UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 83562 / June 29, 2018

ADMINISTRATIVE PROCEEDING

File No. 3-18561

In the Matter of

ALEXANDER CAPITAL, L.P.

Respondent.

ORDER INSTITUTING ADMINISTRATIVE 

PROCEEDINGS PURSUANT TO SECTION 

15(b) OF THE SECURITIES EXCHANGE 

ACT OF 1934, MAKING FINDINGS, AND 

IMPOSING REMEDIAL SANCTIONS

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative proceedings be, and hereby are, instituted pursuant to 

Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”) against Alexander Capital, 

L.P. (“Alexander Capital” or “Respondent”). 

II.

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over him and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, 

Making Findings, and Imposing Remedial Sanctions (“Order”), as set forth below.
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III.

On the basis of this Order and Respondent’s Offer, the Commission finds1that:

Respondent

1. Alexander Capital is a Delaware limited partnership with its main office in New 

York, New York and, from 2012 until 2014, had a branch office on Staten Island, New York. It

has been registered with the Commission as a broker-dealer since 1996.

Background

2. Broker-dealers have a responsibility to supervise their employees through 

procedures and systems to implement the procedures that are reasonably designed to prevent and 

detect violations of the federal securities laws. This is a key component of investor protection. In 

particular, broker-dealers must have reasonable procedures and systems in place to guide 

supervisors on how to identify and address potential misconduct by its registered representatives 

(“RRs”) who sell securities to the public. In addition, individual supervisors must follow firm 

supervisory procedures and reasonably respond to indications of potential violations by RRs. 

Alexander Capital failed reasonably to supervise three registered representatives – referred to

herein as RR1, RR2 and RR3 – with a view to prevent and detect their violations of the federal 

securities laws.

3. From 2012 through 2014, Alexander Capital failed reasonably to implement certain 

policies and procedures and permitted a lax compliance environment in which these RRs were not 

reasonably monitored or disciplined, procedures were not followed, and indications of potential 

misconduct were not acted upon by the supervisors of the three RRs, Supervisor A and Supervisor 

B. As a result, RR1, RR2 and RR3 violated the antifraud provisions of the federal securities laws 

in their handling of customer accounts without anyone at Alexander Capital preventing or 

detecting their violations.

4. Among other misconduct, RR1, RR2 and RR3 made unsuitable investment 

recommendations to their customers, churned their customers’ accounts and engaged in 

unauthorized transactions.

5. Turnover rates and cost-to-equity ratios are used to evaluate activity in customer 

accounts. Turnover rate is the number of times per year a customer’s securities are replaced by 

new securities. The cost-to-equity ratio measures the amount an account has to appreciate annually 

just to cover commissions and other expenses. A turnover rate of six or greater or a cost-to-equity 

ratio in excess of 20% can indicate excessive trading.

 

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding. 
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6. The annualized turnover rate and cost-to-equity ratios for the customers of the three 

RRs were extremely high and are indicative of excessive trading. The turnover rates and cost-toequity ratios for the affected customers were as high as 57.75 and 200.40%, respectively. 

7. Alexander Capital’s Written Supervisory Procedures (“WSPs”) contained sections 

covering both reasonable basis and customer-specific suitability, churning and unauthorized 

trading. 

8. The WSPs related to suitability reminded RRs and supervisors that Financial 

Industry Regulatory Authority (“FINRA”) Rule 2111 on suitability requires that “[a] member or an 

associated person must have a reasonable basis to believe that a recommended transaction or 

investment strategy involving a security or securities is suitable for the customer[.]” The WSPs 

also stated: “A suitable recommendation must have a reasonable basis. This requires that the 

registered representative: perform reasonable diligence to understand the potential risks and 

rewards associated with a recommended security or investment strategy; and determine whether 

the recommendation is suitable for at least some investors based on that understanding.”

