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Aegis Capital Corp. Sanctioned by FINRA After Allegations of Insufficient Supervisory Procedures; Ordered to Pay Back Investors After Investment Loss

In November 2021, a Letter of Acceptance, Waiver, and Consent was submitted by Aegis Capital Corp. to resolve allegations made against it by the Department of Enforcement, FINRA (Financial Industry Regulatory Authority). Aegis Capital Corp. is based in NY and employs hundreds of financial advisors across roughly two dozen offices. More than 50% of company revenue comes from commissions or markups and markdowns associated with buying and selling securities for retail and institutional clients.


Allegations Of Conduct Leading To Investment Loss


Over a 4-year period from 2014 to 2018, FINRA alleges that Aegis Capital Corp. did not have the appropriate supervisory  measures in place to protect investors. The work of its financial advisors did not meet the compliance standards for suitability, and excessive trading in particular. The company missed hundreds of potentially unsuitable transactions in customer accounts. The work of eight registered representatives working out to Aegis Capital Corp.’s Melville and Wall Street branches is especially significant. According to the FINRA allegation, “trading in the accounts of 31 firm customers resulted in an average annualized cost-to-equity ratio (or break-even point) of 71.6%, an average annualized turnover rate of 34.9, combined customer costs (including commissions, markups or 1 For more information about the firm, including prior regulatory events, visit BrokerCheck® at www.finra.org/brokercheck. 2 markdowns, margin interest and fees) of more than $2.9 million, and cumulative losses of $4.6 million. “


During the 5-year period between 2014 and 2019, Aegis Capital Corp. did not have the appropriate supervisory measures in place to shield investors from unsuitable leveraged, inverse, and  inverse-leveraged exchange-traded funds (non-traditional ETFs).


FINRA Imposes Sanctions, Including Recovery of Investor Losses


Aegis Capital Corp. allegedly failed to develop an appropriate supervisory system over its representatives and implement it to ensure compliance with FINRA rules. The company also allegedly failed to review flagged transactions where misconduct or unsuitability was possible based on the available information. And finally, Aegis Capital Corp. allegedly failed to uphold honorable and ethical business practices. FINRA sanctioned Aegis Capital Corp. with a censure, a fine of approximately $1M, an order to pay restitution of roughly  $1.7M; and establish an appropriate supervisory system that meets FINRA standards within a specified time frame.


We Help Recovery Investment Loss?


The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.

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