Attorney General Gurbir S. Grewal today announced several actions by the New Jersey Bureau of Securities in its ongoing investigation of the now-defunct First Standard Financial Company, LLC.

Earlier this month, First Standard agreed to relinquish a big portion of its liquid assets – about $400,000 – to provide restitution to investors. The Bureau previously revoked First Standard’s broker-dealer registration after finding that First Standard was complicit in its agents’ unlawful conduct, and took action against a number of the agents individually.

In addition, the Bureau today revoked the registrations of two more agents who participated in the scheme, including the firm’s top agent. The two agents were also collectively assessed more than $1 million in civil penalties for their roles in the scheme.

Andre P. Davis, who at one time generated nearly a quarter of First Standard’s revenues, had his registration summarily revoked. He was also assessed a $1 million civil penalty.

Frank Venturelli also had his registration revoked and was assessed $120,000 in civil penalties.

According to the Bureau’s findings, First Standard routinely 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” of a single security over a short period 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.

The Bureau found that Davis and Venturelli violated the New Jersey Securities Law by fraudulently engaging in unsuitable, high-cost, excessive trading strategies that generated commissions and fees for themselves and First Standard, while simultaneously causing huge losses for their customers.

Davis and Venturelli’s trades were made on behalf of customers in commissioned-based accounts, meaning that the agents and First Standard were paid commissions on each trade (both purchases and sales) that they executed on the customers’ behalf. This trading strategy reduced the potential gains of any profitable trades and exacerbated the losses on unprofitable trades. It also caused the customers’ accounts to generate exorbitant transaction costs and fees that far exceeded any benefit to the customers.

Despite the harmful impact to his customers, between January 2016 and May 2019, Davis benefited by generating at least $7.5 million in commissions and fees for himself, First Standard, and the other First Standard agents with whom he shared accounts. These commissions and fees represented almost a quarter of First Standard’s total revenue during the same period.

Davis and Venturelli are just the latest First Standard agents to have their registrations revoked in connection with pervasive illegal trading activities at First Standard that unjustly enriched the firm and its agents at the expense of their customers.

The Bureau has also taken action against other First Standard agents for excessive, unsuitable trading activities:

• In February 2020, the Bureau denied and revoked the registration of former First Standard agent Jeffrey Broten and assessed him $100,000 in civil penalties.
• In October 2019, the Bureau revoked the registration of First Standard agent Philip J. Sparacino, who was the last producing agent at First Standard, and imposed $250,000 in civil penalties on him.
• In May 2019, the Bureau revoked the registration of former First Standard agent Gabriel Block and imposed $750,000 in civil penalties on him.