Securities Lawyers Blog
According to records kept by The Financial Industry Regulatory Authority (FINRA) financial Broker Perry Santillo (Santillo), previously associated with Questar Capital Corporation, has at least one disclosable event. These events include one regulatory, alleging that Santillo recommended unsuitable investments in different investment products including debt securities among other allegations and complaints.
FINRA BrokerCheck shows a final customer complaint on August 28, 2024.
The Securities and Exchange Commission (‘Commission’) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted against Perry Santillo (‘Respondent’ or ‘Santillo’). In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the ‘Offer’) which the Commission has determined to accept. The commission finds that it’s complaint alleged that, from at least 2011 to 2017, Santillo participated in a fraudulent Ponzi scheme that defrauded hundreds of investors. Santillo and another individual bought or took over books of business of retiring investment professionals from around the country. Then Santillo or others persuaded these newly acquired clients to withdraw their savings from traditional investments and invest their savings in issuers controlled by Santillo or his associates. Although these issuers purported to conduct legitimate business, their operations were apparently limited or non-existent. Santillo offered and sold securities in these issuers to a number of investors and also provided investment advice to those same investors and to potential investors. Santillo told investors that their funds would be invested in the issuers, but instead, among other things, Santillo, along with others involved in the scheme, enriched himself by misappropriating investor funds. On October 2, 2019, Respondent pled guilty to one count of conspiracy to commit mail fraud in violation of Title 18 United States Code Sections 1349, one count of mail fraud in violation of Title 18 United States Code Section 1341, and one count of conspiracy to launder money in violation of Title 18 United States Code Section 1956(h) before the United States District Court for the Western District of New York, in United States v. Perry Santillo et al., 6:19-CR6135. On January 28, 2022, a judgment in the criminal case was entered against Santillo. He was sentenced to a prison term of 210 months followed by three years of supervised release and ordered to make restitution in the amount of $102,952,582.77, of which $18,683,251 was jointly and severally owed with one co-defendant, and an unidentified amount was jointly and severally owed with a second co-defendant.
Brokers are required to adhere to the SEC’s Regulation Best Interest (Reg BI) standard of care under the Securities Exchange Act of 1934 which establishes a ‘best interest’ standard for broker-dealers and associated persons. This Reg BI standard of care applies to registered representatives making recommendations to customers in the purchase, sale, or exchange of securities or the implementation of investment strategies involving securities and non-securities. The rule also applies to the handling of opening accounts such as account transfers and types of accounts being recommended to be opened. Reg BI is drawn from fiduciary principles that include an obligation to act in the retail investor’s best interest and the broker is prohibited from placing their own interests ahead of the investor’s interest.
There are several different aspects of the rule that brokers must comply with. One of which is the care obligations which requires brokers to form a reasonable belief that their investment advice and recommendations are in the retail investor’s best interest. The care obligations includes three components. First, the advisor must have an understanding of the potential risks, rewards, and costs associated with a product, investment strategy, account type, or series of transactions. Next, the advisor must have a reasonable understanding of the specific retail investor’s investment profile. The customer’s profile information generally includes an investor’s financial situation and needs; investments; assets and debts; marital status; tax status; age; investment time horizon; liquidity needs; risk tolerance; investment experience; investment objectives and financial goals; and any other information the retail investor may disclose in connection with the recommendation or advice. Using the foregoing information, the associated person then must consider reasonably available investment option to accomplish the investor’s goals as well as alternative investment options that may be cheaper or other important qualities. Finally, the advisor must conclude that there is a reasonable basis to believe that the recommendation being provided is in the investor’s best interest.
Brokerage firms and advisors must also understand the features and limitations of various account types as part of meeting Reg BI’s care obligations. Firms typically offer a variety of account options and services with different trading costs, services, such as account and activity monitoring. An advisor’s recommendation as to what type of securities account to open can alter the customers’ overall costs and investment returns. The advisor must determine that the client can benefit from the type of account being recommended to be opened and in the investor’s best interest taking into account the costs, benefits, and needs of the client.
Santillo has been in the securities industry for more than 2 years. Santillo has been registered as a Broker with Questar Capital Corporation since 2006.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.
