Fabricated Customer Statements Result in Felony Plea and Bar for Stockbroker

September 20, 2011

Charles Caputo, Jr. first became registered in the securities industry in 1996 and eventually joined Basic Investors Inc. ("Basic") in July 2000 as a General Securities Representative, until he resigned in October 2008 (thereafter joining another firm from which he resigned on May 6, 2009).

The Financial Industry Regulatory Authority's ("FINRA") Department of Enforcement alleged in a Complaint that from approximately April 2004 through May 2008, while registered with Basic, Respondent Caputo falsified account statements for two customer accounts, and that he failed to appear for an On-The-Record Interview ("OTR") during FINRA's investigation of the matter. FINRA Department of Enforcement, Complainant, V. Charles Caputo, Jr., Respondent (Complaint/2009016885101, April 29, 2011).

AB and Corp Accounts

The Complaint alleged that in April 2004, Customer AB opened at Basic a personal account ("AB Account") and a corporate account ("Corp Account") that were funded with about $150,000 (Caputo was the assigned broker).

By October 2004, the AB Account lost $130,000; and by December 2007, the AB Account's value was $218.50. There was no activity in this account in 2008 and its sole position was one stock valued at $62.70 as of June 30, 2008.

By April 2007, after 18 months of initial active trading in options, speculative tech stocks, and margin, the Corp Account's value was $0. The last trade in the Corp account was executed on March 22,2007.

Fabricated Statements

During the relevant time period when the AB and Corp Accounts were at Basic, customer AB received account statements through Basic's clearing firms, but he also received fabricated account statements provided by Caputo. Caputo's statements were typically one-page in length and listed false market, cash, and option valuations. Caputo's statements were transmitted to customer AB from a facsimile machine kept in Caputo's home and via a fax number that was from his home office.

A fraudulent account statement from Caputo for February 1 to 29, 2008 for the the AB Account disclosed a market value of $260,196.26. The Complaint asserts that the AB Account had only a "nominal balance." For that same period, Caputo's fabricated statement for the Corp Account disclosed a market value of $289,192.50; but by that time, the Complaint alleged that the Corp Account had been closed.

Relying upon the valuations on Caputo's false statements, in July 2008, customer AB requested that $120,000 be wired to him from the Corp Account. At that point, Caputo fessed up to the customer that the two accounts were virtually worthless, and he could not send the wire.


Caputo signed a waiver of Indictment and on November 9, 2009, pled guilty to a Class D felony: criminal possession of a forged instrument as set forth in a criminal Information in Suffolk County, New York, Superior Court. Caputo admitted that between on or about April 7, 2004 and July 23, 2008, with knowledge that it was forged and with intent to defraud, deceive or injure another, Caputo possessed a forged instrument, namely false account statements.


In connection with its examination concerning Caputo's conduct, on June 3,2009, FINRA sent a letter to Caputo requesting that he appear and testify on July 1, 2009 at an OTR at FINRA's Long Island District Office. Pursuant to a request by Caputo's attorney, the OTR was rescheduled for August 3,2009.

By letter dated July 19, 2009, Caputo's counsel requested an adjournment of Caputo's August 3rd OTR. Counsel explained that discussions were planned with the Suffolk County Assistant Attorney related to Caputo's criminal proceeding. Subsequently, FINRA staff and Caputo's counsel agreed to reschedule the OTR for September 9, 2009.

On or about September 2, 2009, Caputo's counsel advised FINRA that his client would not appear for an OTR because Caputo was considering pleading guilty in the criminal proceeding. On or about October 4, 2010, Caputo's attorney advised staff that he was no longer representing Caputo.

Subsequently, Caputo advised FINRA that he intended to appeal his criminal conviction, but FINRA found no proof that such an appeal was filed.  While attempting to verify Caputo's claim of an appeal, FINRA determined that Caputo was required to appear in court on April 15, 2011 in connection with an alleged violation of the terms of his probation.

On or about October 21, 2010, Caputo contacted FINRA with an update that he was in the midst of his appeal and his new attorney had advised him not to testify at the OTR.  Further, Caputo stated that his new attorney would detail Caputo's reasons for not testifying, but no such correspondence was forthcoming.

Subsequently, Caputo declined to appear for a November 19, 2010 OTR.  At that point, it appears that FINRA's patience finally wore out.

FINRA Complaint

By providing false account statements to AB with the intent to deceive him concerning the value of his accounts, the Complaint charged that Caputo violated NASD Conduct Rule 2110. For not appearing at the OTR, the Complaint charged that Caputo violated FINRA Rules 8210 and 2010.

Offer of Settlement

In response to the Complaint but without admitting or denying the allegations, Caputo submitted an Offer of Settlement, which the self regulatory organization accepted. FINRA Department of Enforcement, Complainant, V. Charles Caputo, Jr., Respondent (Offer of Settlement/2009016885101, July 27, 2011). FINRA imposed a Bar from association with any FINRA member firm upon Caputo.