Established in 1984, Aegis Capital Corporation is a comprehensive retail and institutional broker-dealer headquartered in New York. They provide a broad spectrum of investment products and services as brokers and advisors.
The firm recently faced sanctions from the Financial Industry Regulatory Authority (FINRA), triggered both by a client’s complaint of churning and a subsequent internal investigation. This action was primarily due to inappropriate and excessive trading practices in numerous client accounts.
As a consequence, 68 customers affected by these activities will receive a total of $1.7 million in restitution from Aegis Capital Corporation. Furthermore, the firm has been levied a $1.1 million fine for inadequate supervision and violation of industry rules. In relation to these securities infractions, advisors Joseph Giordano and Roberto Berardi, identified as supervisors, have been implicated.
We’re available to review your investment portfolios for Aegis Capital Corporation clients or those who have utilized their asset management services. Please feel free to contact us at our toll-free number: 1-800-856-3352.
Aegis Capital Complaint
Table of Contents
FINRA’s investigation found that between July 2014 and December 2018, Aegis didn’t have a structure in place to ensure it followed the suitability rules.
It was no surprise, therefore, that instances of unsuitable and excessive trading went unidentified, which obviously means that they were not dealt with in a suitable manner.
Identified supervisors Birardi and Giordano did not, it appears, bother to investigate the warning signals of possible churn by brokers under their watch. This caused 31 customers, who were helped by eight different Aegis advisors, to spend more than $2.9 million just on trading costs.
The clearing firm of Aegis Capital, it seems, highlighted over 900 possible unsuitable trading discrepancies, which the firm did not act on. Like it did not act on customer complaints, over 50 in number, claiming either unsuitable or excessive or even unauthorized trading in their account. Berardi and Giordano didn’t even answer 700 of the clearinghouse’s exception reports. To make matters worse, even when deficiencies were highlighted to the firm by compliance teams, they chose to let things be.
Aegis Capital Corp Financial Advisors with sanctions
- Joseph Giordano, based in New York, agreed to a $10K fine and a suspension for 6 months.
- Birardi was suspended for 3 months and was slapped with a $5K fine.
Both agreed to the penalties without denying or confirming the findings.
FINRA also reached settlements with four other brokers of Aegis Capital. Two of them earned a bar, and two earned suspensions. All actions pertaining to the alleged churning in customer accounts.
Aegis Capital has faced scrutiny earlier with regard to its registered representatives. As recently as July 2021, Douglas Szempruch, then an Aegis Capital Advisor, was suspended for a year, again, on allegations of unauthorized and excessive trading, the sixth Aegis broker this year to face sanctions. James Schwartz, then an Aegis broker once again, was barred in 2019 for his engagement with $10 million worth of unauthorized trades, 535 of them in number, that cost customers $660K.
Unsuitable Investments and Trades
If there was a single strategy that worked for everyone, investing would be simple. Each investor is unique in their financial situation, assets, resources, financial goals, risk tolerance, and needs. For a 25-year-old unmarried woman, investments may not be appropriate for her.
A financial professional such as a stockbroker, financial advisor, or financial planner is one way to avoid investing in a one-size-fits-all manner. They are responsible for fully understanding their clients’ financial situation and recommending suitable trading strategies or financial products. Brokers don’t always adhere to the rules when advising clients about investing.
Financial professionals who recommend unsuitable investments to clients or make recommendations that are not in the client’s best interest can be held financially responsible if they cause major losses. A skilled investment fraud attorney can help stockbroker misconduct victims.
The rules and regulations of the Financial Industry Regulatory Authority ( FINRA) apply to brokers, financial advisors, and investment advisors in the United States. FINRA a non-profit organization authorized by Congress to protect American investors by regulating the broker-dealer sector. Brokers and advisors must follow federal law and register with the Securities and Exchange Commission.
In the past, brokers like Aegis Capital and financial advisers had to follow two main rules when recommending investments or investment strategies: (1) FINRA Rule 2111 Suitability; (2) FINRA Rule 2090 Know Your Customer. The SEC recently enacted Regulation Best Interest (B.I ). Reg BI is a new law that’s long and detailed but has yet to be tested by arbitrators or judges. However, it requires that brokers make recommendations in the client’s best interests. These rules are designed to protect customers against brokers who might recommend strategies or investments that do not meet their needs.
FINRA’s Suitability Rule formerly states that brokerage firms and brokers must have a “reasonable basis to believe that a recommended transaction or investment strategy involving a securities or securities is suitable” based on information obtained through reasonable diligence and associated persons. This may include factors like the customer’s age and financial situation, tax status, tax history, liquidity needs, risk tolerance, and investment objectives.
A customer profile must be used to determine whether a strategy or investment is suitable. This includes evaluating the ability of the investor to accept the risks associated with the suggested course of action. This rule states that only brokerage firms or financial advisors can recommend strategies or investments to a customer. Reg BI is expected to increase the “suitability” criteria and raise the standard of quality for broker recommendations.
Aegis Capital Investors Can Call Our Law Firm for Support
Aegis Capital investors are advised to seek expert advice and determine their options if they suspect excessive or unauthorized trading in their accounts.
Haselkorn & Thibaut is actively engaged in pursuing FINRA arbitration claims on behalf of their clients. Our investment fraud attorneys are even investigating customer claims of losses involving Aegis advisors for excessive or unsuitable trading.
To speak with one of our attorneys, call 1-800-856-3352.
