The Investor’s Watchdog

The Investor's Watchdog

FINRA Complaint Alleges Salt Lake City Broker-Dealer Alpine Securities Corporation Scams Millions from Customers in the Face of Multi-Million Dollar Fine for SEC Violations

Wednesday, August 14, 2019

Alpine Securities Corporation (Alpine), a broker-dealer based in Salt Lake City, Utah, was recently named respondent in a Complaint brought forth by the Financial Industry Regulatory Authority (FINRA) Office of Hearing Officers for allegedly converting and misusing customers’ securities, including implementing a series of exorbitant and arbitrary fees.

Alpine has been a FINRA member firm since May 1984 as a self-clearing broker-dealer that carries accounts for retail customers, who primarily hold over-the-counter stocks, and provides clearing services for introducing broker-dealers. John Hurry, who owns Scottsdale Capital Advisors Corp., a retail and institutional broker-dealer in Scottsdale, Arizona, acquired Alpine in 2011. In July 2018, Hurry was barred from associating with FINRA member firms in any capacity following its finding that he had created a broker-dealer overseas to evade federal securities laws in the Scottsdale office.

In December 2018, the court granted an SEC motion for summary judgment, concluding that Alpine had failed to file thousands of suspicious activity reports (SARs) and had filed thousands of other SARs with deficient information. The SEC filed a Motion for Remedies requesting that the court impose a $22 million fine against Alpine.

Now, FINRA alleges that, with the prospect of this multi-million dollar SEC fine and in the face of mounting financial struggles, Alpine instituted a $5,000 monthly account fee, which represented an increase of approximately 60,000% from the firm’s prior $100 annual account fee. Alpine then used these fees to convert customer funds. Alpine also pressured its customers into re-certificating their shares, applying a 100% or 200% markup to the DTC certificate withdrawal fee, and charged them an “illiquidity and volatility fee” through which the firm collected at least $1 million. To satisfy the significant debits the customers’ incurred in their accounts, Alpine told them that it would liquidate their securities or transfer them to proprietary Alpine accounts. In June 2019 alone, Alpine transferred over $950,000 in customer securities to these proprietary accounts.

FINRA further alleges that in early 2019, Alpine deemed any customer securities valued at $1,500 or less to be “worthless,” which it claimed entitled the securities to be purchase by Alpine for one penny per position. According to the Complaint, Alpine purchased or moved nearly $910,000 of these “worthless” customer securities, thus converting millions of shares of securities from its customers for its own benefit and only informed the customers of this activity after the fact. Alpine allegedly backdated a letter to customers and mailed it to the customers a full ten days after taking their securities without their knowledge or authorization. When customers received the letter, many attempted to contact the firm, but Alpine had closed its office, limited access to customers’ accounts on its web portal, and only provided a generic email address for customer contact, though Alpine was largely unresponsive to the customers’ questions.

FINRA also alleges in the Complaint that Alpine has been looting the firm since early 2019. Specifically, Alpine effected six capital withdrawals totaling approximately $2.8 million by claiming to make expense payments to affiliates. First, Alpine amended its pre-existing loan agreement with its affiliate lender, Alpine Securities Holding Corporation (Alpine Holding), to dramatically increase its payments for its line of credit. Then Alpine paid its affiliated landlord, SCAP 9 LLC (SCAP) over $600,000 in response to SCAP’s purported request for payment of “common area maintenance” charges, in addition to the monthly rent and insurance coverage.

Based on the foregoing, Alpine violated FINRA Rule 2150 for converting customer funds, FINRA Rule 2150 for misusing customer assets, FINRA Rule 2010 for unauthorized trading, FINRA Rule 2121 for implementing unfair prices and commissions, FINRA Rule 2122 for unreasonable and discriminatory fees, and FINRA Rule 4110(c) for unauthorized capital withdrawals.

FINRA Department of Enforcement is requesting that the Panel make findings of fact and conclusions that Alpine committed these violations and order the firm to disgorge ill-gotten gains and/or make full restitution, with interest.

Unfortunately, it’s unlikely that investors will recover much, if anything, from Alpine Securities Corporation. However, if you invested through Alpine and lost money, you may have options. Call our team at 1-877-410-8172 to speak directly to an attorney for a free, no obligation consultation.

Author: Jason T. Albin

Jason Albin is an Attorney and Partner at ChapmanAlbin, the investor rights law firm. He has represented hundreds of investors who have lost money due to broker misconduct, unsuitable investment advice and fraud.​ Jason also represents individuals in “whistleblower” suits filed against unscrupulous companies that try to defraud the US federal and state governments.

Leave a Reply

Your email address will not be published. Required fields are marked *