NJ Broker-Dealer Agent's License Revoked for Conning Elderly Investors

Carlos Leston of Maywood loses securities and insurance licenses after unethical practices result in financial losses for elderly clients.

Attorney General Matthew J. Platkin and the Division of Consumer Affairs announced today that the Bureau of Securities has revoked the registrations of Carlos Leston, a broker-dealer agent and investment adviser representative from Maywood, New Jersey. Leston was found to have engaged in unethical practices by recommending and selling high-risk investments to elderly clients that were not in their best interest, ultimately resulting in significant financial losses for them.

Leston, also known as Jose Carlos Leston and Jose C. Leston, advised two elderly clients to invest a total of $3.65 million in a New York lending company without disclosing crucial information. He failed to mention that the CEO of the lending company was a personal friend who had been barred from the securities industry. Leston also neglected to disclose his referral arrangement with the company, which resulted in him receiving over $1.5 million in compensation.

On Leston's recommendation, the elderly clients liquidated their existing insurance annuities—investments they relied on for steady income. The funds were then used to purchase securities in the lending company, which were unsuitable and not in their best interest. This led to the clients incurring losses, surrender charges, and taxes that far exceeded any potential benefit of the investments.

“Protecting New Jersey investors from financial exploitation is a responsibility my office takes very seriously, especially when it comes to seniors and other vulnerable individuals,” said Attorney General Platkin. “The action announced today makes it clear that we have no tolerance for unscrupulous agents who unlawfully enrich themselves at the expense of the elderly clients who trust them with a lifetime of savings.”

Leston carried out these transactions privately while registered as an agent with a Massachusetts-based broker-dealer, violating multiple company policies and procedures, including those related to Regulation Best Interest. This federal rule mandates that broker-dealers act in the best interest of their customers when making recommendations related to securities transactions or investment strategies.

“Instead of putting the financial interests of his clients ahead of his own, as he was required to do, Carlos Leston steered them toward risky, unsuitable investments that benefitted him at the expense of his clients,” said Cari Fais, Acting Director of the Division of Consumer Affairs. “We will continue to vigorously enforce our laws and regulations to protect investors from the kind of egregious financial abuse evidenced in this case.”

In revoking Leston's registrations, the Bureau of Securities determined that Leston engaged in dishonest or unethical business practices, including:

• Violating the Bureau’s rules by failing to comply with U.S. Securities and Exchange Commission Regulation Best Interest.
• Recommending that elderly clients surrender their existing annuities to purchase securities, incurring costs while he financially benefitted.
• Engaging in unauthorized outside business activities, including establishing a joint checking account with a client, being named and acting as a power of attorney, and maintaining an undisclosed referral arrangement with the lending company.
• Failing to disclose or gain approval for these activities from his employer broker-dealer or the affected clients.

Additionally, Leston, who holds an insurance producer license with the New Jersey Department of Banking and Insurance, was found to have violated ethical practices in the insurance business by advising the elderly clients to surrender their annuity contracts. This caused them to incur costs that outweighed any possible financial benefit.

“Investors expect – and the law requires – that financial professionals conduct business in compliance with the policies and procedures in place to promote transparency in securities transactions, prevent conflicts of interest, and ensure professionals act in their clients’ best interest,” said Elizabeth M. Harris, Chief of the Bureau of Securities. “When professionals violate Regulation Best Interest and other important investor protections, we will hold them accountable.”

The Division’s action serves as a reminder of the importance of ethical practices in the securities and insurance industries and highlights the risks posed to vulnerable investors when agents prioritize personal gain over clients' best interests. The Bureau's decision underscores its commitment to protecting consumers from unethical behavior within the financial industry.