This post is part of a series of investigative blog posts that spotlight modern-day boiler rooms that operate under the guise of a reputable brokerage firm. Many of the broker-dealers featured in this series still use boiler room tactics such as cold-calling customers and high-pressure or aggressive sales tactics. Other brokerage firms have a propensity for broker misconduct, such as excessive trading, churning, unauthorized trades, and misrepresentation. Iorio Altamirano LLP is a securities arbitration law firm based in New York City. We represent investors nationwide who have suffered investment losses due to wrongful conduct by financial advisors and brokerage firms. We are investor advocates.
Other Investigative Blog Posts:
- In 2017, in collaboration with Columbia Law School, Reuters analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. In 2021, our firm set out to update that analysis.
- Worden Capital Management was 25th on the Reuters list – and in the country – with forth-three percent (43%) of its brokers having at least one of the most serious red flags on their public disclosure.
- In 2021, nearly fifty-four percent (54%) of registered representatives at Worden Capital Management, which includes brokers and supervisors, have significant red flag disclosures on their BrokerCheck Significant red flag disclosures include regulatory sanctions, terminations of employment after allegations of misconduct, customer disputes that result in an award or settlement, and prior association with a firm that FINRA has expelled.
- Eighteen percent (18%) of Worden Capital Management’s brokers and supervisors have been accused of excessive trading, churning, or unauthorized trading.
- Worden Capital Management is currently the subject of over 30 pending customer complaints.
- All four (100%) current executives have significant red flag disclosures on their BrokerCheck reports; half (50%) of the firm’s executives have been the subject of regulatory sanctions.
BACKGROUND: WORDEN CAPITAL MANAGEMENT LLC (CRD#: 148366 / SEC#: 8-68010)
Worden Capital Management LLC (“Worden Capital Management) has been registered with the Securities and Exchange Commission (“SEC”) and a Financial Industry Regulatory Authority (“FINRA”) member since 2009.
The firm has approximately 39 registered individuals, five branch offices, and is headquartered in Garden City, New York. The branch offices are believed to be in Garden City, NY, New York, NY, Mequon, WI, Wilmington, NC, and Lindenhurst, NY.
According to its website, Worden Capital Management is an investment advising firm that provides retirement planning to individuals. Worden Capital Management also advertises that it offers numerous of products and services to retail clients, including wealth management, estate planning, taxes, and insurance.
WORDEN CAPITAL MANAGEMENT: DISCIPLINARY HISTORY
On December 21, 2020, the Financial Industry Regulatory Authority (“FINRA”), Worden Capital Management, and CEO and majority owner Jaime Worden entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) after FINRA alleged that between January 2015 and October 2019, Worden Capital Management and its owner and CEO, Jaime Worden, violated FINRA rules. Specifically, FINRA alleged that Worden Capital Management and Mr. Worden:
- Worden Capital Management recommended active short-term trading to retail customers with speculative investment objectives. Many Worden Capital Management representatives also recommended that customers use margin to increase their buying power.
- Failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to excessive trading.
- As a result, Worden Capital Management registered representatives made unsuitable recommendations and excessively traded customer accounts, causing customers to incur more than $1.2 million in commissions.
As part of the AWC, Worden Capital Management was ordered to pay approximately $1.2 million in restitution to customers whose accounts were excessively traded by the firm’s representatives. The firm was also ordered to pay a $350,000 fine for supervisory and other violations and agreed to retain an independent consultant to review relevant portions of its supervisory systems and procedures. Mr. Worden received a $15,000 fine, a 15 business-day suspension in all capacities, and a three-month suspension in all supervisory capacities.
According to the AWC, as part of its investigation, FINRA found numerous instances of excessive trading, including:
- Six hundred thirty-five (635) trades in a customer’s account between May 2015 and September 2017. The account had an annualized cost-to-equity ratio of nearly 84% and an annualized turnover rate of more than 92. The customer incurred realized losses of over $1 million, which included $285,169 in commissions.
- Eighty-three (83) trades in a customer’s account between December 2016 and October 2018. The account had an annualized cost-to-equity ratio of nearly 135% and an annualized turnover rate of more than 29. The customer incurred realized losses of $36,838, which included $45,082 in commissions.
Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.
There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. FINRA’s examination found accounts with turnover ratios of 25, 29, 36, and 92.
The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. The accounts examined by FINRA had cost-to-equity ratios of 81%, 84%, 103%, and 135%.
Click on the following link to read more about Worden Capital Management’s AWC and Iorio Altamirano LLP’s investigation: Investor Alert: Iorio Altamirano LLP Investigates Worden Capital Management LLC Over Excessive Trading
WORDEN CAPITAL MANAGEMENT: A HIGH CONCENTRATION OF BROKERS WITH RED FLAGS
The term “boiler room” often refers to an outbound call center that sells questionable investments through unfair, dishonest, and high-pressure sales tactics.
