National investor fraud law firm, KlaymanToskes (“KT”), has commenced an investigation into former Aegis Capital broker Douglas Szempruch in light of his recent suspension by FINRA. On July 9, 2021, FINRA disclosed that it suspended former Aegis Capital broker Douglas Szempruch relating to him recommending and effecting excessive and unsuitable trading, per a FINRA Letter of Acceptance, Waiver and Consent (AWC), Case # 2017054317401.
What is a FINRA AWC?
According to FINRA Rule 9216, if FINRA’s Department of Enforcement has reason to believe a member or associated person has committed a violation, and that member or associated person does not dispute the violation, the Department of Enforcement may prepare and request that the member or associated person execute a Letter of Acceptance, Waiver and Consent.
The AWC contains several important details. For instance, the letter will describe:
- the act or practice engaged in or omitted
- Relevant FINRA rules, regulations, or statutory provision violated, and
- The sanction or sanctions to be imposed.
Former Aegis Capital Broker Douglas Szempruch and the FINRA AWC Summary
Between August 2014 and June 2017, Douglas Szempruch violated FINRA Rules by engaging in the following conduct:
- Recommending and effecting excessive trading as well as unsuitable trading in six customer accounts
- Exercising discretionary authority without prior written authorization to effect trades in seven customer accounts, and
- Sending email communications containing misleading statements about an investment opportunity from his firm-approved email account
Former Aegis Capital Broker Douglas Szempruch and Excessive Trading
According to the Financial Industry Regulatory Authority (FINRA), brokerage firms and its financial advisors that excessively traded or “churn” a brokerage account are in violation securities industry rules and regulations. 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.
According to the FINRA AWC, between August 2014 and September 2016, Szempruch engaged in unsuitable trading in six customer accounts. Each customer had an investment objective of growth (five customers) or balanced growth (one customer) and a risk tolerance of moderate. Szempruch recommended the trading in the six customers’ accounts and the customers routinely followed his recommendations
At various times, Douglas Szempruch exercised discretion when executing trades in these six customers’ accounts. As a result, Douglas Szempruch exercised de facto control over the customers’ accounts.
Former Aegis Capital Broker Douglas Szempruch and Misleading Statements in Emails
The FINRA AWC also states that, between May 2017 and June 2017, Szempruch sent the same or similar email to 34 prospective customers. The email had misleading statements concerning investments in a certain company (“Company A”).
Specifically. Szempruch inaccurately represented that he:
- Had visited Company A’s production facility
- Had met with and was in direct communication with Company A’s management
- Was participating in weekly calls with Company A’s management, and
- Had first-hand information about Company A.
Although Szempruch was invited to visit Company A’s facilities, he did not attend and was instead briefed later by colleagues who did make the trip. He also did not directly communicate with Company A’s management but instead closely followed the company.
FINRA Sanctions Former Aegis Capital Broker Douglas Szempruch
Mr. Szempruch consented to the following sanctions per the FINRA AWC:
- A 12-month suspension from association with any FINRA member in all capacities; and
- A fine in the amount of $99,720.87.
FINRA BrokerCheck of Former Aegis Capital Broker Douglas Szempruch
According to FINRA BrokerCheck, Douglas Szempruch was last registered with Aegis Capital Corporation (Branch Location was Melville, NY) from June 2011 to June 2021.
Douglas Szempruch has two customer dispute disclosures on his BrokerCheck. One was a customer complaint from February 2018 in which the customer alleged $30,000 in damages relating to common and preferred stock.
The second disclosure is a May 2004 customer complaint. There, a customer alleged unauthorized trading while Douglas Szempruch was registered with S.W. Bach & Company. The complaint was settled for $250.00.
Investment Losses with Douglas Szempruch?
Former customers of former Aegis Capital broker Douglas Szempruch with investment losses that exceed $100,000, and those who may have information relating to the manner in which the broker handled their accounts, are encouraged to contact Lawrence L. Klayman, Esq., at (561) 542-5131, and download our Special Investor Report.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm represents high net‐worth, ultra‐high‐net‐worth, and institutional investors, such as non‐profit organizations, unions, public and multi‐employer pension funds. K&T has office locations in California, Florida, New York and Puerto Rico.