On January 12, 2023, the Securities and Exchange Commission charged two former New York-based brokers with making unsuitable recommendations that resulted in substantial losses to customers and hefty commissions for the brokers.  One of the brokers agreed to pay more than $324,000 to settle the charges.

The SEC's complaint, filed in the U.S. District Court for the Southern District of New York, alleges that from December 2015 to December 2018, Terrance Reagan and Nathaniel Clay recommended investments that involved frequent buying and selling of securities without a reasonable basis to believe their recommendations were suitable. According to the complaint, the frequent trading coupled with commissions and other fees, resulted in a high-cost strategy through which customers suffered losses, while generating significant profits for Clay and Reagan. The complaint further alleges that Reagan also engaged in this conduct at another firm from March 2020 to April 2021.

Without admitting or denying the SEC's allegations, Clay consented to entry of a final judgment in the district court action, permanently enjoining him from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and ordering him to pay disgorgement of $150,898, plus prejudgment interest thereon in the amount of $22,936; and a civil monetary penalty of $150,898. The parties proposed consent judgment is subject to Court approval.

The SEC's complaint charges Reagan with violating Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10(b)-5 thereunder. The complaint seeks permanent injunctive relief, disgorgement plus prejudgment interest, and a civil penalty.

The SEC's investigation, which is continuing, was conducted by Dina Levy, Mariel Bronen, Roseann Daniello, and Neil Hendelman, and was supervised by Adam Grace and Thomas P. Smith, Jr. of the New York Regional Office. The litigation against Reagan will be led by Ms. Levy and Ms. Bronen.  The examination that led to the investigation was conducted by Rina Hussain, Robert Miller, Wanda Hunter, Megan Madariaga, Claudia Veloso and Gary Guttenberg, from the Broker-Dealer Exchange Office in the Division of Examinations.  The SEC appreciates the assistance of the Financial Industry Regulatory Authority.