68 Customers To Receive Restitution From NY-Based Broker-Dealer, Aegis Capital
The Financial Industry Regulatory Authority (FINRA) has sanctioned Aegis Capital, which will pay about $2.8M for the excessive and unsuitable trading that allegedly took place in dozens of customers’ accounts.
Of this amount, $1.7M in restitution will go to 68 customers who were potentially harmed. The remaining $1.1M is a fine the broker-dealer will pay for related supervisory violations involving Aegis brokers Roberto Birardi and Joseph Giordano.
The self-regulatory organization’s (SRO’s) probe, and resulting case, came in the wake of a customer arbitration complaint about churning allegations and its own examination of Aegis Capital.
At Shepherd Smith Edwards and Kantas (SSEK Law Firm at investorlawyers.com), our New York churning attorneys are investigating customer claims of losses involving excessive or unsuitable trading by Aegis financial advisors. Contact us today.
Failure to Supervise Allegations, Dozens of Customer Complaints
FINRA found that from July 2014 to December 2018, Aegis Capital did not have a supervisory system that was designed in a manner reasonable enough for it to be in compliance with the SRO’s suitability rule.
Because of this, contends FINRA, the broker-dealer did not identify or deal with occurrences of excessive and unsuitable trading in customer accounts by its registered representatives. This included excessive trading in the accounts of 31 customers by eight Aegis financial advisors, which led to the former incurring trading costs of more than $2.9M.
According to FINRA, Giordano and Birardi, who were designated supervisors, did not take reasonable action to look into red flag warnings of possible churning by brokers at the firm.
The SRO contends that Aegis did not act on over 900 exception reports from its clearing firm, which identified possible unsuitable trading, as well as over 50 complaints from customers alleging unsuitable, excessive, or unauthorized trading. Birardi and Giordano did not respond to 700 of these reports even though they supervised the brokers involved.
FINRA also contends that Aegis did not act promptly when deficiencies in its system to identify potentially excessive trading were identified by compliance staff.
What is Churning?
According to SSEK Law Firm Senior Partner and churning attorney, Kirk G. Smith churning involves the following:
Aegis Capital Brokers Sanctioned and Fined
New York broker Joseph Giordano consented to a six-month suspension and a $10K fine, while Birardi will be suspended for three months and pay a 5K fine. Both consented to the findings by the SRO but did not deny or admit to them.
FINRA arrived at settlements with four other Aegis Capital brokers for alleged churning, including a bar for two of them and suspensions for the other two.
This is not the first time Aegis has come under scrutiny over churning allegations involving its registered representatives. In July 2021, FINRA suspended former Aegis Capital broker Douglas Szempruch for a year following excessive and unauthorized trading allegations. According to Financial Advisor, he was the sixth Aegis broker to face disciplinary actions for this year.
In 2019, FINRA barred ex-Aegis broker James Schwartz after he allegedly made 535 trades that cost customers $660K, engaged in $10M of unauthorized trades, and also for excessively trading.
Experienced Churning and Excessive Trading Law Firm
SSEK Law Firm has helped thousands of investors over the years to recover losses sustained by unauthorized trading, excessive trading, and other types of broker misconduct or negligence. To speak with one of our New York churning attorneys, call (716) 261-3529. Throughout the US, call (800) 259-9010 today.