Three former brokers at an Atlanta investment firm churned client accounts and racked up $845,000 in commissions and fees for themselves and the brokerage firm while their customers lost $2.7 million, regulators said.
The Securities and Exchange Commission alleged that the three former brokers of JP Turner & Co. traded excessively in accounts of seven clients from January 2008 through December 2009.
The SEC said that the trio, Ralph Calabro, Jason Konner and Dimitrios Koutsoubos, disregarded the customers' conservative investment objectives and low tolerance for risk.
The SEC said the affected accounts had annual turnover rates that 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.
JP Turner's head supervisor, Michael Bresner, was charged with failing to supervise two of the brokers, according to the SEC administrative complaint filed last week. He ignored red flags that pointed to the brokers' churning tactics, the SEC said.
The firm and its former president, William Mello, also were charged but agreed to settle without admitting or denying the charges.
The firm will pay about $416,000 in penalties and returned commissions and fees, and he 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 securities firm in a supervisory capacity for five months.
REASONABLE PROTECTION
“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. “JP Turner's supervisory systems failed to do that.”
In a statement, the firm said that it terminated the registered representatives involved in the misconduct “long ago” and its executive leadership team is “committed to making JP Turner a market leader,” focused on 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,” according to the JP Turner statement.
Calls to an attorney for Messrs. Konner and Koutsoubos, Ted Poretz in New York, and to a lawyer for Mr. Calabro, J. Christopher Albanese of New York, weren't returned.
Peter Anderson, an Atlanta-based attorney for Mr. Bresner, said that he is “completely surprised” by the action because he and his client haven'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 JP Turner,” Mr. Anderson wrote in an e-mail.
JP Turner has about 513 reps in 203 U.S. offices, according to the SEC complaint.
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