When disputes arise between investors and brokerage firms, they are usually resolved through arbitration. The Financial Industry Regulatory Authority (FINRA) offers a streamlined and cost-effective dispute resolution forum for resolving disputes in the securities industry. In this blog post, we’ll take a deep dive into FINRA arbitration, its key features, benefits, and what you should know if you find yourself involved in a securities-related dispute.

Understanding FINRA Arbitration

What is FINRA?

The Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization authorized by the United States Congress to oversee and regulate the securities industry. One of FINRA’s essential functions is to provide a forum for resolving disputes between investors, brokerage firms, and individual brokers.

Arbitration vs. Lawsuits: The Key Differences

Unlike traditional litigation, where disputes are resolved through the court system, FINRA arbitration is a private, alternative dispute resolution process. There are several key differences:

1. • Speed and Efficiency: FINRA arbitration typically resolves disputes more quickly than litigation, which can drag on for years. Arbitration cases often conclude within 12-18 months, allowing parties to move on with their lives and investments more quickly.
   • Cost-Effective: Litigation can be expensive due to legal fees, court costs, and other expenses. In contrast, FINRA arbitration tends to be more cost-effective, as it has lower filing fees and streamlined procedures.
   • Less Burdensome Discovery: Discovery is the exchange of relevant documents and information. In a lawsuit, discovery consists of depositions, interrogatories, and the exchange of documents. In FINRA arbitrations, depositions and interrogatories are generally not allowed. As a result, the discovery process is more streamlined, less burdensome, and less costly.
   • Confidentiality: FINRA arbitration proceedings are generally confidential, whereas court proceedings are a matter of public record.

Who Can Initiate FINRA Arbitration?

Parties who can initiate FINRA arbitration include investors, brokerage firms, and individual brokers. Many arbitrations arise over investment losses. Investors often file arbitration claims against their brokerage firms when the firm or its agent broker recommends investments that are not suitable and in the best interest of the investor. Investors also file arbitration claims when their brokers misrepresent or omit material information at the time of the recommendation. Common claims brought by investors include unsuitability, violation of Regulation Best Interest (RegBI), misrepresentation or omission of material information, unauthorized trading, churning, breach of fiduciary duty, and financial elder abuse.

The FINRA Arbitration Process

1. Filing a Claim – The process begins with the filing of a Statement of Claim by the aggrieved party. The respondent (the party against whom the claim is filed) is then given the opportunity to respond
2. Arbitrator Selection – The parties select arbitrators from FINRA’s roster of arbitrators using a strike and rank system. The number of arbitrators that serve on an arbitration panel varies depending on the size of the complaint.
3. Discovery – The exchange of relevant documents and information.
4. Hearing – A hearing is held where both parties present their cases, including evidence and witnesses. The arbitrators evaluate the evidence and arguments presented.
5. Award – The arbitrators deliberate and issue a written decision. This decision is final and binding. Parties are generally required to abide by the decision, and there is limited scope for appeal.

Settlement

At any time during the arbitration process, the parties can resolve their dispute by entering into a settlement. Approximately 69 – 70% of all FINRA arbitrations are resolved through settlement instead of a hearing.

Conclusion

Investors who have suffered investment losses should be aware of their rights to pursue arbitration when disputes arise. Legal representation is often advisable to navigate the complexities of the process effectively.

Investors involved in a securities-related dispute are encouraged to consult with attorneys who have vast experience in FINRA arbitration to help them navigate the process and ensure that their rights and interests are protected throughout the proceedings.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have over 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have suffered investment losses, contact securities arbitration lawyers August Iorio at august@ia-law.com or Jorge Altamirano at jorge@ia-law.com. Alternatively, call the firm toll-free at (646) 330-4624.

Mr. Buffett’s words of wisdom can also be applied to investment recommendations made by a financial advisor in a bull market. Almost everyone looks like a genius in a booming market, including financial advisors. However, when the stock market enters into a correction, or something even more dreadful, the real risks of an investment or investment strategy are exposed, often leaving a trail of investment losses in their wake.

Investors who have suffered investment losses due to unsuitable or misleading investment recommendations by brokers or brokerage firms should consult with a lawyer to review their legal rights.

Fresh off its historic arbitration award against Robinhood, New York securities arbitration law firm Iorio Altamirano LLP offers free and confidential consultations to investors who may have been financially harmed.

Who Should Consult a Lawyer?

Brokerage firms and financial advisors are required to have a customer’s best interest in mind when they make investment recommendations or offer investment advice. This obligation is mandated by the SEC.

Specifically, when a financial advisor makes an investment recommendation, it must be in the investor’s best interest and must not place the interest of the financial professional or brokerage firm ahead of the interests of the retail investor. This standard of care, which is commonly referred to as “Regulation Best Interest” or “Reg BI,” applies to recommendations to purchase securities, sell or hold securities, implement an investment strategy, or open a specific type of account.

Financial advisors must also be truthful and disclose all material facts and risks to the customer when making an investment recommendation. If the financial advisor omits or misrepresents material facts or risks, they could be liable for investment losses.

Investors who have suffered financial losses due to investment recommendations that were not in their best interest, or misleading investment advice, may be able to file a lawsuit, in the form of a FINRA arbitration, to recover losses.

