More On Legal & Compliance
from The Advisor's Professional Library- Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients’ transactions. If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communications—to clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
The Securities and Exchange Commission (SEC) announced Monday that it has charged three former brokers at an Atlanta-based brokerage firm, JP Turner & Co., for “churning” the accounts of customers with conservative investment objectives, causing the customers to lose $2.7 million.
The SEC says it also charged the head supervisor, Michael Bresner, as well as the firm’s president, William Mello, and the firm itself for compliance failures.
JP Turner and Mello agreed to settle the SEC’s charges, while an administrative proceeding will continue against the three brokers and the supervisor.
In settling the SEC’s charges without admitting or denying the findings, JP Turner agreed to hire an independent consultant to review the firm’s supervisory procedures in order to prevent future violations. The SEC’s order censures JP Turner and requires payment of $200,000 in disgorgement (JP Turner’s approximate share of the commissions and fees generated by the fraudulent churning) plus $16,051 in prejudgment interest and a $200,000 penalty.
The order suspends Mello from association in a supervisory capacity with a broker, dealer, or investment advisor for a period of five months and requires him to pay a $45,000 penalty.
The SEC’s Enforcement Division alleges that the brokers Ralph Calabro, Jason Konner and Dimitrios Koutsoubos engaged in churning while they worked at JP Turner, collectively generating commissions, fees and margin interest totaling approximately $845,000 while the defrauded customers suffered aggregate losses of approximately $2.7 million.
“Broker-dealers’ supervisory systems must provide customers with reasonable protection from churning and similar abuses. JP Turner’s supervisory systems failed to do that,” said William P. Hicks, associate director of the SEC’s Atlanta Regional Office, in a statement.
According to the SEC’s order instituting administrative proceedings against the three brokers and the supervisor, Calabro lives in Matawan, N.J., and Konner and Koutsoubos live in Brooklyn, N.Y. They all work at different firms now. While at JP Turner, they collectively churned the accounts of seven customers with conservative investment objectives and low or moderate risk tolerances. The churning occurred between January 2008 and December 2009.
