Aegis Capital Broker Douglas Szempruch Suspended by FINRA After Allegations of Unsuitability
Douglas Szempruch (CRD#: 4159318) was a previously registered Broker at Aegis Capital Corp. in Melville, NY. He entered the securities industry in 2000 and previously worked for Global Capital Corp.; Prestige Financial Center, Inc.; S.W. Bach & Co., Harrison Securities, Inc.; and Weatherly Securities Corp .
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in July 2021, FINRA sanctioned Douglas Szempruch, suspending him from working with member firms in any capacity for 12 months, beginning on July 19, 2021; he must also pay restitution of $99,720. The FINRA sanction states, “Without admitting or denying the findings, Szempruch consented to the sanctions and to the entry of findings that he engaged in quantitatively unsuitable trading in customer accounts. The findings stated that each customer had an investment objective of growth or balanced growth and a risk tolerance of moderate. Szempruch recommended the trading in the customer accounts and the customers routinely followed his recommendations. In addition, Szempruch exercised discretion when executing trades in these customers’ accounts and, as a result, exercised de facto control over their accounts. Szempruch’s trading in the accounts was excessive and unsuitable given the customers’ investment profiles. The customers paid $127,198 in commissions and suffered $157,605 in losses. The findings also stated that Szempruch exercised discretion to effect trades in customer accounts without the customers providing prior written authorization for him to exercise discretion and without his member firm accepting any of the accounts as discretionary accounts. The findings also included that Szempruch sent emails to prospective customers making misleading statements concerning investments in a company. Specifically, Szempruch inaccurately represented that he had visited the company’s production facility, met with and was in direct communication with the company’s management, was participating in weekly calls with the company’s management, and had first-hand information about the company. In fact, although Szempruch was invited to visit the company’s facilities, he did not attend and was instead briefed later by colleagues who did make the trip. Szempruch also did not directly communicate with the company’s management but instead closely followed the company. Although Szempruch understood that colleagues at the firm had begun conducting periodic status conferences with the company’s management, the company’s management ceased participating in the conferences shortly after executing an agreement with the firm. Szempruch thus did not have direct or first-hand information about the company, and misleadingly described his relationship and interactions with the company and its management.”
For a copy of the FINRA sanction, click here.
In addition, Douglas Szempruch has been the subject of two customer complaints, including the following:
● February 2018–”TIME FRAME: MAY 21, 2015 TO OCTOBER 21, 2016. CLIENT ALLEGES POOR PERFORMANCE AND UNSUITABLE RECOMMENDATION.”The customer dispute was settled for $30,000.
● September 2005–”APPLICANT WAS CHARGED WITH ONE COUNT OF BRIBERY, 200.00, WHICH IS A CLASS D FELONY AND ONE COUNT OF CRIMINAL POSSESSION OF STOLEN PROPERTY, 165.40, WHICH IS A CLASS A MISDEMEANOR. APPLICANT PLEAD GUILTY TO A REDUCED CHARGE OF 110-195.05, ATTEMPTING TO OBSTRUCT GOVERNMENT ADMINISTRATION, WHICH IS A CLASS B MISDEMEANOR.” Douglas Szempruch pled guilty and was convicted of a Class B Misdemeanor; he paid a fine of $250 and received a conditional discharge of one year.
● May 2004–”UNAUTHORIZED TRADING.” Damages of $5,004.35 were sought, and the customer dispute was settled for $250.
For a copy of Douglas Szempruch’s FINRA BrokerCheck, click here.
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.
Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s agee, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.
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