About Iorio Altamirano LLP

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA securities arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

If you have suffered investment losses, contact securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com, or toll-free at (646) 330-4624 for a free and confidential consultation and review of your legal rights.

Additionally, the FINRA AWC alleged from July 2014 to June 2019, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 when selling leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (Non-Traditional ETFs) to retail customers. As a result, Aegis Capital failed to identify customers who purchased and held Non-Traditional ETFs for extended periods of time or whose purchase was inconsistent with their recorded investment objective, risk tolerance, or finances.

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Aegis Capital Corp.

FINRA Letter of Acceptance, Waiver, and Consent No. 201605174305

FINRA and Aegis Capital entered into a Letter of Acceptance, Waiver, and Consent No. 201605174305on November 8, 2021, after FINRA alleged that between July 2014 through December 2018, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 as it pertains to excessive trading.

Excessive Trading

Specifically, with regard to excessive trading, FINRA alleged the following:

• Between 2014 and 2018, Aegis Capital employed on average more than 350 registered representatives across more than 20 branch offices, with the majority working in the firm’s Melville, 40 Wall Street, and Seventh Avenue branches.
• More than 10% of the firm’s registered representatives disclosed personal financial issues, such as outstanding liens, judgments, or bankruptcies on FINRA’s Central Registration Depository.
• During the relevant period, Aegis Capital used boilerplate WSPs prepared by an outside vendor for supervision of registered representatives’ trading in customer accounts.
• Aegis Capital’s WSPs instructed its branch managers to monitor trading for suitability issues during their daily review of Aegis Capital’s trade blotters but did not explain how the firm’s supervisors should conduct the daily trade review or use the trade blotters and other available customer information to identify potentially unsuitable or excessive trading in Aegis Capital’s customers’ accounts.
• The WSPs also did not define or require supervisors to calculate or consider, turnover rate, or cost-to-equity ratio.
• Additionally, Aegis Capital did not provide its branch and assistant branch managers training to compensate for the lack of guidance in the WSPs.
• Aegis Capital’s trade blotters were not designed to flag excessive trading activity, as they did not show the trading history in an account or the holding period between buys and sells in the same security. The blotters also did not include cost-to-equity or turnover, or information regarding the use of margin, even though many of the firm’s registered representatives recommended the use of margin to their customers.
• Aegis Capital’s WSPs also required branch managers to conduct monthly and semi-annual reviews of customer account activity to monitor for suitability and churning, and the firm’s chief compliance officer or their designee to review “active accounts” (defined as accounts with more than 20 transactions per month and $5,000 in commissions), to determine if the type, size, and frequency of trades were consistent with the customer’s investment objectives. However, these reviews were not performed for most of the relevant period.
• Aegis Capital had access to additional supervisory tools to monitor and identify excessive trading. Aegis Capital received exception reports from its clearing firm specifically designed to identify accounts with turnover rates and commission-to-equity ratios indicative of excessive and unsuitable trading. The exception reports were triggered when the annualized cost-to-equity ratio in accounts with an aggressive or speculative investment objective exceeded 5% or 6%, respectively, for three or more consecutive days, or the turnover exceeded 500% for five or more consecutive days.
• From July 2014 to December 2018, the active, in-and-out trading conducted by Aegis Capital’s registered representatives generated thousands of exception reports identifying customer accounts with potentially unsuitable turnover rates and commission-to-equity ratios. Approximately one-third of the exception reports related to trading in accounts held by senior investors, and more than 900 identified potentially unsuitable trading by eight registered representatives who worked in Aegis Capital’s Melville and Wall Street branches (the Representatives).
• These exception reports were active and viewable in the trade review system that Aegis Capital’s supervisors used to conduct their daily trade reviews. However, for most of the relevant period, Aegis Capital’s WSPs did not reference the exception reports or require its supervisors to review and address them.
• Aegis Capital also received more than 50 complaints from customers alleging excessive, unsuitable, or unauthorized trading in their firm accounts, including at least 13 complaints from customers whose accounts were managed by the Representatives.
• Aegis Capital failed to take reasonable steps to investigate these numerous red flags of potentially excessive and unsuitable trading by its registered representatives. Instead, Aegis Capital and its supervisors sent disclosure letters designed to document a customer’s general acknowledgement of the trading in their accounts and the trading costs they incurred. However, the letters did not include the actual costs of the trading, the costs incurred due to the use of margin, or explain what trades (or series of trades) prompted Aegis to issue the letter.
• During the relevant period, Aegis Capital’s compliance department prepared reports documenting the “key compliance issues” identified during its review and testing of Aegis Capital’s supervisory systems, procedures, and controls. Aegis Capital’s annual testing reported that:
• Aegis Capital lacked specific procedures to monitor turnover and commission-to-equity ratios in customers’ accounts.
• Aegis Capital should use exception reports that monitor commission activity and trading velocity (or turnover) to ensure “adequate” commission-to-equity ratios in its customers’ accounts.
• Aegis Capital was not utilizing specific alerts provided by its clearing firm that would ensure adequate commission-to-equity ratios.
• Aegis Capital’s WSPs did not identify which clearing firm exception reports that it would use to conduct supervisory trading reviews or the principals responsible for reviewing them.
• Aegis Capital needed additional compliance personnel to keep pace with Aegis Capital’s rapid hiring and growth.
• Although many of these findings carried over from year-to-year, Aegis Capital did not immediately address the deficiencies identified by its annual testing. Aegis Capital did not supplement its daily trade reviews with systems, surveillance, or reviews specifically designed to monitor or calculate commission-to-equity ratios or turnover rates in customer accounts or require its supervisors to review the exception reports provided by its clearing firm. Aegis Capital also did not update the daily trade blotters to include information that would enable its supervisors to identify patterns of trading, commissions, or accumulated losses in customer accounts.
• In 2018, Aegis Capital retained a third-party vendor to provide new automated trade surveillance and alerts. In 2019 and again in 2020, Aegis Capital also retained independent consultants to conduct comprehensive reviews of its WSPs and supervisory controls, and its remediation is ongoing.
• Even so, during the Relevant Period, Aegis Capital failed to identify potentially excessive and unsuitable trading in hundreds of customer accounts. Aegis Capital’s unreasonable supervisory system, combined with the failure to respond to the red flags discussed above, also allowed the Representatives to make unsuitable recommendations and excessively trade the accounts of 31 customers. The trading by the Representatives in the accounts of those 31 customers resulted in annualized turnover rates ranging from 4.2 to 199.8 and cost-to-equity ratios ranging from 21.2% to 164.6%, and more than $2.9 million in costs and $4.6 million in losses.
• Accordingly, Aegis Capital violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had a turnover rate between 4.2 and 199.8.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 21.2% and 164.6%.

