The Securities and Exchange Commission on Monday
charged two brokers with violating securities laws in a fraudulent excessive-trading scheme meant to enrich themselves at the expense of their customers.
The SEC alleged brokers Gregory T. Dean and Donald J. Fowler used a “high-cost trading strategy consisting of the excessive buying and selling of stocks” that led to “enormous losses” for clients but benefited them through “substantial commissions and other fees.”
According to the complaint filed by the SEC in New York district court, Mr. Dean and Mr. Fowler used the strategy in 27 customer accounts while registered at J.D. Nicholas & Associates Inc., a now-defunct broker-dealer that was based in Syosset, N.Y., without “having a reasonable basis for believing the strategy was suitable for anyone.”
The SEC said the brokers engaged in “churning” in three of the 27 accounts.
“This case marks another chapter in the SEC's pursuit of brokers who deploy excessive trading as a strategy in customer accounts to enrich themselves at customers' expense,” Andrew Calamari, director of the SEC's New York regional office, said. “The allegations in our complaint are based on our examination of trading patterns across more than two dozen customer accounts, and this trading data show that only the brokers stood to profit from this cost-laden in-and-out strategy.”
Mr. Dean and
Mr. Fowler were registered with J.D. Nicholas for seven years, through 2014. Both have since been registered with Worden Capital Management, based in Garden City, N.Y. They declined comment on the allegations.
Both defendants have disciplinary records, according to their respective Finra BrokerCheck reports. Mr. Dean's record includes nine customer complaints and Mr. Fowler's includes 11. The majority of the complaints were listed as settled or still pending.
