Gary Costello


September 15, 2023

Type of alert:

Unauthorized Trading  

Gary Costello—former Oppenheimer & Co. registered representative—allegedly traded “penny stocks” and other highly speculative investments with his clients’ funds. These investments included shares in BioNano Genomics, a startup genetic testing company, and Lytus Technologies, an IT company trading at $0.29 per share. Costello—who since leaving Oppenheimer registered with Truist Investment Services and Aegis Capital—allegedly executed many of these trades without his clients’ permission.

“Penny stocks” are highly speculative investments in small companies whose shares are traded at relatively low prices. Generally, penny stocks:

  • Are priced under $5 per share and a typical penny stock is less than $1;
  • Are not traded on the major exchanges, but on Pink Sheets or the OTC Bulletin Board; and
  • Generate high commissions and fees for brokers and brokerage firms compared to the price of the stock.

Since trading penny stocks is extremely risky, they are generally unsuitable investments for any customer without a high-risk profile. Brokers and their registered representatives are prohibited from selling penny stocks without fully disclosing the risks. Penny stocks have often been used to perpetrate various scams.

Costello allegedly exposed his clients to even greater risk when he failed to diversify their investments. He allegedly “overconcentrated” his clients’ investment portfolios with speculative investments in the technology sector, ignoring more stable asset classes, such as bonds, altogether.

Brokers and their registered representatives have a duty to only recommend investment strategies that are suitable for their clients. When they fail in that duty, brokers may be liable to individual investors for damages. Overconcentration, unauthorized trading, and failure to disclose the risks associated with penny stocks are serious violations.

If you believe you may have been wronged by an investment professional, contact ChapmanAlbin today.

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