SEC Nails Newport Coast Director For Illegal Fees
John Alexander Tarpinian of New York New York a former Newport Coast Securities Managing Director has been censured and fined $25,000.00 by Securities and Exchange Commission (SEC) according to an Order Instituting Administrative Cease and Desist Proceedings Pursuant to Securities Exchange Act of 1934 Section 15(b) and Investment Advisers Act of 1940 Section 203 containing findings that Tarpinian unlawfully procured $50,000.00 from advisory customers of Newport Coash Securities. In the Matter of John Tarpinian Administrative Proceeding File No. 3-18337 (Jan. 17, 2018).
According to the Order, during the time that Tarpinian was Managing Director of Newport Coast Securities, he reportedly provided more than one hundred of the firm’s investment advisory customers valuations of securities and facilitated purchases and sales of securities. Apparently, investors were charged an advisory fee as a result of the managed assets which consisted of equities, municipal bonds and structured products.
Apparently, between March of 2013 and December of 2015, a total of 2,785 trades had been executed by Tarpinian in the Newport Coast Securities proprietary trading account as well as the accounts of the customers. Apparently, in some of those circumstances, Tarpinian depended on the firm’s principal account to effect securities purchases and sales on behalf of customers.
The Order revealed that in most of the trades Tarpinian placed involving the firm’s principal account, Tarpinian was cognizant about charging twenty five basis points for each unit that the advisory customer purchased and sold. Particularly, Tarpinian would either mark down a security that the customer sold to the firm’s principal account or mark up a security sold to customer from the principal account. Apparently, this transpired without Tarpinian having disclosed to the customers that he was assuming a principal capacity in the transactions. Moreover, Tarpinian reportedly failed to procure advisory customers’ consent prior to effecting those trades involving the firm’s principal account.
The Order further stated that the markups and markdowns of twenty five basis points were not referenced in any notification to customers provided by the firm. SEC found that the notifications also omitted other commissions and fees charged to customers. Consequently, the Order revealed that Tarpinian generated $50,000.00 from the advisory customers in a manner which ran afoul of Advisers Act Section 206(3).
Financial Industry Regulatory Authority (FINRA) Public Disclosure reveals that Tarpinian has been identified in nine customer initiated investment related disputes pertaining to accusations of his misconduct while employed with Newport Coast Securities Inc., Paulson Investment Company LLC and PaineWebber Incorporated. Specifically, a customer initiated investment related arbitration claim regarding Tarpinian’s activities was resolved for $20,000.00 in damages based upon allegations that contractual obligations to the customer had been breached; misrepresentations were made about investments; fiduciary duties had been breached; the account was negligently administered; the customer’s funds were converted; and the customer had been defrauded. National Association of Securities Dealers (NASD) Arbitration No. 97-03665.
Then, on June 30, 2016, a customer filed an investment related complaint regarding Tarpinian’s conduct where the customer requested $20,000.00 in damages supported by accusations that false or misleading statements had been made to the customer concerning corporate debt transactions executed in their accounts while Tarpinian was employed by Newport Coast Securities. Moreover, Tarpinian is the subject of a customer initiated investment related complaint which was settled for $13,873.43 in damages on October 2, 2018 founded on allegations that the customer was provided poor investment advice concerning corporate debt investments; and inappropriate bond purchases were executed in the customer’s account between September 27, 2017 and November 20, 2017.
Further, on October 2, 2018 , a customer initiated investment related complaint concerning Tarpinian’s conduct was resolved for $17,327.39 in damages based upon accusations that inappropriate and unsuitable investment recommendations had been made to the customer concerning corporate debt transactions placed in the customer’s account between September of 2017 and November of 2017.
Tarpinian’s registration with Newport Coast Securities Inc. has been terminated as of June 25, 2018. Since January 31, 1982, Tarpinian has been associated with eleven different broker dealers, three of which, including Newport Coast Securities Inc., have been expelled by securities regulators for violation of federal securities laws or are otherwise defunct. Specifically, Newport Coast Securities was fined $1,000,000.00 and expelled from FINRA membership according to a FINRA Office of Hearing Officers Extended Hearing Panel Decision containing findings that the firm made quantitatively unsuitable trades in customer accounts and churned customer accounts; conduct violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5 and FINRA Rule 2010. Department of Enforcement v. Newport Coast Securities Inc. et al. Disciplinary Proceeding No. 2012030564701 (Oct. 17, 2016).