsuitably over-concentrated one investor's accounts in an Oklahoma oil and gas company that later went bankrupt. Mr. Kajouras did not return a call to comment.
Meanwhile, Revere Securities “has a history of hiring broker-dealer agents with a record of prior disclosures, including customer complaints,” according to the complaint. The Revere Securities broker, Jonathan Eric Altman, “has a history of customer complaints related to excessive trading, unauthorized transactions and unsuitable transactions,” according to the complaint.
Mr. Altman allegedly traded a client's account, an individual retirement account that has dropped approximately $290,000 in value to date, excessively, according to the complaint. Revere and Mr. Altman split $141,000 in commissions and concessions, according to the complaint.
The complaint seeks to bar Mr. Altman from the securities industry in Massachusetts as well as restitution to investors. It also seeks a cease and desist order against Revere and restitution and a fine. Mr. Altman could not be reached to comment.
The Financial Industry Regulatory Authority Inc. this year has also focused attention on brokers with checkered backgrounds and their potential to undermine a firm's culture.