Former Broker Ordered to Pay Disgorgement and Penalties

Litigation Release No. 24460 / April 25, 2019

Securities and Exchange Commission v. Zachary S. Berkey, et al., Civil Action No. 17-cv-9552 (GHW) (GWG) (S.D.N.Y., filed December 6, 2017)

On April 18, 2019, the United States District Court for the Southern District of New York, ordered a former broker, Zachary S. Berkey, to pay $106,000 in disgorgement, plus prejudgment interest, and $71,000 in civil penalties.

The SEC charged Berkey on December 6, 2017, alleging that, while a broker at Four Points Capital Partners LLC, Berkey conducted in-and-out trading that was almost certain to lose money for customers while yielding commissions for himself. According to the complaint, Berkey's customers incurred significant costs with every transaction and the securities were held briefly; thus, the price of the securities had to rise significantly for customers to realize even a minimal profit. The complaint also alleged that Berkey churned customer accounts and concealed material information from his customers, namely that the costs associated with their recommendations, including commissions and fees, would almost certainly exceed any potential gains on the trades.

The SEC's complaint charged Berkey with violating the antifraud provisions, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and sought permanent injunctions, disgorgement plus prejudgment interest and civil monetary penalties. Previously, without admitting or denying the SEC's allegations, Berkey had consented to a judgment permanently enjoining him from future violations of the antifraud provisions.