Broker Joseph Anthony Giordano (Giordano) was recently barred from the financial industry by The Financial Industry Regulatory Authority (FINRA) over allegations that he participated in the distribution of unregistered debentures issued by Empire Corporation, a Maryland corporation (Empire Debentures) to customers of Capital Investment Group, Inc. (CIG). FINRA alleged that Giordano violated FINRA Rules by soliciting the sales of the Empire Debentures. In addition, FINRA found Giordano’s Empire Debentures sales to customers were without a reasonable basis for making such recommendation. Finally, FINRA found that Giordano engaged in securities fraud by making intentionally false and misleading statements in connection with the sales of the Empire Debentures to customers.
Giordano was registered with Capital Investment Group from September 1992 until his termination on June 20, 2012. Giordano’s U5 states that he was terminated for “selling away” and making false and misleading statements to the firm. On July 2, 2012, Giordano became registered with Meyers Associates, L.P. (Meyers) until his registration was terminated by Meyers on July 10, 2013. Giordano’s BrokerCheck states that he is the general manager of Giordano Asset Management LLC and treasurer of Giordano Holding Corporation.
FINRA found that Giordano sold approximately $3.1 million of the Empire Debentures to at least 45 customers of CIG. The Empire Debentures had varying maturities but the majority had a five-year maturity and promised interest at an annual compounded rate of ten percent paid at maturity. FINRA alleged that the Empire Debentures were speculative investments considering their high-yield, lack of credit analyses or an effective registration statement, and the complete absence of a secondary market. The sale of the Empire Debentures was in contravention of Section 5 of the Securities Act of 1933 requiring the registration of securities. The securities were also not registered with the State of Maryland. In addition, FINRA alleged that Giordano failed to conduct adequate due diligence regarding the registration status of the Empire Debentures prior to recommending and selling the debentures to customers.
FINRA alleged that as early as January 2006, CIG’s compliance department conducted a branch examination of Giordano’s office and was aware that several customers held Empire Debentures. Giordano told CIG that one of its former chief compliance officers had approved the Empire Debenture transactions. CIG informed Giordano in February 2006 that he was permitted to continue to sell the debentures, but could not solicit them to customers. Notwithstanding this condition, Giordano’s sales of the Empire Debentures from May 2006, through November 2009, were solicited and increased substantially. Giordano sold over $900,000 of the Empire Debentures in 2008. In 2009, Giordano sold over $1.4 million of the Empire Debentures.
FINRA also found that Giordano’s recommendations to purchase the Empire Debentures were unsuitable to at least 14 customers based on their investment objectives, risk tolerances, and financial profiles. Further, Giordano also recommended the Empire Debentures in unsuitable concentration levels. For instance, one customer had 111% of his stated net worth concentrated in the Empire Debentures and four customers had more than 30% of their stated net worth concentrated in the Empire debentures.
Beginning in April 2009, Giordano became aware of instances where redemption checks issued by Empire Corporation were returned for insufficient funds causing existing investors to receive significantly untimely redemption payments. FINRA alleged that Giordano contacted Empire Corporation’s chief executive officer on seven occasions regarding late redemption payments and returned redemption checks. Notwithstanding Giordano’s knowledge of multiple instances of returned redemption checks and late redemption payments, Giordano continued to solicit additional investors to purchase the Empire Debentures in May through November 2009. According to FINRA, Giordano also intentionally failed to disclose to investors that the issuer had been experiencing difficulties meeting redemption payments.
The attorneys at Gana LLP are experienced in investigating claims concerning failure to supervise the sale of private placements. Our attorneys can help you detect and uncover suspicious activity in your accounts. Our consultations are free of charge and the firm is only compensated if you recover.