Catoggio faced allegations that he failed to implement a compliance program designed to detect and report suspicious activity.
The Sonn Law Group is investigating allegations that Michael Cattogio committed misconduct. If you or a family member has suffered losses investing, we want to discuss your case. Please contact us today for a free review of your case.
Michael Nicholas Catoggio (CRD#: 2402269) was formerly the CEO of First Standard Financial, a New Jersey-based broker-dealer, who recently had its registration in the state of New Jersey revoked after the firm failed to take reasonable action to curtail misconduct. In January 2020, the broker-dealer’s compliance officer, Michael Leahy, was barred by FINRA from associating with any FINRA member firm in any capacity. This was due to “significant supervisory failures” at First Financial.
FINRA’s findings stated that First Financial had “held itself out as a legitimate financial services firm,” but the firm actually “served as a haven for greedy, dishonest agents who traded clients’ accounts like sharks in a feeding frenzy.”
FINRA also barred two representatives from First Financial, Philip Sparacino and Gabriel Block, from associating with any FINRA member firm for engaging in what FINRA called a “fraudulent course of business that consisted of excessive, unsuitable, and frequently unauthorized short-term trading in customers’ accounts that generated commissions for First Standard and its agents at its customers’ expense.”
Catoggio is the most recent First Standard executive to face regulatory action from FINRA. Without admitting or denying the findings, Catoggio consented to the sanctions and to the entry of findings that he, as the AML compliance officer of his member firm, failed to establish and implement an AML compliance program reasonably designed to detect and cause the reporting of potentially suspicious activity relating to transactions involving the deposit and liquidation of low-priced securities.
The findings stated that Catoggio’s firm had only one exception report related to low-priced securities. The exception report did not identify red flags generally associated with trading in low-priced securities, including the percentage the trading constituted of the market volume in the particular low-priced security or information identifying potentially suspicious price fluctuations. Moreover, the exception report did not capture potentially suspicious trends in customer activity over time. Catoggio did not implement any other exception reports or tools to monitor for those red flags or other red flags related to low-priced securities identified in the firm’s WSPs.
Catoggio delegated the review of the exception report to the firm’s branch managers and regional supervisor. However, he did not provide any training to his designees regarding how to use the exception report alone or in conjunction with other accounts, trading and fund transfer information to flag potentially suspicious trading activity, and did not ensure that they had any understanding of how to monitor for suspicious trading in low-priced securities.
Catoggio failed to take reasonable steps to monitor the review so that it was effective, reasonably designed, and functioning as intended. In fact, when notified that branch managers were not performing their delegated reviews of the exception report, Catoggio did not take any action in response. As a result, Catoggio and the firm failed to detect and investigate red flags that suggested potentially suspicious activity in the accounts of customers that deposited low-priced securities, liquidated those shares, and immediately withdrew the proceeds.
The findings also stated that Catoggio failed to establish and maintain a supervisory system, including WSPs, reasonably designed to achieve compliance with Section 5 of the Securities Act of 1933. Catoggio failed to ensure that the firm had any system or procedures in place to avoid becoming a participant in unregistered sales of securities, despite being aware that firm customers frequently deposited stock certificates for low-priced securities in physical and electronic form.
The firm’s WSPs, which Catoggio, as chief executive officer of the firm, was responsible for, failed to set forth any guidance as to what due diligence the firm should conduct on securities deposits, including deposits of low-priced securities, to evaluate whether securities deposited by customers were freely tradeable. Catoggio did not personally conduct a reasonable review of whether the low-priced securities deposited by the firm’s customers were freely tradeable, nor did he delegate that responsibility to any other firm employee. Indeed, contrary to the terms of its clearing agreement, the firm relied solely on its clearing firm to determine if securities deposited and sold by its customers were freely tradeable.
Based on these findings, FINRA suspended Catoggio from acting in any principal capacity for a period of at least two months and ordered him to pay a fine of $5,000. Catoggio also agreed that in order to requalify as a General Securities Principal, he must retake the Series 24 examination and receive a passing score.
Catoggio has one other disclosure on his BrokerCheck report.
June 2016 Customer Dispute
- Status: Settled
- Allegations: “Customer alleges unsuitability and over-concentration resulting in losses of $84,124 occurring over an 8-9 month period between February and November of 2015.”
- Damage Amount Requested: $93,624.00
- Settlement Amount: $54,700.00
Contact Us Today
The Sonn Law Group is currently investigating allegations that Michael Catoggio committed misconduct. We represent investors in claims against negligent brokers and brokerage firms. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.