The Financial Industry Regulatory Authority on Monday filed churning charges against five brokers formerly associated with Newport Coast Securities Inc.
New York-based Newport Coast and two former supervisors at the firm, Marc Arena and Roman Luckey, were also charged in the complaint.
Finra alleges that from September 2008 through May 2013, brokers Douglas Leone, Andre LaBarbera, David Levy, Antonio Costanzo and Donald Bartelt churned the accounts of 24 customers, using margin and risky securities to generate huge commissions, wiping out most of the customers’ capital in the process.
All told, the losses amounted to more than $1 million, Finra alleges.
The complaint claims the brokers created new account forms for clients that misstated net worth, investment experience and objectives.
Finra also claims that Levy, of West Palm Beach, Fla., and Costanzo, based in Chesapeake, Va., attempted to dissuade several customers from cooperating with Finra’s investigation.
Newport Coast CEO Donald Wojnowski, who joined the firm in December 2012, said he hopes to settle the matter.
He said the alleged churning “predates our management team we have now” and that the brokers involved have left the firm or were asked to leave.
“We’ve laid out plans to Finra for restructuring the firm,” he said, and “made significant investments in new [compliance] systems and people.”
The type of active trading described in the Finra complaint “doesn’t exist at the company anymore,” Wojnowski added. “It’s not a business we want to be in.”