Bedminster-Based Investment Company
Assessed $75,000 Penalty For Violations
at South Jersey Branch Office
NEWARK – Attorney General Paula T. Dow, through the New Jersey Bureau of Securities, has assessed a $75,000 civil penalty against a broker-dealer for failure to reasonably supervise its agents and for failure to maintain required books and records.
The penalty was assessed against The Investment Center Inc., a broker-dealer based in Bedminster, in connection with its failure to reasonably supervise Dominic Vricella, the former manager of its Marlton branch office; and an agent in the office, Anthony Faiola. Vricella and Faiola also were undisclosed principals of North Shore Investment Group, LLC. Ten investors sustained losses after investing a combined $1.6 million in North Shore through Vricella and Faiola. Those investors included five clients of the Marlton branch office of Investment Center Inc., who invested in North Shore without knowing that Vricella and Faiola were principals.
In its investigation, the Bureau of Securities found that The Investment Center Inc. had on at least three occasions, from 2002 through 2004, conducted audits of the Marlton branch which uncovered deficiencies and violations of Investment Center Inc.'s supervisory rules and procedures, including unapproved sales materials and business cards containing unapproved email addresses. The New Jersey Uniform Securities Law requires a broker-dealer to reasonably supervise its agents to ensure compliance with its own rules and procedures, and these deficiencies should have raised red flags and prompted a more thorough audit and examination of the Marlton branch office computers.
Despite admonishing the brokers, The Investment Center Inc. never examined the Marlton office computers for additional evidence of outside activity, and never instituted any procedures for the inspection of such electronic devices. Furthermore, The Investment Center Inc. permitted Vricella to operate the Marlton branch office until December 2006 while it investigated the matter.
"If investors had known that Vricella and Faiola stood to personally profit by steering their hard-earned money to an investment company they secretly controlled, they may have reconsidered," Attorney General Dow said. "But investors were never given this opportunity because The Investment Center Inc. failed to properly supervise its employees in the Marlton branch office."
The Bureau of Securities previously took disciplinary actions against both Vricella and Faiola. The Bureau revoked Vricella's agent registration and assessed a $100,000 civil penalty against him, with $85,000 of the total suspended. The Bureau barred Faiola from the state's securities industry and assessed a $150,000 civil penalty against him, with $120,000 of the total suspended. In a separate criminal prosecution, Faiola pleaded guilty to committing securities fraud. He also paid $125,000 in restitution in a civil lawsuit.
The Bureau's investigation also found that The Investment Center Inc. closed four of its branch offices between May 2005 and May 2007 but failed to secure investor records from those branches before they were shut down.
"We want to make it perfectly clear that investment firm oversight that does not include reasonable surveillance of everyday technologies such as computer drives and email is inadequate," said Marc B. Minor, Chief of the N.J. Bureau of Securities. "Storing records and communications electronically is such a fundamental tool of the modern office that failing to include it as a central part of compliance reviews is really not meaningful branch examination."
The Investment Center Inc. cooperated with Bureau investigators and has updated its policies and procedures to comply with requirements under New Jersey's Uniform Securities Law and related regulations. The company entered into a Consent Order to settle this case, which is posted with this release at www.njpublicsafety.com.
"Full and complete disclosure is vital to investors. Withholding key information from investors adds unnecessary risk to today's already uncertain investment environment, and our Bureau of Securities will continue to vigorously pursue those who attempt to deceive New Jersey's investors," said Thomas R. Calcagni, Acting Director of the N.J. Division of Consumer Affairs.
The investigation was handled by Deputy Bureau Chief Amy Kopleton, Enforcement Chief Rudolph Bassman, Supervising Investigator Michael McElgunn, and Investigator Isaac Reyes.
View Consent Order [pdf]