The Financial Industry Regulatory Authority ("FINRA") has filed a complaint against Los Angeles-area brokerage firm Newport Coast Securities, Inc. and several current and former brokers. FINRA has alleged that Newport Coast Securities, along with some of its current and former brokers, Donald Andrew Bartelt, Antonio Costanzo, Andre Vincent LaBarbera, Douglas Anthony Leone, and David Michael Levy excessively traded and churned customers’ accounts. Churning is one of the most fundamental forms of stockbroker fraud.
Churning is where a broker makes trades for the primary purpose of generating commissions, regardless of whether the trades make sense for the customer. Churning violates FINRA and internal rules and brokerage firm’s legal duties owed to customers. FINRA has alleged that Newport supervisors, Marc Anthony Arena and Roman Tyler Luckey, failed to adequately supervise the brokers because the churning was so egregious that they should have quickly caught and stopped the misconduct.
FINRA found obvious hallmarks of churning and improper account management, including that:
- there were extraordinary amounts of in-and-out trading;
- customer accounts were highly margined and often concentrated in one security; and
- solicited trades were inaccurately characterized as unsolicited.
In sum, FINRA has alleged that Newport Coast Securities and the brokers engaged in a manipulative, deceptive and fraudulent scheme by churning customer accounts and that they acted with intent to defraud and/or with reckless disregard of their customers’ interests by seeking to maximize their own compensation in disregard of the interests of their customers.
FINRA also has accused Constanzo, LaBarbera, and Levy of recommending risky and speculative leveraged and/or inverse exchange-traded products to customers without having reasonable grounds for believing that the securities were suitable for the customers and without making sure that the customers understood and were willing to assume the risks relating to these securities. On top of that, FINRA has alleged that Newport failed to offer or provide any training on these complex products. Finally, FINRA accuses broker Leone of lying to a customer about the value of the customer’s account.
We are not surprised by the accusations made against Newport Coast Securities. After all, this is the same brokerage firm that hired infamous broker Bambi Holzer, who had more than 50 customer complaints on her record at the time she was hired.
With offices in Los Angeles, Miami, New York, and West Palm Beach, Dimond Kaplan & Rothstein, P.A. represents victims of stockbroker misconduct and investment fraud in FINRA arbitration claims throughout the United States. If you have questions about your rights, or have been the victim of investment fraud, contact attorney Jeffrey B. Kaplan for a free consultation at jkaplan@dkrpa.com or (888) 578-6255
