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LI financial adviser convicted of fraud in SEC case

A Long Island financial adviser with a now-defunct Syosset brokerage has been convicted in a stock churning case after his co-defendant earlier agreed to a settlement, the Securities and Exchange Commission announced.

The broker, Donald J. Fowler of Massapequa, was found guilty of fraud in a jury trial in U.S. District Court in Manhattan last week.

The complaint filed by the SEC in January 2017 said that Fowler and his co-defendant, Gregory T. Dean of Seaford, recommended a "high-cost trading strategy consisting of the excessive buying and selling of stocks" to generate high commissions and fees while working at J.D. Nicholas & Associates Inc. 

Dean settled with the SEC on June 10 before going to trial.

He admitted violating federal securities laws by recommending trades with no reasonable basis. Dean agreed to pay more than a half million dollars to settle the case: $253,881 in disgorgement, $50,521 in prejudgment interest, and a civil penalty of $253,881.

The court will determine penalties against Fowler, who was convicted on June 20, at a later date.

The complaint said that Dean and Fowler considered themselves partners and, although they had separate customers, split all revenue 50-50. The brokerage, J.D. Nicholas, received 20 percent of broker-generated revenue.

Dean and Fowler produced more than $1 million in revenue from customer accounts and received about $800,000, according to the complaint.

The complaint against Dean and Fowler charged that from June 1, 2014, to February 28, 2015, one customer registered a total loss of $32,994 on an account with an average value of $4,927.

Another customer had a total loss of $474,958 on an account with an average value of $256,407. Commissions, markups, markdowns, margin interest and other fees for that customer totaled $252,003.

The 27 accounts they churned from March 2011 to February 2015 included those of a retired Army veteran and a disabled retired aerospace engineer. On average, they held each investment for only nine days.

The SEC said that cumulative commissions charged by Fowler were so high that investors' portfolios would have needed to generate a 142 percent return just to break even.

The SEC registration of J.D. Nicholas, with its primary office on Jericho Turnpike, ended in July 2015. Financial Industry Regulatory Authority records show six instances where the firm ran afoul of regulators, and penalties of tens of thousands of dollars.

A telephone call to Manhattan attorney Liam O'Brien, who represented the two brokers, was not immediately returned. 

A representative at Garden City-based Wexler Burkhart Hirschberg & Unger, LLP said that firm no longer was involved with the case.

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