The practice of excessively trading customers’ accounts is unethical and illegal. Such conduct is also a violation of securities rules and regulations and can cause enormous harm to customers.

Non-Traditional ETFs

The FINRA AWC also alleged from July 2014 to June 2019, Aegis Capital failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with the suitability requirements of FINRA Rule 2111 when selling leveraged, inverse, and inverse-leveraged Exchange-Traded Funds (Non-Traditional ETFs) to retail customers.

Specifically, with regard to Non-Traditional ETFs, FINRA alleged the following:

• Exchange-Traded Funds (ETFs) are typically registered unit investment trusts or open-end investment companies whose shares represent an interest in a portfolio of securities that track an underlying benchmark or index. Shares of ETFs often are listed on national securities exchanges and traded throughout the day at prices established by the market.
• Leveraged ETFs seek to return a multiple of the performance of the index or benchmark they track. Some Non-Traditional ETFs are “inverse” or “short” funds, meaning they seek to deliver the opposite of the performance of the index or benchmark they track. Some funds are both inverse and leveraged, meaning that they seek to achieve a return that is a multiple of the inverse performance of the underlying index or benchmark. Most Non-Traditional ETFs reset daily, meaning they are designed to achieve their stated objectives only over the course of one trading session – usually a single day.
• In June 2009, FINRA issued Regulatory Notice 09-31. Regulatory Notice 09-31 reminded member firms that the performance of Non-Traditional ETFs over periods of time longer than a single trading session “can differ significantly from the performance … of their underlying index or benchmark during the same period of time.” Because of these risks and the complexity of these products, the notice further advised that “[w]hile the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”
• In January 2012, FINRA issued Regulatory Notice 12-03. Regulatory Notice 12-03 reminded member firms that Non-Traditional ETFs that reset daily are complex products that require heightened supervision. The notice explained that member firms should have: (i) a well-designed system of internal controls; (ii) adequate training, so its registered representatives understand how Non-Traditional ETFs are expected to perform in normal market conditions and the risks associated with them; and (iii) monitoring systems or procedures reasonably designed to determine that Non-Traditional ETFs are recommended and sold only to customers who understand their essential features and for whom the product is suitable.
• From July 1, 2014, to June 1, 2019, Aegis Capital’s registered representatives executed more than 3,000 transactions, with a total principal value of more than $400 million, in Non-Traditional ETFs that reset daily. The transactions were executed in 524 retail customer accounts and generated approximately $422,000 in sales compensation for Aegis Capital and its registered representatives.
• Consistent with Regulatory Notice 12-03, Aegis Capital’s WSPs designated Non-Traditional ETFs as a complex product requiring heightened supervision. For example, Aegis Capital’s WSPs required the firm to provide its registered representatives with mandatory training on the features and risks of Non-Traditional ETFs and clear instructions regarding the types of customers for whom Non-Traditional ETFs were suitable. Aegis Capital’s WSPs also required the firm to appoint a product manager responsible for determining the type of investor for whom the purchase or sale of Non-Traditional ETFs was suitable and tasked the firm’s branch managers with reviewing each Non-Traditional ETF transaction for customer-specific suitability.
• Aegis Capital failed to conduct the heightened supervision its WSPs required. Aegis Capital did not designate an individual to act as the product manager or require its branch managers to perform the heightened suitability review its WSPs mandated for sales of Non-Traditional ETFs. Aegis Capital did not provide its registered representatives with any training on Non-Traditional ETFs until November 2018 or establish guidance regarding the types of customers for whom the purchase of Non-Traditional ETFs was suitable until June 2019.
• Aegis Capital’s supervisory systems were also not reasonably designed to detect potentially unsuitable transactions involving Non-Traditional ETFs. As discussed in Regulatory Notice 09-31, a primary risk associated with Non-Traditional ETFs is that their performance over longer periods of time can differ significantly from the performance of their underlying index or benchmark, particularly in volatile markets. Aegis Capital relied on its daily trade review to monitor how long customers who purchased Non-Traditional ETFs held the security before selling it. However, the trade blotter did not include information that allowed the branch managers to identify whether a customer held a Non-Traditional ETF for more than one day, and Aegis Capital did not track the holding periods of Non-Traditional ETF positions.
• As a result, Aegis Capital failed to identify customers who purchased and held Non-Traditional ETFs for extended periods of time up to and including a year or longer and customers whose purchase was inconsistent with their recorded investment objective, risk tolerance, or finances. Fifteen of those customers – including seniors and individuals with conservative or moderate risk tolerances – incurred total realized losses of $132,463.
• Accordingly, Aegis Capital violated NASD Rule 3010 and FINRA Rules 3110 and 2010.

