The Financial Industry Regulatory Authority has filed a complaint against a former chief compliance officer at SW Financial, a New York based broker-dealer that has been expelled from the industry, claiming he failed to curtail churning and unsuitable trading that cost clients more than $700,000. 

Christopher Cacace, who worked as chief compliance officer for SW from May 2017 through November 2019, failed to properly supervise and curtail the excessive and unsuitable trading and churning of four SW registered representatives that caused 14 customers to lose $709,444, according to Finra’s complaint. SW Financial, which was expelled from Finra last May for numerous violations, and its representatives pocketed $546,855 in commissions, fees and costs, the agency said. 

The complaint said the representatives’ trading produced high costs that “were so egregious it was nearly impossible for customers to profit.” Specifically, Finra noted that the trading resulted in high annualized cost-to-equity ratios ranging from 39.40% to 195.65%, high annualized turnover rates, from 7.81 to 65.88. A cost-to-equity ratio of 100%, for example, means that clients would need an annual return of more than 100% to break even and a turnover ratio of six usually suggests excessive trading.   

“Although Cacace was responsible for supervising the SWF [registered reps] and was aware of numerous red flags related to [the reps’] trading of their customer accounts, he failed to reasonably investigate and respond to red flags of churning, excessive trading and unsuitable trading,” the regulatory agency said. “Cacace never restricted or limited the trading by the SWF [reps] in their customers’ accounts or took any other meaningful steps to prevent their trading.” 

Furthermore, the compliance officer failed to investigate the representatives despite their “extensive” history of regulatory infractions, suspensions and numerous customer complaints of churning and excessive trading.   

Cacace also should’ve been aware that the reps were under financial strain that made them susceptible to “self-serving activities to generate commissions,” Finra said. The reps were burdened by bankruptcy filings, outstanding tax liens and unpaid judgements. 

Between May 2017 and December 2019 Cacace was registered with Finra as a general securities principal, among other titles, at SW Financial, according to the complaint. He registered as chief compliance officer with the firm in 2018 and worked out of its Melville, N.Y., office, where he was also office supervisor. All his registrations through SW ended December 11, 2019, but he has since registered with Finra through three other member firms, though not as CCO. 

According to Cacace’s LinkedIn profile and Finra’s BrokerCheck page, he worked as CCO at TradeZero America, in Brooklyn, N.Y., an online broker-dealer from January 2019 to April 2020. He’s currently top compliance officer at J. Streicher & Co., a New York City broker-dealer, and is listed as a co-founder and co-CEO of a consulting outfit called Compliance Solutions of New York.

Cacace couldn’t be reached for comment.  

In January 2017, Cacace was fined $5,000 and suspended from association with any Finra member in any principal way for 20 business days for, among other things, failing to ensure his former employer reported timely summary information regarding customer complaints.   

In May 2023, SW Financial was expelled from Finra for multiple violations, including churning customer accounts and failing to supervise its representatives.    

Cacace also worked for another firm that eventually ran afoul of regulators. The former compliance officer worked for Legend Securities in 2011 to 2014. Finra expelled that firm in 2017 for failing to pay fines.