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Cape Securities Alert

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Cape Securities was founded in 1976 and markets itself basted on a tradition of integrity and service, with each member of the team dedicated to assisting the customer. Cape Securities “seeks to exceed your expectations.”

Cape Securities is a stockbrokerage firm with its main office is located at 1600 Pennsylvania Ave., McDonough, Georgia 30253. Cape Securities is registered with the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) the stockbrokerage self-regulator. Cape Securities took over Seacoast Investor Services Inc. in 2011.

Cape Securities and their brokers have some history of FINRA violations and customer complaints. In particular, on August 8, 2013 Cape Fear Securities broker, Paul Elvidge Jr. was indicted for 36 counts of wire fraud and six counts of aggravated identity theft. The indictment stemmed from an investor complaint filed against Paul Elvidge Jr. back in 2012. Cape Securities broker, Paul Elvidge Jr. was permanently barred from the securities industry in January 2013 and ordered to pay $620,177 in restitution.

Cape Securities has drawn a regulatory action against itself and its Chief Compliance Officer, Michael A. Lovett. To settle these allegations, Lovett was suspended for six months and paid a $5,000 fine. Cape Securities was fined $125,000. FINRA alleged that Cape Securities and Lovett failed to adequately supervise Elvidge and these wire transfers during 2012. FINRA further alleged that some of the funds were actually wired into Elvidge’s operating account. Cape Securities was also alleged to have failed to supervise accounts that were actively traded between October 2011 to February 2013. Some of the accounts had turnover ratios ranging between 7 to 19, with cost-equity ratios of 11% to 63%.

One of the most common ways to determine whether the account was excessively traded or churned is to determine the annual turnover ratio. This ratio shows how often the securities in the account are bought or sold within a year. SEC and other regulatory cases have held that an annual turnover of 4 or more is a “presumption” of churning, and an annual turnover of 6 or more is a “conclusion” of churning. Thus, if the accounts had turnovers of 7 to 19, then there would be a conclusion that there was churning or excessive trading.

A second way to consider whether there was excessive trading is the cost equity ratio. This ratio takes the commissions generated by the trading, divided by the average value of the account. This ratio essentially determines the returns that an account needs to make just to break even.

Thus, an account with a cost-equity ratio of 63% would need to earn 63% just to break even from all the costs of trading.

Paul Elvidge was a financial advisor and registered representative of Cape Securities from August 2011 to October 2012. He worked at a branch office in Port St. Lucie, Florida.

On September 20, 2013 Cape Securities broker, Michael A. Lovett entered into a letter of Acceptance, Waiver and Consent (AWC) for failing to provide a timely response to an SEC request for information. Michael A. Lovett was fined $4,000. However, this is not the first time Michael A. Lovett had entered into these AWC’s. In 2007, Mr. Lovett signed another AWC for failing to establish appropriate supervisory procedures over the firm’s stockbroker. At that time, Michael A. Lovett was a registered broker at Pacific West Securities, which is no longer licensed with FINRA.

On April 4, 2011 Cape Securities broker, Gaynell A. Palmisano received an investor complaint alleging Gaynell A. Palmisano recommended his customer switch mutual funds. The switch, however, proved only beneficial to Gaynell A. Palmisano, as it nearly tripled the annual fees and caused the investor to lose money. Gaynell A. Palmisano also received more fees as a result of this switch. That claim settled before arbitration for almost $25,000.

If you have a concern or complaint with Cape Securities, you should contact StockBrokerLawyer.com for a free, no-cost, review and evaluation of whether your investments losses at Cape Securities can be recovered.


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