New Jersey Bureau of Securities revokes registration of First Standard Financial Company
“In reality the firm served as a haven for greedy, dishonest agents who traded clients’ accounts like sharks in a feeding frenzy,” said Christopher W. Gerold, Chief of the Bureau of Securities.
The New Jersey Bureau of Securities has taken another action in its ongoing investigation of broker-dealer First Standard Financial Company, LLC. On Monday, November 4, 2019, the regulator announced it has revoked the broker-dealer’s registration and obtained a court-ordered freeze of the firm’s assets amid findings that its agents raked in more than $28.7 million through unauthorized and excessive trading.
According to documents issued by the Bureau and filed in Superior Court, First Standard regularly hired agents with a history of customer complaints and regulatory problems involving excessive, unsuitable, and unauthorized trading. First Standard and these agents then defrauded the firm’s clients through unsuitable and frequently unauthorized in-and-out trading for the purpose of generating sales commissions at their clients’ expense. This included short-term trading in bonds and other securities for which active trading is unsuitable.
In addition to issuing a Summary Order revoking First Standard’s broker-dealer Registration, the Bureau filed documents in New Jersey Superior Court in Essex County requesting that the Court temporarily restrains First Standard from destroying any documents, computer files, or other business records; to freeze the bank accounts and other assets of the firm; and to order First Standard to provide the Bureau with a list of all its assets and liabilities.
The Honorable James R. Paganelli, J.S.C. granted all of the Bureau’s requests including the freeze of First Standard’s assets.
The Bureau is also seeking civil monetary penalties against First Standard for each violation of the Securities Law and restitution of ill-gotten gains to clients, as well as disgorgement of all profits or funds gained through violations of the Securities Law.
Last month, the Bureau revoked the registration of First Standard agent Philip J. Sparacino, who was the last producing agent at First Standard, and issued him with $250,000 in civil penalties for defrauding clients through excessive, unsuitable trading activities that earned him and First Standard more than $1.4 million in commissions and fees at their clients’ expense.
In May, the Bureau revoked the registration of former First Standard agent Gabriel Block and assessed him $750,000 in civil penalties for engaging in unsuitable, high-cost, fraudulent trading strategies that generated at least $1.6 million in commissions and fees for himself and his associated broker-dealers at the expense of his clients.
At the end of 2018, First Standard had 44 agents registered with the Bureau and had branch offices in New York. More recently, however, it saw an exodus of agents and principals leaving to join other broker-dealers.
“First Standard held itself out as a legitimate financial services firm but in reality the firm served as a haven for greedy, dishonest agents who traded clients’ accounts like sharks in a feeding frenzy,” said Christopher W. Gerold, Chief of the Bureau of Securities. “Through the actions announced today, we put an end to First Standard’s unlawful boiler room operation and secured a court order to preserve what’s left of its ill-gotten gains to potentially reimburse clients for the money they lost.”