The Securities and Exchange Commission has barred a broker from the industry for his role in a scheme to defraud retail investors of millions, the agency claims.
Emil Botvinnik was originally charged in September 2018 for churning clients’ funds in order to boost profits at the expense of clients. Coral Gables, Fla.-based Botvinnik was a registered representative at the New York-based firm Meyers Associates, which was later renamed Windsor Street Capital, and was charged in tandem with Jovannie Aquino, another rep at the firm accused of similar actions.
The alleged churning occurred over a period of more than two years, from June 2012 to November 2014, according to the commission's 2018 complaint. The SEC argued that Botvinnik solicited five unnamed customers to open accounts, and subsequently recommended they make short-term investments involving frequent purchases and sales of securities.
Botvinnik charged the five customers commissions or other types of fees on each trade, causing clients’ funds to diminish with each transaction, including both losing and profitable trades, according to the SEC. The broker tended to recommend clients hold securities for an average of 6.7 days before selling them. He also had a deal with his firm to get 90% of the commissions that were generated by it, the SEC says. Botvinnik could not immediately be reached for comment.
But these types of recommendations could only be profitable if the price of the security went up during the short time clients held the security in their account. In total, the five unnamed clients paid about $5.1 million in “commissions, mark-ups, mark-downs, and other trading costs” in the time their accounts were open. The SEC believed Botvinnik’s actions left the clients with $2.7 million in total losses and $3.7 million in gains for himself. Some clients individually lost hundreds of thousands of dollars alone, according to the commission.
Further, Botvinnik told clients his trading strategy would result in profits, while the SEC claims his strategy was “highly unlikely” to do so for any investor.
“Botvinnik knew or was reckless in not knowing that generating even a minimal profit from his trading strategy depended on price increases of the stocks greater than the commissions, markups, markdowns and other fees that he was charging the customers,” the complaint read.
Aquino was previously barred by the SEC in 2019, and Windsor Street Capital was also eventually barred from the industry by FINRA, according to the firm’s BrokerCheck report. In addition to the bar, Botvinnik is ordered to pay $160,000 in civil penalties, disgorgement of more than $1.1 million and more $208,000 in pre-judgment interest.