Sanctions

Aegis Capital consented to the imposition of the following sanctions: a censure, a fine of $1,050,000, and restitution of $1,692,256.44.

Aegis Capital Corp: 2021 Disciplinary Actions

This blog has repeatedly written about Aegis Capital and its brokers’ propensity to engage in excessive and unsuitable trading in customers’ accounts.

The following chart summaries disciplinary actions that have been taken against Aegis Capital and its brokers in 2021 and also includes links to previous blog posts:

Unfortunately, Aegis Capital’s misconduct is not new. Aegis Capital Corp has a long history of allegations of wrongdoing.

In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure reports.

The alleged conduct by the brokers that have been sanctioned this year, such as excessive trading, churning, and unauthorized trading, are common practices for “boiler room” broker-dealers.

Aegis Capital Corp. – A Duty to Supervise

Financial institutions like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as annuity switches, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Iorio Altamirano LLP Investigates Aegis Capital Over GPB Funds

According to publicly available records filed with the SEC, Aegis Capital likely received sales compensation for selling the private offerings by GPB Capital to retail investors.

Iorio Altamirano LLP is investigating claims on behalf of defrauded investors who were victims in the GPB funds scheme. The GPB funds were marketed to independent broker-dealers and investment advisers who would, in turn, sell the GPB funds to their retail investors.

If you lost money investing in private offerings by GPB Capital with Aegis Capital Corp, including GPB Automotive, you might have a claim.

The SEC has charged GPB Capital, Ascendant Capital, and Ascendant Alternative Strategies with running a Ponzi-like scheme that raised roughly $1.8 billion from securities issued by GPB Capital. The SEC believes that as many as 17,000 retail investors nationwide have been defrauded.

Nearly $1.7 billion of that total was invested in GPB Capital’s four flagship funds:

• GPB Holdings, LP / GPB Holdings Qualified, LP (“Holdings Qualified”) (collectively, “Holdings I”), launched in March 2013;
• GPB Automotive Portfolio, LP (“Automotive Portfolio”), launched in May 2013;
• GPB Holdings II, LP (“Holdings II”), launched in April 2015; and
• GPB Waste Management, LP (“Waste Management”), launched in August 2016.

See Also: Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

If you invested in the GPB funds with Aegis Capital, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account. We have nearly 20 years of combined experience as securities arbitration lawyers and have helped investors recover investment losses in over 1,000 cases. Our firm will file a FINRA arbitration claim on your behalf on a contingency fee basis to try to recover your losses. If we do not obtain a recovery, you do not owe us a legal fee.

Related actions have also been initiated all over the country. The New York State Attorney General filed a complaint against GPB Capital. According to the complaint, as of June 2019, GPB Capital estimated the fair market value of its funds’ portfolio assets at approximately $1 billion – representing a more than 40% loss on investors’ initial capital contributions. The exact portfolio asset values are unknown, as the funds have not issued audited financials since 2016.

In addition to the State of New York, Massachusetts, Georgia, Illinois, Missouri, South Carolina, and Alabama have initiated similar legal proceedings.

You can read more about our firm’s investigation into the GPB funds and the SEC action here.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Aegis Capital Corp. or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Mr. Marzocco was registered as a broker with Woodstock Financial Group, Inc. in Nesconset, New York, from June 2019 to December 2019. Prior to joining Woodstock Financial Group, Mr. Marzocco was a registered stockbroker with First Standard Financial Company LLC in Miller Place, New York, from June 2017 to June 2019.

This is the second time Mr. Marzocco has been suspended for excessive trading. In July 2020, Mr. Marzocco contended to an 11-month suspension after FINRA alleged that he engaged in quantitatively unsuitable trading in a customer’s account. The findings stated that Marzocco’s trading of the accounts resulted in high turnover rates and cost-to-equity ratios, as well as significant losses. The customers suffered collective losses of $196,331 and paid $81,523 in commissions and fees. Marzocco also recommended a significant number of trades using margin in the customer accounts. In particular, Marzocco recommended using margin to a customer, even though he was aware that the customer’s financial circumstances made it unsuitable for him.

Iorio Altamirano LLP is investigating potential legal claims on behalf of customers of Len Marzocco, Woodstock Financial Group, and First Standard Financial Company LLC related to investment recommendations and account activity made by Mr. Lenny Marzocco.

