According to FINRA, Christopher Cacace (CRD #4308782), a broker based in Rockville Centre, New York, was named as a respondent in a FINRA complaint on August 15, 2024, alleging that he failed to reasonably supervise registered representatives while serving as his member firm's Chief Compliance Officer (CCO). These are allegations that have not been adjudicated.
The complaint charges Cacace with failing to reasonably supervise, investigate, and respond to red flags of churning, excessive trading, and unsuitable trading by registered representatives at his firm. Churning occurs when a broker engages in excessive buying and selling of securities in a customer's account primarily to generate commissions rather than to benefit the customer. According to the complaint, Cacace never restricted or limited the trading by firm representatives and failed to take any meaningful steps to prevent their trading activity, despite clear warning signs.
FINRA alleges that the representatives under Cacace's supervision had extensive regulatory histories and numerous customer complaints, which should have served as significant red flags requiring heightened oversight. The complaint further alleges that Cacace failed to reasonably supervise one representative's churning of a specific customer's account, resulting in his failure to supervise that representative's willful violation of Section 10(b) of the Securities Exchange Act and Rule 10b-5, which are among the most serious anti-fraud provisions in federal securities law.
The financial impact alleged in this case is substantial. According to the complaint, customers incurred losses totaling $709,444, while the firm and its representatives obtained $546,855 in commissions, fees, and costs. This disparity between customer losses and firm profits is a hallmark indicator of churning and excessive trading.
This case is tied to FINRA Case #2020065599103. For investors, this case illustrates the critical role that compliance officers play in protecting customers from abusive trading practices. A CCO who fails to act on red flags of misconduct effectively leaves investors without the protections that the regulatory framework is designed to provide. Supervisory failures can be just as harmful to investors as the underlying misconduct they enable.
Investors who believe they may have been subjected to churning or excessive trading should review their account statements for signs of frequent trading, high turnover ratios, and disproportionate commission charges. These allegations have not been adjudicated, and Cacace is entitled to a hearing before a FINRA disciplinary panel.