Historically, Long Island, New York, has been a haven for boiler-room brokerage firms. This notoriety has inspired blockbuster movies such as “Boiler Room” and “The Wolf of Wall Street.” The Wolf of Wall Street was based on the true story of broker Jordan Belfort and his firm, Stratton Oakmont. Jordan Belfort pleaded guilty to securities fraud and money laundering in 1999.
Many broker-dealers still use boiler room tactics such as cold-calling customers and high-pressure or aggressive sales tactics. Other modern-day boiler room brokerage firms have a propensity for broker misconduct, such as excessive trading, churning, and unauthorized trades.
In 2017, Reuters investigated and exposed 48 brokerage firms that tended to employ brokers with histories of misconduct sanctions, legal disputes, and financial distress. Each of the 48 firms had more than 30 percent of its brokers with at least one significant red flag on their records.
FINRA requires brokers to publicly disclose 23 different incidents that the regulator believes could cause concern to investors. The Reuters analysis only examined the 12 most serious incidents among the 23 that FINRA requires brokers to disclose, which included: (i) customer disputes regarding an investment-related complaint that resulted in a settlement or award/judgment; (ii) a final, formal proceeding initiated by a regulatory authority for a violation of investment-related rules or regulations; (iii) financial liens; (iv) criminal charges that resulted in a conviction or plea arrangement; and (v) employee separation after allegations. At the time, the 48 firms oversaw about 4,600 brokers and billions in investor funds.
In 2017, Worden Capital Management was 25th on the list, and in the country, with 43% of its brokers having at least one of the most serious red flags on their public disclosure. At the time, that compared to 9% of brokers industry-wide who had at least one significant red flag on their record. Reuters sought comment from Worden Capital Management was before publishing its 2017 findings, and the firm’s CEO provided the following comment: “It is impossible to draw accurate conclusions from FINRA-mandated disclosures about incidents in a broker’s past.” Mr. Worden added that such disclosures “only represent a sliver of the information surrounding any circumstance” and that his firm” rigorously vets” prospective brokers.”
In May 2021, Iorio Altamirano LLP set out to update the Reuters 2017 analysis. We found that 46% of Worden Capital Management’s registered representatives had at least one of the most serious red flags on their public disclosure reports, a slight increase from 2017.
Although the Reuters’ analysis was comprehensive, it did not consider brokers’ past associations with firms that FINRA had expelled as one of its significant red flags. That was an oversight. A review of regulatory sanctions and registration histories of the firms and their brokers suggests the same players are involved from ownership to management to brokers. In short, brokers and supervisors with significant disciplinary histories get shuffled around from one “boiler room” broker-dealer to another, taking their questionable sales and supervisory practices with them.
At Worden Capital Management, over 15% of its brokers had at some point in their careers worked at a firm that was later expelled by FINRA.
When you include this disclosure to the other 12 red flags used by Reuters in its 2017 analysis, nearly 54% of brokers at Worden Capital Management have significant red flag disclosures on their BrokerCheck reports. That is, 54% of Worden Capital Management’s registered representatives, which includes its salesforce and management, have a history that includes at least one of the following:
- Customer disputes that resulted in settlements or judgments.
- Regulatory sanctions.
- Civil judgments.
- Personal bankruptcies.
- Employment terminations after allegations of misconduct.
- Prior association with a firm that FINRA has expelled.
Iorio Altamirano LLP’s investigation also revealed the following:
- Worden Capital Management is the subject of over 30 customer complaints that are currently pending resolution.
- Thirty-three percent (33%) of Worden Capital Management’s brokers have a history of at least one customer dispute that has resulted in a monetary settlement, arbitration award, or civil judgment. A customer dispute is defined as a customer-initiated, investment-related complaint, arbitration proceeding, or civil suit containing allegations of sale practice violations against the broker.
- Thirteen percent (13%) of Worden Capital Management’s brokers have regulatory sanctions on their public disclosures. A regulatory sanction is defined as a final, formal proceeding initiated by a regulatory authority to violate investment-related rules or regulations.
In addition, eighteen percent (18%) of brokers have been accused of excessive trading, churning, or unauthorized trading. Specific customer complaints and allegations can be found below.
Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.
Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.
Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.
Excessive trading, churning, and unauthorized trading are unethical and illegal practices. They are all also violations of securities rules and regulations and can cause enormous harm to customers.
WORDEN CAPITAL MANAGEMENT: DISCLOSURES BY BROKER
Worden Capital Management has approximately 39 registered individuals, five branch offices, and is headquartered in Garden City, New York. The branch offices are believed to be in Garden City, NY, New York, NY, Mequon, WI, Wilmington, NC, and Lindenhurst, NY.
