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NEWARK
– Attorney General Paula T. Dow, through
the New Jersey Bureau of Securities, has
assessed a $75,000 civil penalty against
a broker-dealer for failure to reasonably
supervise its agents and for failure to
maintain required books and records.
The
penalty was assessed against The Investment
Center Inc., a broker-dealer based in Bedminster,
in connection with its failure to reasonably
supervise Dominic Vricella, the former manager
of its Marlton branch office; and an agent
in the office, Anthony Faiola. Vricella
and Faiola also were undisclosed principals
of North Shore Investment Group, LLC. Ten
investors sustained losses after investing
a combined $1.6 million in North Shore through
Vricella and Faiola. Those investors included
five clients of the Marlton branch office
of Investment Center Inc., who invested
in North Shore without knowing that Vricella
and Faiola were principals.
In
its investigation, the Bureau of Securities
found that The Investment Center Inc. had
on at least three occasions, from 2002 through
2004, conducted audits of the Marlton branch
which uncovered deficiencies and violations
of Investment Center Inc.'s supervisory
rules and procedures, including unapproved
sales materials and business cards containing
unapproved email addresses. The New Jersey
Uniform Securities Law requires a broker-dealer
to reasonably supervise its agents to ensure
compliance with its own rules and procedures,
and these deficiencies should have raised
red flags and prompted a more thorough audit
and examination of the Marlton branch office
computers.
Despite
admonishing the brokers, The Investment
Center Inc. never examined the Marlton office
computers for additional evidence of outside
activity, and never instituted any procedures
for the inspection of such electronic devices.
Furthermore, The Investment Center Inc.
permitted Vricella to operate the Marlton
branch office until December 2006 while
it investigated the matter.
“If
investors had known that Vricella and Faiola
stood to personally profit by steering their
hard-earned money to an investment company
they secretly controlled, they may have
reconsidered,” Attorney General Dow
said. “But investors were never given
this opportunity because The Investment
Center Inc. failed to properly supervise
its employees in the Marlton branch office.”
The Bureau of Securities previously took
disciplinary actions against both Vricella
and Faiola. The Bureau revoked Vricella’s
agent registration and assessed a $100,000
civil penalty against him, with $85,000
of the total suspended. The Bureau barred
Faiola from the state’s securities
industry and assessed a $150,000 civil penalty
against him, with $120,000 of the total
suspended. In a separate criminal prosecution,
Faiola pleaded guilty to committing securities
fraud. He also paid $125,000 in restitution
in a civil lawsuit.
The Bureau’s investigation also found
that The Investment Center Inc. closed four
of its branch offices between May 2005 and
May 2007 but failed to secure investor records
from those branches before they were shut
down.
“We
want to make it perfectly clear that investment
firm oversight that does not include reasonable
surveillance of everyday technologies such
as computer drives and email is inadequate,”
said Marc B. Minor, Chief of the N.J. Bureau
of Securities. “Storing records and
communications electronically is such a
fundamental tool of the modern office that
failing to include it as a central part
of compliance reviews is really not meaningful
branch examination.”
The
Investment Center Inc. cooperated with Bureau
investigators and has updated its policies
and procedures to comply with requirements
under New Jersey’s Uniform Securities
Law and related regulations. The company
entered into a Consent Order to settle this
case, which is posted with this release
at www.njpublicsafety.com.
“Full
and complete disclosure is vital to investors.
Withholding key information from investors
adds unnecessary risk to today’s already
uncertain investment environment, and our
Bureau of Securities will continue to vigorously
pursue those who attempt to deceive New
Jersey’s investors,” said Thomas
R. Calcagni, Acting Director of the N.J.
Division of Consumer Affairs.
The
investigation was handled by Deputy Bureau
Chief Amy Kopleton, Enforcement Chief Rudolph
Bassman, Supervising Investigator Michael
McElgunn, and Investigator Isaac Reyes.
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