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Carlos Leston, who also goes by Jose Carlos Leston, of Maywood, made the sale in securities in a New York Lending company without disclosing that the CEO of the corporation was a friend of his who had been barred from the securities industry, Platkin said.
Leston also failed to disclose that he had a referral arrangement with the lending company and was compensated more than $1.5 million by the company, Platkin said.
On Leston’s recommendation, the elderly clients liquidated existing insurance annuities they relied on for steady incomes and used the proceeds to purchase the investments, which were neither suitable nor in their best interest, Platkin said. As a result of the full or partial surrenders of their annuity contracts, the clients incurred losses, taxes, and surrender charges that exceeded any potential benefit of purchasing the lending company securities.
Leston sold the lending company securities in unauthorized private transactions while registered as an agent/investment adviser representative for a Massachusetts-based broker-dealer.
According to Platkin, the transactions violated numerous policies and procedures in place at the broker-dealer, including those mandating that agents comply with Regulation Best Interest, a federal rule that requires broker-dealers to act in the best interest of their retail customers when making recommendations about securities transactions or investment strategies.
In revoking Leston’s registrations, the Bureau found that he engaged in dishonest or unethical business practices in the securities business by:
Violating the Bureau’s rules by failing to abide by the U.S. Securities and Exchange Commission Regulation Best Interest and by recommending his elderly clients surrender existing annuity contracts to purchase the lending company securities, transactions in which they incurred costs and Leston benefitted; and
Violating his employer broker-dealer’s policies and procedures in conduct that included:
- engaging in outside business activities that were prohibited, not disclosed, and not approved;
- being named and acting as a power of attorney on behalf of a client, acts that were prohibited, not disclosed, and not approved;
- establishing a joint checking account with a client, an act that was prohibited; and
- entering into a referral arrangement with the lending company that was neither approved nor disclosed to the broker-dealer or to the elderly clients, then advising the clients to purchase the company’s securities and receiving undisclosed compensation from the company.
The Bureau also found that Leston, who holds an insurance producer license with the New Jersey Department of Banking and Insurance, engaged in dishonest or unethical business practices in the insurance business by recommending that the elderly clients surrender and replace annuity contracts, which incurred costs that exceeded any benefit.
The Bureau’s action was handled by Deputy Bureau Chief Amy Kopleton, Supervising Investigators Rachel Glasgow and Irwin Slotnick, and Investigator Gillian Spellman of the Bureau of Securities within the Division of Consumer Affairs.
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