Customers who have suffered investment losses or suspect other misconduct by Mr. Marzocco, Woodstock Financial Group, or First Standard Financial Company LLC in their investment, brokerage, or retirement accounts, should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Woodstock Financial Group, Inc., and First Standard Financial Company LLC.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019061956601

FINRA and Mr. Marzocco entered into a Letter of Acceptance, Waiver, and Consent No. 2019061956601 on November 5, 2021, after FINRA alleged that between June 2019 and December 2019, while associated with Woodstock Financial Group, Mr. Marzocco excessively and unsuitable traded a customer’s account, in violation of FINRA Rules 2111 and 2010. Specifically, FINRA alleged:

• Between June 2019 and December 2019, while registered through Woodstock Financial Group, Mr. Marzocco engaged in excessive and unsuitable trading in a customer’s account.
• During this period, Mr. Marzocco recommended more than 160 options transactions to his customer, primarily involving call options with short-term expiration dates.
• The customer relied on Mr. Marzocco’s advice and accepted his recommendations.
• Marzocco’s recommended trades caused the customer to pay $27,078 in commissions and other trading costs in approximately six months, even though the account’s average equity was only approximately $40,000.
• Collectively, those trades resulted in the customer’s account having an annualized cost-to-equity ratio of more than 112 percent—meaning the customer’s investments would have had to grow by more than 112 percent annually just to break even.
• Marzocco’s recommended securities transactions in the account of his customer were excessive and unsuitable.
• Accordingly, Mr. Marzocco violated FINRA Rules 21111 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the account at issue had a cost-to-equity ratio of more than 112%.

Excessive trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

Financial Advisor Leonard Joseph Marzocco (CRD No. 3106494)

Mr. Marzocco has ten years of experience in the securities industry and has been associated with eight different firms, including three firms that have been expelled from the industry by FINRA. Mr. Marzocco is not currently registered or associated with any brokerage firm.

According to his public disclosure report, Leonard Marzocco is a registered broker with a history of regulatory sanctions, customer complaints, and an employment termination after allegations of misconduct. In addition, in 2002, he pled guilty to a felony DWI. According to FINRA, this was his third DUI offense, having also been convicted in May 2000 and March 2001.

Mr. Marzocco has been the subject of at least seven customer complaints. Most recently, in 2017, a customer filed a securities arbitration claim alleging $82,699 in damages as a result of unsuitability, churning, commission abuse, fraud, misrepresentation, and breach of fiduciary duty. Mr. Marzocco denied wrongdoing but settled the dispute with the customer. The other customer disputes alleged unauthorized trading, misrepresentation, unsuitability, and failure to follow instructions.

FINRA’s BrokerCheck tool can be used to obtain Mr. Marzocco’s complete and updated disclosure report.

Woodstock Financial Group, Inc. & First Standard Financial Company LLC – A Duty to Supervise

Financial institutions like Woodstock Financial Group, Inc. and First Standard Financial Company LLC must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Losses or Obtain a Free Consultation

When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer in an effort to be compensated.

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

If you have lost money with Mr. Marzocco, Wood Stock Financial Group, or First Standard Financial Company LLC, contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.

Mr. Yurovsky has been registered as a broker with Joseph Stone Capital L.L.C. in Mineola, New York, since April 2016.

Iorio Altamirano LLP is investigating potential legal claims on behalf of customers of Lenny Yurovsky and Joseph Stone Capital related to investment recommendations and account activity made by Mr. Yurovsky.

Customers who have suffered investment losses or suspect other misconduct by Mr. Yurovsky or Joseph Stone Capital in their investment, brokerage, or retirement accounts, should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights.

Joseph Stone Capital L.L.C.

According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that seventy-six percent (76%) of Joseph Stone Capital’s brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Joseph Stone Capital L.L.C. Reveals Troubling Pasts for Owners, Executives, and Brokers

Mr. Yurovsky was one of the brokers who had serious incidents reported on his BrokerCheck report.

Financial Advisor Leonid Yurovsky (CRD No. 4554905)

Leonid Yurovsky has 18 years of experience in the securities industry and has been associated with 14 different firms, including one firm that has been expelled from the industry by FINRA.

In 2014, Mr. Yurovsky was ordered to pay $55,000 in restitution to a customer by the securities regulators in Arkansas, who alleged that he excessively traded the customer’s account.

FINRA’s BrokerCheck tool can be used to obtain Mr. Yurovsky’s complete and updated disclosure reports.

Joseph Stone Capital – A Duty to Supervise

Financial institutions like Joseph Stone Capital must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Losses or Obtain a Free Consultation

When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer in an effort to be compensated.

Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.

If you have lost money with Mr. Yurovsky or Joseph Stone Capital, contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.

Customers of Mr. Lianzo, Laidlaw & Company (UK) LTD, or SW Financial should consult with a securities arbitration law firm. If you or a loved one were a customer of Joseph Lianzo, Laidlaw & Company (UK) LTD, or SW Financial LLC, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Laidlaw & Company (UK) Ltd or SW Financial.