9. Supervisors were also required to “oversee the suitability requirements and 

documentation related to recommended (i.e., solicited) transactions by those individuals under their 

immediate supervision.” Alexander Capital’s WSPs further stated: “We will review all 

transactions for appropriateness and suitability during our regular and random reviews of client 

accounts. If a trade appears unsuitable, we will call the representative in to discuss the trade and 

defend why it seemed appropriate and/or suitable. If the individual is unable to show why the trade 

was suitable, disciplinary action may be warranted. We will maintain documentation of all such 

findings and follow-up actions in the files.”

10. Churning, defined in the WSPs as “executing transactions solely for the purpose of 

generating commissions,” was “STRICTLY PROHIBITED.” Also, any “churning activities”

would “result in, at the very least, suspension of the representative’s trading activities for a 

specified period of time and, in severe or repeat instances, termination.” In addition, the WSPs 

state that “churning is generally characterized by short-term holding periods and high turnover 

ratios.”

11. The WSPs also required supervisors with the responsibility for ensuring that “all 

transactions undertaken by individuals under their direct supervision are reviewed in such a 

manner to reasonably detect and deter any instances of illegal churning in customer accounts.” 

Supervisors were specifically directed in the WSPs to look at “turnover rate,” “[c]ost-equity ratio” 

and “[i]n-and-out trading.” Reports, to be generated on at least a quarterly basis, were required to 

be reviewed by the designated principal, and accounts with “an excessive amount of client 

activity” were to be “carefully reviewed.” Accounts that seemed “to generate a disproportionately 

high amount of commissions relative to the size of the investment” were to be “singled out for 

further review and possible investigation.” All reviews were to be documented, as well as any 

sanctions put into place.
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12. The WSPs also stated that “unauthorized trading in a customer account is NEVER a 

permissible activity” and without discretionary authority, transactions could not be undertaken “in 

a client’s account without the customer’s PRIOR knowledge and approval.” Also, the WSPs noted 

that unauthorized trading “often falls under the churning prohibition.” As with churning, the WSPs 

tasked supervisors with ensuring that those they were supervising did not engage in unauthorized 

transactions. The WSPs also required reliance on “specific exception report red flag items,” and 

required supervisors to make “notations to the exception reports,” indicating the “individual who 

reviewed the report and undertook the investigation.” 

13. Alexander Capital failed to develop and implement reasonable supervisory policies 

and procedures for both reasonable basis and customer-specific suitability. As conveyed during a 

training session for Alexander Capital staff, Alexander Capital management knew that FINRA 

Rule 2111 required RRs to have a reasonable basis to believe that a recommended transaction or 

investment strategy was suitable. The training materials further conveyed that the RRs must be 

able to explain how a customer would make money and that a recommendation could only be 

made after a representative conducted reasonable diligence. The same training advised the RRs of 

the need to document their reasonable basis determinations. Alexander Capital failed to put in 

place reasonable mechanisms for supervisors to use to monitor registered representatives for 

compliance with their reasonable basis and customer-specific suitability obligations. 

14. For both reasonable basis and customer-specific suitability, Alexander Capital’s 

supervisory systems and implementation provided insufficient guidance to supervisors. In 

addition, Alexander Capital failed to implement reasonable mechanisms to address whether

supervisors were reasonably monitoring the customer accounts for reasonable basis and customerspecific suitability and having discussions with the three RRs about why the RRs concluded their 

recommendations were suitable when the recommendations were questionable.

15. Alexander Capital failed to develop reasonable systems to implement its

supervisory policies and procedures related to churning. For example, Alexander Capital failed to 

adequately train Supervisors A and B or to implement any procedures reasonably designed to 

identify whether they were reviewing customer accounts for churning. Although there were 

certain exception reports and alerts when turnover and commissions reached certain pre-set levels, 

Supervisors A and B failed to use this information to monitor reasonably RR1, RR2 and RR3 to 

determine whether they were churning customer accounts, and in some cases, these supervisors 

were not familiar with the metrics or the available reports. 

16. Alexander Capital failed to develop reasonable systems to implement its 

supervisory policies and procedures with respect to unauthorized trading. For example, the WSPs 

referred to “specific exception report red flag items that would result in immediate, in-depth 

scrutiny of the account and the registered representative” for use in detecting unauthorized trading; 

however, the firm provided no guidance concerning which particular exception reports the 

supervisors were supposed to use. 

