Washington, DC (STL.News) The Securities and Exchange Commission Thursday charged a former broker with fraud for engaging in unsuitable and unauthorized trading in the accounts of retail brokerage customers.
The SEC’s complaint alleges that Dominic A. Tropiano placed more than 500 trades of complex, high-risk securities called leveraged exchange traded funds (ETFs) for at least 40 retail customer accounts. According to the complaint, the leveraged ETFs Tropiano purchased were high-risk securities intended to be traded by sophisticated investors and not held for periods longer than one day. As alleged, however, Tropiano recommended and purchased leveraged ETFs for the accounts of retail investors who had only moderate risk profiles and long-term investment objectives. The complaint alleges that Tropiano held the leveraged ETFs in those accounts for weeks and, in some cases, months. The complaint also alleges that Tropiano fraudulently traded leveraged ETFs for certain customers without their authorization. According to the complaint, as a result of Tropiano’s fraudulent trading in leveraged ETFs, his customers sustained combined losses of more than $1 million.
The SEC’s complaint, filed in the U.S. District Court for the Northern District of Ohio, alleges that Tropiano violated the antifraud provisions Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the SEC’s allegations, Tropiano agreed to the entry of a judgment that permanently enjoins him from violating the charged provisions of the federal securities laws, and provides that the amount of disgorgement, prejudgment interest, and civil penalties will be determined by the court at a future date. The settlement is subject to court approval.
The SEC’s investigation was conducted by Chris White and Jean Javorski and supervised by C.J. Kerstetter of the Chicago Regional Office. Senior Trial Counsel Ben Hanauer will lead the litigation.