FINRA Letter of Acceptance, Waiver, and Consent No. 2018058278601

FINRA and Mr. Lianzo entered into a Letter of Acceptance, Waiver, and Consent on August 31, 2021, after FINRA alleged that between March 2016 and November 2019, Mr. Lianzo excessively traded four customers’ accounts in violation of FINRA Rules 2111 and 2010. FINRA also alleged that Mr. Lianzo placed 13 unauthorized transactions in accounts of two of those four customers, in violation of FINRA Rule 2010. Specifically, FINRA alleged:

• Lianzo engaged in quantitatively unsuitable trading in the account of one customer at Laidlaw, Customer A, and in the accounts of three customers at SW Financial, Customers B, C, and D.
• Lianzo recommended the trading in the accounts for the four customers, and they routinely followed his recommendations.
• As a result, Mr. Lianzo exercised de facto control over the four customers’ accounts. Lianzo’s trading of the accounts resulted in high turnover rates and cost-to-equity ratios, as well as significant losses.
• Specifically, Mr. Lianzo engaged in quantitatively unsuitable trading in Customer A’s account. Between March 2016 and March 2017, Customer A’s account exhibited an annualized turnover rate of 35 and an annualized cost-to-equity ratio of 145%. Customer A’s account incurred losses of $42,487 and paid $15,169 in commissions.
• During the period October 2017 through November 2019, Mr. Lianzo also engaged in quantitatively unsuitable trading in the accounts of Customers B, C, and D.
• Customer B’s account exhibited an annualized turnover rate of 15 and an annualized cost-to-equity ratio of 65%. Customer B’s account incurred losses of $95,570 and paid $22,975 in commissions.
• Customer C’s account exhibited an annualized turnover rate of 18 and an annualized cost-to-equity ratio of 78%. Customer C’s account incurred losses of $112,173 and paid $51,781 in commissions.
• Customer D’s account exhibited an annualized turnover rate of 15 and an annualized cost-to-equity ratio of 72%. Customer D’s account incurred losses of $43,078 and paid $37,581 in commissions.
• Lianzo’s trading in his four customers’ accounts was excessive and unsuitable given the customers’ investment profiles.
• Therefore, Lianzo violated FINRA Rules 2111 and 2010.
• Additionally, between February 14, 2017, and March 16, 2017, while registered through Laidlaw, Mr. Lianzo placed seven trades in Customer A’s account without Customer A’s authorization, knowledge, or consent.
• Between August 9, 2018, and October 31, 2018, while registered through SW Financial, Mr. Lianzo placed six trades in Customer B’s account without Customer B’s authorization, knowledge, or consent.
• Therefore, Lianzo violated FINRA Rule 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

Excessive trading, churning, and unauthorized trading are unethical and illegal practices. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had an annual turnover rate between 15 and 35.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 65% and 145%.

Financial Advisor Joseph Augustien Lianzo (CRD No. 4516842)

Joeseph Augustien Lianzo, who had only 19 years of experience in the securities industry, has a history of customer complaints and associations with disreputable firms.

Mr. Lianzo has been affiliated with nine different brokerage firms, including two which have been expelled from the industry by FINRA:

• SW Financial, from September 2017 to the present.
• Arive Capital Markets, from March 2017 to October 2017.
• Laidlaw & Company (UK) Ltd., from September 2015 to August 2017.
• Cape Securities Inc., from August 2014 to September 2015.
• Salomon Whitney LLC, from October 2012 to August 2014.
• P. Turner & Company, L.L.C., from December 2004 to October 2012.
• New Castle Financial Group, Inc. (expelled by FINRA), from August 2004 to December 2004.
• Newbridge Securities Corporation, from April 2003 to August 2004.
• Harrison Securities, Inc. (expelled by FINRA), from April 2003 to May 2003.
• Milestone Financial Services, Inc., from April 2002 to March 2003.

Mr. Lianzo has been the subject of 2 customer complaints and securities arbitrations relating to allegations of suitability, excessive trading, churning, and unauthorized trading. Both cases resulted in monetary compensation to the harmed customer(s).

FINRA’s BrokerCheck tool can be used to obtain Mr. Lianzo’s complete and updated disclosure reports.

SW Financial and Laidlaw & Company (UK) Ltd – A Duty to Supervise

Financial institutions like SW Financial and Laidlaw & Company (UK) Ltd must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Joseph Lianzo, SW Financial, or Laidlaw & Company (UK) Ltd or suspect other inappropriate activity occurred in your investment or retirement account, contact securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Customers of Mr. Fowler or Worden Capital Management LLC should consult with a securities arbitration law firm. If you or a loved one were a customer of Donald Fowler or Worden Capital Management LLC, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Worden Capital Management LLC.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

FINRA Letter of Acceptance, Waiver, and Consent No. 2017056432606

FINRA and Mr. Fowler entered into a Letter of Acceptance, Waiver, and Consent on August 25, 2021, after FINRA alleged that from December 2014 through December 2018, while associated with Worden Capital Management LLC, Mr. Fowler churned and excessively traded four customers’ accounts. While exercising de facto control over these customers’ accounts, Mr. Fowler recommended excessive activity, and his customers routinely followed his recommendations. Specifically, FINRA alleged:

• Fowler’s trading in the four customers’ accounts was excessive and, with reckless disregard for the customers’ interests, conducted to maximize his commissions. Mr. Fowler employed an investment strategy that entailed short-term in-and-out trades, and Mr. Fowler used margin as a means to increase the buying power in his customers’ accounts.
• Fowler’s trading of the four accounts resulted in high turnover rates and cost-to-equity ratios.
• From December 2014 to May 2016, Mr. Fowler effected 1,419 trades in Customer 1’s account, resulting in an annualized turnover rate of 114.47 and an annualized cost-to-equity ratio of 77.75%. Mr. Fowler’s trading in Customer 1’s account generated total trading costs of $766,256, including $664,797 in commissions and $74,488 in margin interest, and caused $755,727 in realized losses.
• From September 2015 to January 2017, Mr. Fowler effected 53 trades in Customer 2’s account, resulting in an annualized turnover rate of 29.23 and an annualized cost-to-equity ratio of 71.19%. Mr. Fowler’s trading in Customer 2’s account generated total trading costs of $60,824, including $53,440 in commissions and $5,898 in margin interest, and caused $29,736 in realized losses.
• From June 2016 to March 2017, Mr. Fowler effected 65 trades in Customer 3’s account, resulting in a turnover rate of 27.25 (equivalent to an annualized turnover rate of 32.70) and a cost-to-equity ratio of 61.02% (equivalent to an annualized cost-to-equity ratio of 73.22%). Fowler’s trading in Customer 3’s account generated total trading costs of $41,609, including $35,365 in commissions and $4,473 in margin interest, and caused $118,137 in realized losses.
• From April 2015 to December 2018, Mr. Fowler effected 193 trades in Customer 4’s account, resulting in an annualized turnover rate of 16.68 and an annualized cost-to-equity ratio of 43.90%. Mr. Fowler’s trading in Customer 4’s account generated total trading costs of $271,930, including $195,754 in commissions and $70,836 in margin interest, and caused $192,178 in realized losses.
• Fowler’s trading in these customers’ accounts was excessive and unsuitable. Moreover, Mr. Fowler effected short-term in-and-out trading with reckless disregard for these four customers’ interests.
• Therefore, Mr. Fowler willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and violated FINRA Rules 2111, 2020 and 201

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had an annual turnover rate between 16.68 and 114.47.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 43.90% and 77.75%.

Financial Advisor Donald Joseph Fowler (CRD No. 4989632)

Donald Joseph Fowler, who had only 13 years of experience in the securities industry, has a history of customer complaints and regulatory discipline.

Mr. Fowler has been affiliated with the following firms in New York:

• Worden Capital Management LLC, from November 2014 to August 2019.
• D. Nicholas & Associates, Inc., from January 2007 to November 2014.
• American Capital Partners, LLC, from September 2005 to February 2007

Mr. Fowler has been the subject of 14 customer complaints and securities arbitrations, several relating to allegations of excessive trading, churning, and unauthorized trading. Twelve of the disputes were resolved by paying a settlement to the harmed customer(s).

Excessive trading, churning, and unauthorized trading are unethical and illegal. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

FINRA’s BrokerCheck tool can be used to obtain Mr. Fowler’s complete and updated disclosure reports.

Worden Capital Management – A Duty to Supervise

Financial institutions like Worden Capital Management must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Donald Fowler or Worden Capital Management or suspect other inappropriate activity occurred in your investment or retirement account, contact securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Customers of Messrs. Stazzone and Beliakov or Woodstock Financial Group, Inc. who have suffered financial losses, or suspect that the brokers did not have their best interest in mind when recommending investments or making account transactions, can contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of their legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Woodstock Financial Group, Inc.

FINRA Letter of Acceptance, Waiver, and Consent Nos. 2018060806601 and 2018060806602

FINRA and Mr. Stazzone entered into Letter of Acceptance, Waiver, and Consent No. 2018060806601 on August 16, 2021.

FINRA and Mr. Beliakov entered into Letter of Acceptance, Waiver, and Consent No. 2018060806602 on August 16, 2021.

In both instances, FINRA alleged that between September 2017 and August 2018, while the brokers were registered through Woodstock Financial Group, Messrs. Stazzone and Beliakov engaged in quantitatively unsuitable trading in the account of their customer, a 57-year-old manager at a printing company whose only prior experience with securities was with mutual funds in his retirement account. The funds with which the customer opened his account at Woodstock Financial Group came from savings bonds. Messrs. Stazzone and Beliakov recommended all of the trades in the customer’s account, and the customer followed their recommendations. As a result, Messrs. Stazzone and Beliakov exercised de facto control over the customer’s account.

Messrs. Stazzone and Beliakov recommended frequent trading in the customer’s s account, which resulted in an annualized cost-to-equity ratio of 221.56. As a result, the customer’s investments would have had to grow by more than 221 percent to break even. The customer paid more than $173,000 in commissions during this period.2 The securities transactions recommended by Messrs. Stazzone and Beliakov in the customer’s account were excessive and unsuitable given the customer’s investment profile.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Accordingly, Messrs. Stazzone and Beliakov violated FINRA Rules 2111 and 2010.