17. If Alexander Capital had reasonably developed systems to implement the firm’s 

policies and procedures regarding reasonable basis and customer-specific suitability, churning and 
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unauthorized trading, it is likely that the firm would have prevented and detected the violations of 

the federal securities laws by RR1, RR2 and RR3.

18. As a result of the conduct described above, Alexander Capital failed reasonably to 

supervise RR1, RR2 and RR3 within the meaning of Section 15(b)(4)(E) of the Exchange Act with 

a view to preventing and detecting their violations of Section 17(a) of the Securities Act of 1933, 

Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

Alexander Capital’s Cooperation

19. In determining to accept the Offer, the Commission considered remedial acts 

undertaken by Alexander Capital and cooperation afforded the Commission staff. 

Undertakings

20. Respondent Alexander Capital undertakes:

a. to retain, within 30 days of the date of entry of the Order, at its own expense, the 

services of an Independent Consultant not unacceptable to the Division of 

Enforcement of the Commission (“Division of Enforcement”), to (i) review 

Alexander Capital’s written supervisory policies and procedures, including but 

not limited to review of policies and procedures designed to prevent and detect 

unsuitable recommendations, churning and unauthorized trading; and (ii) 

review Alexander Capital’s systems to implement its written supervisory 

policies and procedures designed to prevent and detect unsuitable 

recommendations, churning and unauthorized trading.

b. to require the Independent Consultant, at the conclusion of the review, which in 

no event shall be more than 120 days after the entry of the Order, to submit a 

report of the Independent Consultant to Alexander Capital and the Division of 

Enforcement. The report shall address the supervisory issues described above 

and shall include a description of the review performed, the conclusions 

reached, the Independent Consultant’s recommendations for changes or 

improvements to the policies, procedures and practices of Alexander Capital 

and a procedure for implementing the recommended changes or improvements 

to such policies, procedures and practices.

c. to adopt, implement, and maintain all policies, procedures and practices 

recommended in the report of the Independent Consultant. As to any of the 

Independent Consultant’s recommendations about which Alexander Capital and 

the Independent Consultant do not agree, such parties shall attempt in good 

faith to reach agreement within 180 days of the date of the entry of the Order. 

In the event that Alexander Capital and the Independent Consultant are unable 

to agree on an alternative proposal, Alexander Capital will abide by the 
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determinations of the Independent Consultant and adopt those 

recommendations deemed appropriate by the Independent Consultant.

d. to cooperate fully with the Independent Consultant in its review, including 

making such information and documents available as the Independent 

Consultant may reasonably request, and by permitting and requiring Alexander 

Capital’s employees and agents to supply such information and documents as 

the Independent Consultant may reasonably request.

e. that, in order to ensure the independence of the Independent Consultant, 

Alexander Capital (i) shall not have the authority to terminate the Independent 

Consultant without prior written approval of the Division of Enforcement; and 

(ii) shall compensate the Independent Consultant, and persons engaged to assist 

the Independent Consultant, for services rendered pursuant to the Order at their 

reasonable and customary rates. 

f. to require the Independent Consultant to enter into an agreement that provides 

that for the period of engagement and for a period of two years from 

completion of the engagement, the Independent Consultant shall not enter into 

any employment, consultant, attorney-client, auditing or other professional 

relationship with Alexander Capital, or any of its present or former affiliates, 

directors, officers, employees, or agents acting in their capacity. The 

agreement will also provide that the Independent Consultant will require that 

any firm with which he/she is affiliated or of which he/she is a member, and 

any person engaged to assist the Independent Consultant in performance of 

his/her duties under this Order shall not, without prior written consent of the 

Division of Enforcement in New York, New York, enter into any 

employment, consultant, attorney-client, auditing or other professional 

relationship with Alexander Capital, or any of its present or former affiliates, 

directors, officers, employees, or agents acting in their capacity as such for the 

period of the engagement and for a period of two years after the engagement.

