Former Broker Charged with Suitability Violations and Misappropriating Customer Funds

The SEC charged a former broker with trading unsuitable investment products in customer accounts and misappropriating customer funds.

The SEC Complaint alleges that a former broker "knowingly or recklessly" traded inherently complex and volatile investments, which subjected customers with little or no investing experience and modest net-worth levels to significant degrees of risk. The SEC investigation determined that the broker traded 179 daily leveraged exchange-traded funds and exchange-traded notes in the customers' accounts, generating commissions and fees totaling around $128,000 and a net loss for the customers of approximately $150,000. The Complaint also alleges that in one instance, the broker misappropriated more than $170,000 in funds that he used for personal expenses, including "bar and restaurant bills, credit card and student loan debt, and living expenses such as rent."

SEC New York Regional Office Director and Enforcement Division Broker-Dealer Task Force Co-Chair Andrew M. Calamari said that the SEC is "very focused on brokers who seek to exploit their customers by willfully recommending unsuitable trades or strategies to them."

The SEC stated that it is seeking the return of ill-gotten gains, plus interest and civil monetary penalties.

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