Linus Unah – Fourth Estate Contributor
Washington, DC, United States (4E) – The U.S. Securities and Exchange Commission (SEC) Wednesday charged a former broker with trading unsuitable investment products in the accounts of five customers and misappropriating more than $170,000 from one of those customers.
The SEC’s complaint alleged that Demitrios Hallas, a former registered representative at a New York City broker-dealer, violated the antifraud provisions of the federal securities laws by purchasing and selling daily leveraged Exchange-Traded Funds and Notes (ETFs and ETNs) in his customers’ accounts.
ETFs are investment companies and ETNs are unsecured notes, products that the SEC alleges are inherently risky, complex and volatile, and only appropriate for sophisticated investors.
The agency said Hallas, 40, “knowingly or recklessly” disregarded that these products were unsuitable for such customers, exposing customers who were unsophisticated with limited or no investing experience to a significant degree of volatility and risk.
The SEC alleged that Hallas traded 179 daily leveraged exchange traded funds (ETFs) and exchange traded notes (ETNs) for more than a year.
This, in turn, generated commissions and fees of about $128,000 and net loss of $150,000 across all 179 positions, according to the SEC.
The SEC’s complaint further alleged that Hallas misappropriated more than $170,000 in funds from one customer, allegedly depositing the funds into his own personal bank accounts and spending them on personal expenses.
“As alleged in our complaint, Hallas enriched himself by systematically disregarding his customers’ investment profiles and repeatedly trading in risky, volatile products that were unsuitable for them,” Andrew M. Calamari, director of the SEC’s New York office, said in a statement.
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