The US Securities and Exchange Commission is accusing brokers Jovannie Aquino and Emil Botvinnik of fraud that allegedly cost investors about $3.6M. According to the regulator, Botvinnik, who is a Florida resident and is no longer a registered representative, and Aquino who is a New York resident, recommended frequent, short-term trades, earning them about $4.6M in commissions while practically guaranteeing that their customers would lose money. Botvinnik’s alleged excessive trading took place between 6/2012 and 11/2014. Aquino’s alleged excessive trading occurred between 12/2015 to 11/2017.
Many of these customers were retail investors. A number of them were of retirement age or close to that age.
At the time of the alleged broker fraud, Aquino and Botvinnik were with Meyers Associates LP. The firm is now called Windsor Street Capital LP. Aquino then went to work with Spartan Capital Securities while Botvinnik moved on to Newport Coast Securities, SW Financial, and Worden Capital Management.
The SEC claims that the investments of Aquino’s customers would have had to make 21-406% in yearly returns just to cover the transaction costs that came with the trading strategy that he employed. For Botvinnik’s customers to have covered their transaction costs, their yearly returns would have had to have been 31-150%.
The Commission said that because of Botvinnik’s fraud, his customers lost about $2.7M while he made approximately $3.7M in ill-gotten gains. Aquino’s customers, meantime, lost about $881K, while his purported ill-gotten gains were $935K.
Neither man purportedly had grounds for thinking that the investments that they were recommending were suitable for the customers. The two brokers are accused of engaging in unauthorized trading and hiding material information related to the transaction costs from the customers.
Excessive trading effectively means trading too frequently for a particular investor’s risk tolerance or investment goals. Generally, the more frequently an account is being traded, the more risk the investor is exposed to. Sometimes these high volume trades are done on an unauthorized basis, meaning the broker is making trades on a customer’s behalf without having the required authorization. Other times, the broker is getting the authorization on a trade by trade basis, but the recommendation to trade in that manner might still be unsuitable for that client. When a broker is placing trades in a client’s account solely to generate additional commissions for himself, that is referred to as churning. As the SEC notes in its investor alert, even if an account’s value is growing, excessive trading may still have taken place.
The Commission is charging Aquino and Botvinnik with violating the federal securities’ laws anti-fraud provision. They want the two men to disgorge ill-gotten gains and pay prejudgment interest.
Aquino’s BrokerCheck record indicates six disclosures, including four customer disputes. Botvinnik’s BrokerCheck record shows eight disclosures, most of them customer disputes.
It is important that brokers recommend and invest in securities that are suitable for an investor’s goals, risk tolerance, portfolio, and financial state. At Shepherd Smith Edwards and Kantas, LLP, our broker fraud lawyers represent investors nationwide. Over the years, we have helped thousands of investors recoup their investment losses from financial representatives and their brokerage firms for fraud, negligence, or other misconduct.
Our investor lawyers represent retirees, other individual investors, family and small business owners, high net worth individual investors, and institutional clients. Contact our securities law firm today.
SEC Charges Two Brokers With Defrauding Customers, September 10, 2018
Investor Alert: Excessive Trading at Investors’ Expense, SEC, January 9, 2017
Jovannie Aquino, BrokerCheck
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