John Sykes' brokerage, JHS Capital Advisors, penalized for actions of a 'legacy' broker
Even business pros like John Sykes, shown here in Tampa where he keeps his jet, can run into customer complaints that get industry regulators involved. (Photo: Stephen J. Coddington, Tampa Bay Times.)
Wake up and good morning. It's not a big deal in the scheme of investment services but it highlights the challenge anyone -- including wealthy Tampa business pro and philanthropist John Sykes -- will encounter when knitting together a new brokerage firm from the parts of others.
Sykes-owned JHS Capital Advisors and a former broker were penalized $1.9 million last week in a Finra (Financial Industry Regulatory Authority) award stemming from allegations the broker churned -- traded excessively to generate extra commissions -- a client's account. Here's a Wall Street Journal story.
"This is the most egregious case of churning I've ever seen," attorney Timothy Feil of the New York City area law firm of Finkelstein & Feil, representing John Sisk against JHS, told the publication Investment News here. Really? Churning is, unfortunately, a fairly common act by brokers. In this case, broker Enver R. Alijaj, who was named in the award, also had to pay $500,000 to settle a previous charge of churning.
The Wall Street Journal does point out a troubling detail. JHS and its predecessor company allowed Alijaj to charge client Sisk 5 percent on the purchase of securities. The industry's going rate is close to 2 percent.
This posting is less about the Finra award and more about Sykes' efforts to build JHS Capital into a player in the competitive broker-dealer business, in part by stressing a superior standard of conduct demanded by its brokers. Click on the JHS web site and look at its lengthy code of ethics.
Sykes, as most readers know, founded Tampa call center company Sykes Enterprises which is now run by his son Chuck. Rather than retire, the elder Sykes tried to buy and make a go of Tampa broker-dealer GunnAllen Holdings several years ago. The firm's problems of the past were too much, so Sykes resigned from the GunnAllen board and bought Pointe Capital, from which he reorganized and branded it as JHS Capital. GunnAllen was taken over by regulators in 2010, as this Tampa Bay Times story reports.
Here's a telling item in the Investment News report: "The ($1.9 million) award is about five times the net capital JHS Capital held at the end of last year," it states, citing SEC regulatory filings. The same filing says JHS Capital Advisors reported a net loss of $6.6 million in 2011.
JHS spokeswoman Eileen Canady told Investment News: "We are extremely disappointed in this panel's award related to this legacy" -- meaning JHS inherited this broker-client problem -- "acquisition item." Alijaj, the broker, worked for Pointe Capital in 2007 and 2008 and left JHS in 2010 to work at Legend Securities, the publication says.
Canady said JHS is looking at its options. JHS may still have some winnowing ahead of "legacy" problems from cobbling together existing firms.
-- Robert Trigaux, business columnist, Tampa Bay Times