Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, September 10, 2012

SEC Charges JP Turner with Compliance Failures Involving Churning

The SEC charged three former brokers at JP Turner & Co., an Atlanta-based brokerage firm, with  “churning” the accounts of customers with conservative investment objectives.  The SEC also charged the head supervisor, Michael Bresner, as well as the firm’s president William Mello and the firm itself for compliance failures. JP Turner and Mello agreed to settle the SEC’s charges, while an administrative proceeding will continue against the three brokers and the supervisor.

According to the SEC’s order instituting administrative proceedings against the three brokers and the supervisor,  the brokers collectively churned the accounts of seven customers with conservative investment objectives and low or moderate risk tolerances. The churning occurred between January 2008 and December 2009. Bresner, an executive vice president and the head of supervision at JP Turner, is charged with failing to reasonably supervise two of the brokers, who generated such high commissions for some of their churned customers that it triggered a requirement in the firm’s procedures requiring that Bresner personally review the underlying trading activity.

In settling the SEC’s charges without admitting or denying the findings, JP Turner agreed to hire an independent consultant to review the firm’s supervisory procedures in order to prevent future violations. The SEC’s order censures JP Turner and requires payment of $200,000 in disgorgement (JP Turner’s approximate share of the commissions and fees generated by the fraudulent churning) plus $16,051 in prejudgment interest and a $200,000 penalty. The order suspends Mello from association in a supervisory capacity with a broker, dealer, or investment adviser for a period of five months and requires him to pay a $45,000 penalty.

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