According to FINRA, Michael Christopher Venturino (CRD #5872439) of Dix Hills, New York, was barred from associating with any FINRA member firm and ordered to pay $171,419 in disgorgement following an Office of Hearing Officers (OHO) decision dated April 11, 2024. Importantly, Venturino has appealed this decision to FINRA's National Adjudicatory Council (NAC), and the sanctions are not in effect pending the outcome of that review. This action arises from FINRA Case #2021070337501.
Venturino is alleged to have churned six customer accounts with scienter, meaning he acted with deliberate intent or knowledge of wrongdoing. The churning was charged as a willful violation of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and FINRA Rules 2020 (use of manipulative, deceptive, or other fraudulent devices) and 2010 (standards of commercial honor). A willful violation of federal securities laws carries particularly severe consequences, including potential statutory disqualification from the industry.
The OHO found that Venturino engaged in excessive and unauthorized trading in customer accounts, generating a total of $252,256 in trading costs borne by his customers. To conceal the true extent of these trading costs, Venturino allegedly hid them through a scheme of alternating between riskless principal trades and agency trades. This technique can obscure the markups and commissions embedded in transactions, making it more difficult for customers to understand the true cost of trading in their accounts.
Churning is one of the most harmful forms of broker fraud. It occurs when a broker executes trades in a customer's account primarily to generate commissions rather than to benefit the customer. To establish churning, regulators typically examine metrics such as the turnover rate and the cost-to-equity ratio of an account. When combined with scienter, churning rises to the level of securities fraud under federal law.
Because this case is currently on appeal to the NAC, the sanctions -- including the bar and the disgorgement order -- are not yet in effect. Venturino is accused of, rather than finally found liable for, these violations until the appellate process concludes. Investors should be aware that the NAC review could affirm, modify, or reverse the OHO's findings.
Investors who traded through Venturino should carefully review their account statements for excessive trading activity and unexplained costs. FINRA BrokerCheck provides updated information on the status of pending disciplinary actions and appeals.
