Three former brokers at Atlanta-based securities brokerage firm JP Turner excessively traded (“churned”) customer accounts in order to produce $845,000 in commissions and fees for themselves and the firm, leaving those customers with $2.7 million in losses, according to the SEC.
The churning reportedly took place in the accounts of seven JP Turner customers from January 2008 through December 2009. The brokers involved ? Ralph Calabro, Jason Konner and Dimitrios Koutsoubos ? allegedly ignored the customers’ conservative investment objectives and low risk tolerances. (“Brokers churned accounts and lost $2.7 million for clients, SEC says,” by Liz Skinner, InvestmentNews).
The classic measures of churning are the annual turnover ratio and the break-even ratio. According to the SEC, the annual turnover rates were so high that the JP Turner customers needed an annual return of 73.3% just to break even!
JP Turner’s head supervisor, Michael Bresner, allegedly disregarded “red flags” of churning and failed to supervise two of the brokers, according to the SEC. According to the Atlanta Journal Constitution, Bresner was also fined $25,000 in 2004 for failing to properly supervise brokers at another firm. (“3 area brokers accused of fraud,” by Greg Bluestein).
JP Turner, and its former president and one of the firm’s founders, William Mello, also were charged but decided to consent to the SEC’s findings against them and settle the charges. The firm agreed to pay approximately $416,000 in penalties and disgorgement of unlawful profits. Mello agreed to a $45,000 penalty, and a suspension from associating with a firm in a supervisory capacity for five months.
“Broker-dealers’ supervisory systems must provide customers with reasonable protection from churning and similar abuses,” William Hicks, associate director of the SEC’s Atlanta office, was quoted as saying, adding: “JP Turner’s supervisory systems failed to do that.”
JP Turner has about 513 representatives in 203 U.S. offices, according to the article. Since 1998, the firm has compiled a record of 18 final regulatory items, many featuring an element of failure to supervise, and 12 final arbitration actions.
Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.