g. that no later than 15 months after the date of entry of the Order, Alexander 

Capital shall direct the Independent Consultant to conduct a follow-up review 

of Alexander Capital’s efforts to implement each of the recommendations 

made by the Independent Consultant and Alexander Capital shall direct the 

Independent Consultant to submit a follow-up report to the Commission staff 

no later than 17 months after the date of the entry of the Order. Alexander 

Capital shall direct the Independent Consultant to include in the follow-up 

report the details of Alexander Capital’s efforts to implement each of the 

Independent Consultant’s recommendations and shall separately state whether 

Alexander Capital has fully complied with each of the Independent 

Consultant’s recommendations.
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h. to certify, in writing, compliance with the undertaking(s) set forth above. The 

certification shall identify the undertaking(s), provide written evidence of 

compliance in the form of a narrative, and be supported by exhibits sufficient 

to demonstrate compliance. The Commission staff may make reasonable 

requests for further evidence of compliance, and Respondent Alexander 

Capital agrees to provide such evidence. The certification and reporting 

material shall be submitted to Steven G. Rawlings, Assistant Regional 

Director, with a copy to the Office of the Chief Counsel of the Division of 

Enforcement, no later than sixty (60) days from the date of the completion of 

the undertakings.

i. For good cause shown and upon timely application by the Independent 

Consultant or Alexander Capital, the Commission’s staff may extend any of 

the deadlines set forth above.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent Alexander Capital’s Offer.

Accordingly, pursuant to Section 15(b)(4) of the Exchange Act, it is hereby ORDERED 

that:

A. Respondent Alexander Capital is censured.

B. Respondent Alexander Capital shall pay disgorgement of $193,774.86 and 

prejudgment interest of $23,436.78, and civil penalties of $193,774.86, to the Securities and 

Exchange Commission. Payment shall be made in the following installments: 

1. $102,746.65 within 10 days of the entry of this Order;

2. $61,647.97 within 60 days of the entry of this Order;

3. $61,647.97 within 120 days of the entry of this Order;

4. $61,647.97 within 180 days of the entry of this Order;

5. $61,647.97 within 240 days of the entry of this Order;

6. $61,647.97 within 300 days of the entry of this Order.

Payments shall be deemed made on the date they are received by the Commission and shall 

be applied first to post-Order interest, which accrues pursuant to SEC Rule of Practice 600 and/or 

pursuant to 31 U.S.C. 3717. Prior to making the final payment set forth herein, Alexander Capital 

shall contact the staff of the Commission for the amount due for the final payment, which shall 

include accrued interest. If any payment is not made by the date the payment is required by this 

Order, the entire outstanding balance of disgorgement, prejudgment interest, and civil penalties,

plus any additional interest accrued pursuant to SEC Rule of Practice 600 and/or pursuant to 31 

U.S.C. 3717, minus any payments made, shall be due and payable immediately, without further 

application.
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Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to: 

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter identifying Alexander 

Capital, L.P. as a Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Sanjay Wadhwa, Senior 

Associate Regional Director, Division of Enforcement, Securities and Exchange Commission, 

New York Regional Office, Brookfield Place, 200 Vesey Street, Suite 400, New York, New York 

10281-1022.

C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair 

Fund is created for the disgorgement, prejudgment interest and/or penalties referenced in paragraph

B above. Regardless of whether any such Fair Fund distribution is made, amounts ordered to be 

paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the 

government for all purposes, including all tax purposes. To preserve the deterrent effect of the 

civil penalty, Respondent agrees that in any Related Investor Action, it shall not argue that it is 

entitled to, nor shall it benefit by, offset or reduction of any award of compensatory damages by 

the amount of any part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”). 

If the court in any Related Investor Action grants such a Penalty Offset, Respondent agrees that it

shall, within 30 days after entry of a final order granting the Penalty Offset, notify the 

Commission’s counsel in this action and pay the amount of the Penalty Offset to the United States 

Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 
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substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding.

D. Respondent shall comply with the undertakings enumerated in Section III above.

By the Commission.

Brent J. Fields

Secretary