Below is a summary of significant disclosures by Worden Capital Management’s current workforce. FINRA’s BrokerCheck tool can be used to obtain complete and updated disclosure reports.
|Name||CRD No.||Office||Customer Dispute (Settled or Award)||Customer Dispute (Pending)||Financial||Judgment / Lien||Regulatory||Employment Separation After Allegations||Criminal||Association with Expelled Firm(s)|
|Burton Bartlett II||1038728||Mequon, WI||1||1|
|Gregory Bodkin||3008389||Garden City, NY||1||3||2|
|Richard Borgner||1104666||Garden City, NY||4||1||3|
|Miguel Cabarcas||5771333||New York, NY||1||1|
|Jason Collichio||4727199||Garden City, NY||1|
|Philip Connors||5274094||40 Wall Street||2||1|
|Gary Cuccia||1386493||New York, NY||1|
|Daniel Drahos||5834650||Garden City, NY||2|
|Matt Gates||4727945||New York, NY||2||1|
|Jason Goldberg||2647054||Lindenhurst, NY||3|
|Craig Herman||5753804||New York, NY||2|
|Mark Kolta||5324620||Garden City, NY||9||14||1|
|David Murry||1870050||New York, NY||2||2||3|
|Bob Nolie||4184016||Lindenhurst, NY||2||1||1|
|Brandon Pflaum||5762933||New York, NY||1|
|Cesar Pozo||5802115||New York, NY||1||1|
|Robert Rotunno||4025263||New York, NY||1||1|
|James Welch||2633094||Garden City, NY||1|
|Kevin Wilson||3262701||New York, NY||3||7|
|Jamie Worden||4637404||Garden City, NY||3||3||1|
|Robert Yasnis||2399141||New York, NY||1||1||3|
WORDEN CAPITAL MANAGEMENT – MANAGEMENT AND OWNERSHIP
The troubled history of Worden Capital Management’s workforce is a reflection of the firms’ management and ownership. All four of the firm’s top executives have significant red-flag disclosures, and two of the top four executives have been the subject of regulatory sanctions.
The Chief Executive Officer (CEO) and majority owner, Jamie John Worden, has 18 years of experience in the securities industry and has been associated with eight firms, including two firms that have been expelled by FINRA. As discussed above, in December 2020, for his role in the firm’s failure to supervise brokers excessively trading their clients’ accounts, Mr. Worden received a $15,000 fine, a 15 business-day suspension in all capacities, and a three-month suspension in all supervisory capacities. He has also been the subject of at least six customer disputes alleging a failure to supervise, three of which have settled for monetary compensation, and three of which are currently pending.
The interim CEO and Chief Compliance Officer (CCO), Gregory Patrick Bodkin, has nine years of experience in the securities industry and has been associated with three different firms. He has also been the subject of at least four customer disputes alleging a failure to supervise, one of which has settled for monetary compensation. The other three customer disputes are pending resolution.
The Chief Operating Officer (COO), Richard Reiss Borgner, has 37 years of experience in the securities industry and has been associated with 14 different firms, including three firms that have been expelled by FINRA. In 2013, Mr. Borgner consented to sanctions, including a 10-day suspension and $5,000 fine, after FINRA alleged that Mr. Borgner, who was in a supervisory capacity, failed to ensure accurate and timely reporting of customer complaints to FINRA. He has also been the subject of at least four customer disputes alleging a failure to supervise, three of which have settled for monetary compensation. The other customer disputes concluded with a $100,000 arbitration award for the complaining customer.
The Financial and Operational Principal (FinOp), Gary John Cuccia, has 26 years of experience in the securities industry and has been associated with 20 different firms, including one firm that has been expelled by FINRA.
HOW TO RECOVER FINANCIAL LOSSES OR OBTAIN A FREE CONSULTATION
When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a lawsuit, in the form of a securities arbitration claim, against their financial advisor and/or broker-dealer in an effort to be compensated. The case will be presented and defended in a FINRA arbitration proceeding to a panel of arbitrators.
Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who understands the FINRA forum and can navigate the arbitration process to effectively advocate on their behalf.
Iorio Altamirano LLP is a securities arbitration law firm located in the heart of New York City. Iorio Altamirano LLP represents investors nationwide who have suffered investment losses due to securities fraud. Iorio Altamirano LLP generally represents investors through a contingency fee arrangement, which means that if we do not obtain a recovery, we do not collect a fee.
We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1000 cases.
If you or a loved one were a customer of Worden Capital Management and either sustained financial losses or suspect inappropriate activity in your investment or retirement accounts, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at firstname.lastname@example.org or toll-free at (855) 430-4010 for a free and confidential evaluation of your account and a review of your legal rights.
**Corrections and Clarifications: July 7, 2021**
- An earlier version of this blog post indicated that Robert Rotunno had 11 customer disputes that resulted in a settlement or judgment disclosed on his BrokerCheck report. Iorio Altamirano LLP’s statement was accurate at the time of publication and was based on publicly available information. On June 17, 2021, a FINRA arbitrator recommended that 10 of the 11 customer disputes be expunged from Mr. Rotunno’s BrokerCheck Report. Although the disclosures remain on Mr. Rotunno’s BrokerCheck report until Mr. Rotunno receives a court order to execute the expungement directive, Iorio Altamirano LLP has updated this blog post to reflect that Mr. Rotunno only has one remaining customer dispute disclosure on his public disclosure report.