The Securities and Exchange Commission (SEC) recently imposed significant sanctions against Alexander Capital Advisors, a brokerage firm based in New York, for egregious supervisory failures. The agency censured the firm and levied a $410,987 fine after finding that three of its registered brokers engaged in a pattern of misconduct, including:
Unsuitable investment recommendations
Unauthorized trades
Churning (excessive trading to generate commissions)
This misconduct caused significant financial losses to vulnerable clients—primarily individuals nearing retirement with limited investing experience.
What the SEC Found: Breakdown of Violations
Between 2012 and 2014, Alexander Capital Advisors failed to implement effective compliance systems and supervisory mechanisms. This allowed the brokers to repeatedly violate industry rules without consequence. The firm:
Permitted a “lax” compliance culture where misconduct was overlooked
Lacked sufficient oversight on the activities of its brokers
Failed to detect and prevent unsuitable investment advice, a core duty under FINRA rules
Ignored internal policies related to churning and unauthorized trading
These findings point to systemic supervisory deficiencies, not just isolated misjudgments.
For investors, the consequences were devastating: loss of savings, emotional stress, and diminished retirement security.
The Brokers Named: Gennity, Roveccio, and Torres
The three brokers involved—William C. Gennity, Rocco Roveccio, and Laurence M. Torres—engaged in conduct that violated multiple securities laws:
Gennity and Roveccio: In 2023, the SEC filed a civil complaint accusing them of making unsuitable and fraudulent recommendations, misrepresenting investment products, churning customer accounts, and executing trades without authorization.
Torres: Entered into a $411,107 settlement with the SEC in connection with similar allegations.
Each of these individuals prioritized commissions over their clients’ best interests—an unacceptable breach of fiduciary duty.
If you believe you were impacted by any of these brokers, it’s important to take legal action promptly. Contact our team of experienced investment fraud attorneys for a confidential consultation.
How Supervision Failures Harm Investors
Brokerage firms have a legal and regulatory obligation to supervise their representatives. When this obligation is neglected:
Clients may suffer financial harm
Misconduct goes unreported and unchecked
Firms can be held liable under FINRA Rule 3110
Investment firms are required to implement written supervisory procedures (WSPs), monitor account activity for red flags, and respond appropriately to client complaints.
Alexander Capital’s failure to adhere to these standards demonstrates a broader industry issue: weak oversight can often enable predatory behavior by brokers looking to maximize profits through illicit means.
Churning and Unauthorized Trades: Common Signs to Watch For
If you’re concerned your account may have been mishandled, here are some warning signs:
You’re receiving trade confirmations for transactions you never approved
Your portfolio experiences frequent turnover without strategic reasoning
Your broker discourages you from reviewing your statements
There’s an unusual number of high-commission or complex products in your account
These red flags may indicate churning or unauthorized trading—both of which are forms of securities fraud. Victims may be entitled to recover damages through arbitration or litigation.
If you suspect your account was mishandled by a broker at Alexander Capital, call the Frankowski Firm at 888.741.7503 or contact us today.
How to Recover Investment Losses from Broker Misconduct
Victims of broker misconduct may be eligible to recover losses through:
FINRA Arbitration – A private forum where disputes between investors and brokers/firms are resolved.
SEC Whistleblower Claims – In some cases, reporting fraud can lead to awards.
Civil Lawsuits – For clients who were significantly defrauded and whose cases extend beyond FINRA jurisdiction.
The Frankowski Firm can help you determine the most strategic legal path to recover lost funds. We have extensive experience representing clients across the U.S. in cases involving:
Unauthorized trading
Churning
Unsuitable investments
Misrepresentation and omission of material facts
In-Depth Legal Perspective: Duties of Investment Firms Under FINRA and SEC Rules
Investment firms like Alexander Capital are bound by FINRA Rule 3110, which mandates:
Supervision of registered persons to ensure compliance with securities laws
Implementation of robust Written Supervisory Procedures (WSPs)
Ongoing monitoring of account activity to detect anomalies
Immediate corrective action in response to red flags
In this case, the SEC concluded that Alexander Capital failed on multiple fronts: they didn’t monitor the brokers’ activity adequately, failed to act on signs of abuse, and didn’t even enforce their own procedures related to high-risk conduct.
