More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- Best Practices for Working with Senior Investors Securities examiners deal harshly with RIAs that do not fulfill their fiduciary obligations toward senior investors, as the SEC and state securities regulators view older investors as particularly vulnerable and in need of protection.
FINRA announced on Monday it has filed a complaint against John Thomas Financial of New York, and its CEO, Anastasios "Tommy" Belesis, charging fraud in connection with the sale of common stock, physical intimidation of registered representatives, trading ahead, failing to provide best execution for customer orders and various other violations. The charges come on the heels of similar action by the SEC in March.
Belesis appeared in the film Wall Street 2: Money Never Sleeps.
The complaint also names Michele Misiti, branch office manager; John Ward, trader; Joseph Castellano, chief compliance officer; and Ronald Vincent Cantalupo, regional managing director.
Also, the complaint charges JTF, Belesis, Castellano and Cantalupo with violating FINRA's anti-intimidation rule by physically threatening (including threatening to have them "run over"), harassing and assaulting registered representatives who have disagreed with Belesis' business practices, and threatening to ruin the registered representatives' financial careers by improperly marking their industry records.
JTF and many of its customers owned America West Resources (AWSR) common stock as a result of participation in the company's private financings. According to the complaint, on Feb. 23, 2012, the price of AWSR common stock, which at the time was thinly traded on the OTC Bulletin Board, spiked higher, by approximately 600%, opening at 28 cents per share, peaking at $1.80 per share and eventually closing the day at $1.29 per share. On the same day, JTF sold 855,000 shares, the majority of its proprietary position in AWSR, reaping proceeds of more than $1 million.
The complaint alleges that while JTF sold its shares at the height of the price spike, the firm received at least 15 customer orders to sell more than 1 million shares, yet only entered one of these orders for execution on Feb. 23, 2012.
Instead, JTF and Belesis prevented the orders from being executed on the same day they were received and some customer orders were executed the following day or days after at prices grossly inferior to those obtained by the firm while other customer orders were not entered or executed at all. AWSR is now in bankruptcy, and the customers' investments are virtually worthless.
In addition, the complaint alleges that JTF and Belesis, through Misiti and Castellano, lied to the firm's registered representatives and customers about the reasons the customer shares could not be sold on Feb. 23, 2012, including that there was a problem with the clearing firm's trading systems, there was insufficient volume on that day to fill the orders, and the shares could not be sold because they were restricted under the Securities Act of 1933.
FINRA further alleges that to conceal that the firm received the orders during the Feb. 23 price spike but failed to execute them, JTF and Belesis, through Misiti, "lost" order tickets for customer orders received on Feb. 23, 2012, and replaced six of those tickets with falsified tickets dated Feb. 24, 2012. Belesis and Misiti also made misrepresentations to FINRA concerning Belesis' role in the misconduct.
Read SEC Charges Hedge Fund Manager, BD CEO Belesis With Fraud on AdvisorOne.