SEC wins churning case against 'cockroaching' broker

Barred broker worked at 10 different firms in his 13-year career

Mar 5, 2019 @ 1:10 pm

By Jeff Benjamin

The Securities and Exchange Commission obtained a final judgment against a broker charged with excessive churning of client brokerage accounts.

William Gennity, who has been suspended from the industry by the Financial Industry Regulatory Authority Inc., was ordered to pay $302,483, which includes $127,686 in disgorgement, $14,797 in prejudgment interest and a civil penalty of $160,000.

Mr. Gennity, who worked at 10 different brokerage firms during his 13-year career, most recently worked at First Standard Financial Company in Staten Island, N.Y., from 2014 through 2018.

According to the SEC complaint filed in the U.S. District Court of the Southern District of New York, between July 2012 and August 2014 Mr. Gennity "recommended to four customers a pattern of high-cost, in-and-out trading without any reasonable basis to believe that his customers could make a profit."

(More:Cetera fined $1.4 million for award-winning broker's excessive trades)

Mr. Gennity's recommendations resulted in losses for the customers and gains for Mr. Gennity, according to the SEC.

According to Finra's BrokerCheck, Mr. Gennity was employed at New York-based Alexander Capital when he was churning the client accounts.

"This is indicative of a bigger problem in the industry because it shows that firms are not properly supervising to look for churning activity," said Adam Gana, an attorney at Gana Weinstein, who was not involved in this case.

"Churning is one of the worst activities a broker can conduct," he added. "And one of the red flags should have been the way this broker was moving from firm to firm, which the industry calls cockroaching."

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