SEC Wins Trial Against N.Y. Broker Charged With Defrauding Customers

The Securities and Exchange Commission has won its lawsuit against a New York-based-broker who excessively traded customer accounts using a scheme that generated hefty commissions for the broker but significant losses for his customers, according to a news release.

A jury in Manhattan federal court on Thursday ruled against Donald J. Fowler, who, along with his partner Gregory T. Dean, was sued by the SEC in January 2017 on fraud charges. The partners' strategy involved selling the securities within a week or two of purchase and charging customers a commission for each transaction, the complaint said.

Both men were registered with J.D. Nicholas & Associates Inc., a now-defunct broker-dealer in Syosset, N.Y.

Dean, the release said, admitted to his misconduct and settled with the SEC on June 10, the eve of the trial. Among other things, he admitted that he knowingly or recklessly made trade recommendations to his customers with no reasonable basis, and that his conduct violated the federal securities laws, the SEC said.

Fowler engaged in fraud when he deployed an in-and-out trading scheme that was unsuitable for his customers in order to generate large commissions for himself, the SEC argued.

The SEC also said Fowler failed to do any reasonable due diligence to determine whether his trading, which involved frequent buying and selling of securities, could deliver a profit for his customers.

The commissions Fowler charged were so high that investors would have needed to generate, on average, a 142 percent return simply to break even, the SEC said.

Fowler was found liable on all counts of violating the antifraud provisions of the federal securities laws, according to the SEC. Dean consented to the entry of the final judgment, which enjoined him from violating the above antifraud provisions.

In addition to admitting that his conduct violated the law, Dean agreed to pay $253,881 in disgorgement, $50,521 in prejudgment interest and a $253,881 civil penalty. The court will determine remedies against Fowler at a later date, the SEC said..