SEC Obtains Final Judgment Against Broker Found Liable by Jury for Defrauding Customers
Litigation Release No. 24756 / March 2, 2020
Securities and Exchange Commission v. Donald J. Fowler, et al., No. 17 Civ. 00139 (S.D.N.Y. filed January 9, 2017)
The Securities and Exchange Commission obtained a final judgment on February 28, 2020 against a New York-based broker who was charged with fraud for excessively trading customer accounts using a trading scheme that resulted in hefty commissions for the broker but significant losses for his customers.
According to the SEC's complaint, filed January 9, 2017, and as proved at trial, Donald J. Fowler engaged in fraud when he deployed a trading scheme that was unsuitable for his customers in order to generate large commissions for himself. The evidence showed that Fowler failed to do any due diligence to determine whether his trading, which involved frequent buying and selling of securities, could deliver a profit for his customers. The SEC proved that Fowler engaged in unsuitable trading in all 13 customer accounts that were examined at trial, and engaged in unauthorized trading in all but one of those accounts. Fowler's conduct resulted in substantial losses for his clients, many of whom were not wealthy. The court found that all 13 customers lost money, and that the very high amount of commissions that Fowler charged his clients was responsible for much of those losses.
The final judgment against Fowler, entered on February 28, 2020 by the U.S. District Court for the Southern District of New York, enjoins Fowler from violating the antifraud provisions of 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. The final judgment further orders Fowler to pay disgorgement of $132,085.20, prejudgment interest of $35,195.04, and a civil penalty in the amount of $1,950,000.
The SEC obtained a final judgment against Fowler's partner, Gregory T. Dean, on June 10, 2019. As part of that final judgment, Dean admitted, among other things, that he knowingly or recklessly made trade recommendations to his customers with no reasonable basis, and that his conduct violated the federal securities laws.
The SEC's litigation was conducted by Kristin Pauley, David Stoelting, Jorge Tenreiro, and Thomas P. Smith, Jr. of the New York Regional Office. The investigation that led to the SEC's action was conducted by Ms. Pauley, Mr. Stoelting, Barry O'Connell, Michael P. Fioribello, Jordan Baker, Leslie Kazon, and Mr. Smith. The case has been supervised by Sanjay Wadhwa.