Related Internal Resources
To learn more about investor rights and legal recovery options, see our related resources:
Key Takeaways
- The SEC fined Alexander Capital Advisors for failing to supervise brokers engaged in misconduct
- Three brokers were found to have engaged in churning, unauthorized trades, and misrepresentations
- The clients affected were often near-retirees with no prior investment experience
- Investors may be eligible to recover losses through FINRA arbitration or legal action
- The Frankowski Firm offers skilled legal representation in investment fraud matters
FAQs
1. What are “unsuitable investment recommendations,” and why are they illegal?
Unsuitable investment recommendations occur when a broker suggests investments that do not align with a client’s financial goals, risk tolerance, time horizon, or level of investing experience. Under FINRA Rule 2111, brokers are legally obligated to have a reasonable basis for every investment they recommend. This includes conducting due diligence on the product and ensuring it’s appropriate for the specific client. For example, recommending a high-risk derivative product to a conservative retiree is a clear violation. These recommendations can result in substantial financial losses and may qualify as investment fraud. If an unsuitable recommendation leads to harm, the firm or broker may be held liable. At the Frankowski Firm, we evaluate these cases in-depth and guide clients through recovery. If you were advised to invest in products that didn’t match your financial profile or needs, contact us to explore your legal options.
2. What is churning, and how can it harm investors?
Churning is an unethical and illegal practice where a broker makes excessive trades in a client’s account to generate commission income, without regard to the client’s financial goals. It often results in high fees, taxes, and losses while benefiting only the broker. The key indicator of churning is frequent, unnecessary trading, particularly when it involves products that carry hefty transaction costs or when the client’s portfolio has no need for such active management. Churning violates both FINRA rules and the fiduciary duty brokers owe their clients. Older investors and those unfamiliar with investing are often prime targets. If your statements show frequent trades that were never discussed with you—or if your account balance seems to decline with no clear explanation—churning could be the cause. The Frankowski Firm can help you assess whether your broker’s activity was abusive and recover damages if necessary.
3. How does unauthorized trading occur, and what can I do about it?
Unauthorized trading happens when a broker buys or sells securities in your account without your prior knowledge or consent. Even if a broker has discretionary authority, they must act in accordance with your risk profile and investment objectives. Unauthorized trades are often detected when clients see unfamiliar transactions in their account statements or receive unexpected trade confirmations. These trades can lead to substantial financial harm, especially if the investments are risky or not in line with the client’s goals. It is illegal for brokers to execute trades without consent unless they have documented, approved discretionary authority. If you suspect this has occurred, save all communication, print your trade records, and speak with a securities attorney immediately. The Frankowski Firm can help determine if your broker acted improperly and guide you through the FINRA arbitration process or litigation to seek financial recovery.
4. What legal options do I have if I lost money through broker misconduct?
If you lost money due to broker misconduct—such as unsuitable investments, churning, or unauthorized trading—you have several legal avenues for recourse. The most common is FINRA arbitration, a process specifically designed to resolve disputes between investors and brokerage firms or advisors. In arbitration, evidence is presented, and a neutral panel issues a binding decision, which can include financial compensation. In some cases, a civil lawsuit may also be appropriate, especially if the misconduct was egregious or involved fraud. Additionally, whistleblower provisions may be available through the SEC in fraud-related matters. The key to successful recovery is timely action and having an experienced investment fraud attorney represent you. At the Frankowski Firm, we handle every stage of the process—from gathering documentation and filing a claim to negotiating or litigating on your behalf.
5. How can I check a broker’s history before investing?
Before investing with any broker or financial advisor, it’s essential to conduct due diligence. A good starting point is FINRA’s BrokerCheck tool, which allows investors to see a broker’s registration status, employment history, and any disciplinary actions or complaints. Additionally, the SEC’s Investment Adviser Public Disclosure website provides details on investment advisors and their firms. Look out for red flags such as multiple client disputes, regulatory sanctions, or employment terminations. You should also review the firm’s reputation, regulatory history, and disciplinary actions. Asking your advisor detailed questions about their compensation structure, investment philosophy, and fiduciary responsibilities is also advisable. If you have any doubts about your current broker or are unsure how to evaluate someone you’re considering, the Frankowski Firm offers consultations to help you assess your financial team’s trustworthiness and track record.