Financial Advisor Alfonse Joseph Stazzone (CRD No. 4908107)

Alfonse Joseph Stazzone has 16 years of experience in the securities industry and has been associated with nine different firms, including one firm that has been expelled from the industry by FINRA. He is not currently registered with any brokerage firm. Most recently, Mr. Stazzone has been associated with the following firms:

• Monmouth Capital Management LLC in Holmdel, NJ, from April 2021 to July 2021.
• Garden State Securities, Inc. in Red Bank, NJ, from November 2019 to March 2021
• Woodstock Financial Group, Inc. in Staten Island, NY, from May 2013 to December 2019.
• Chelsea Financial Services in Staten Island, NY, from February 2011 to May 2013.

According to his public disclosure report with FINRA, Mr. Seale has been the subject of at least three customer disputes. Most recently, a customer filed a securities arbitration complaint alleging $148,500 in damages as a result of unsuitable trading. The matter was settled by Chelsea Financial Services, the firm that employed Mr. Stazzone when the alleged conduct occurred, for $60,000.

FINRA’s BrokerCheck tool can be used to obtain Mr. Stazzone’s complete and updated disclosure report.

Financial Advisor Maxim Beliakov (CRD No. 5968432)

Maxim Beliakov has nine years of experience in the securities industry and has been associated with the following firms:

• Garden State Securities, Inc. in Red Bank, NJ, from November 2019 to March 2021
• Woodstock Financial Group, Inc. in Staten Island, NY, from May 2013 to December 2019.
• Chelsea Financial Services in Staten Island, NY, from February 2011 to May 2013.

Mr. Beliakov is not currently registered with any broker-dealer.

FINRA’s BrokerCheck tool can be used to obtain Mr. Beliakov’s complete and updated disclosure report.

Woodstock Financial Group, Inc. – A Duty to Supervise

Financial institutions like Woodstock Financial Group, Inc. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Alfonse Stazzone, Maxim Beliakov, or Woodstock Financial Group, Inc., or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.

Customers of Mr. Cangialosi or Worden Capital Management LLC, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of John Cangialosi or Worden Capital Management LLC, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Worden Capital Management LLC.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

FINRA Letter of Acceptance, Waiver, and Consent No. 2017056432605

FINRA and Mr. Cangialosi entered into a Letter of Acceptance, Waiver, and Consent on August 13, 2021, after FINRA alleged that from October 2014 through December 2014, while associated with Legend Securities, Inc., and then Worden Capital Management LLC, Mr. Cangialosi excessively traded three customers’ accounts. Specifically, FINRA alleged:

• From October 2014 through December 2018, Mr. Cangialosi engaged in quantitatively unsuitable trading in three customer accounts.
• Cangialosi recommended high-frequency trading in the three customer accounts, with each customer often holding concentrated positions in one or two securities for short periods of time.
• Cangialosi’s customers routinely followed his recommendations, and, as a result, Mr. Cangialosi exercised de facto control over the three customers’ accounts. All of these transactions were solicited.
• Cangialosi’s trading of the three accounts resulted in high turnover rates and cost-to-equity ratios, as well as significant losses.
• From October 2014 to October 2016, Mr. Cangialosi effected 90 trades in Customer A’s account, resulting in an annualized turnover rate of 13.7 and an annualized cost-to-equity ratio of 58.38%. Mr. Cangialosi’s trading in Customer A’s account generated total trading costs of $173,337, including $169,342 in commissions, and caused $279,803 in realized losses.
• From January 2016 to December 2018, Mr. Cangialosi effected 83 trades in Customer B’s account, resulting in an annualized turnover rate of 20.23 and annualized cost-to-equity ratio of 95.74%. Mr. Cangialosi’s trading in Customer B’s account generated total trading costs of $116,442, including $102,280 in commissions and $10,472 in margin interest, and caused $93,834 in realized losses.
• From March 2017 to October 2017, Mr. Cangialosi effected 15 trades in Customer C’s account, resulting in a turnover rate of 5.62 (equivalent to an annualized turnover rate of 8.43) and a cost-to-equity ratio of 26.14% (equivalent to an annualized cost-to-equity ratio of 39.21%). Mr. Cangialosi’s trading in Customer C’s account generated total trading costs of $21,450, including $21,035 in commissions, and caused $31,618 in realized losses.
• Cangialosi’s trading in these three customers’ accounts was excessive and unsuitable given the customers’ investment profiles.
• As a result of Mr. Cangialosi’s excessive trading, the customers suffered collective realized losses of $405,255, while paying total trading costs of $311,229, including commissions of $292,657.
• Therefore, Mr. Cangialosi violated FINRA Rules 2111 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had a turnover rate between 5.62 and 13.7.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 26.14% and 95.74%.

Financial Advisor John S. Cangialosi (CRD No. 3273830)

John Sebastian Cangialosi, who has 19 years of experience in the securities industry, has a history of customer complaints, regulatory discipline, associations with disreputable brokerage firms, and an employment termination after allegations of misconduct.

Mr. Cangialosi is currently registered as a broker with SW Financial in New York, New York. Previously, he had been affiliated with the following firms:

• Worden Capital Management LLC, from November 2016 to December 2019.
• Legend Securities, Inc. (expelled by FINRA), from August 2013 to November 2016.
• Joseph Gunnar & Co. LLC, from June 2012 to August 21013.
• Brookstone Securities, Inc. (expelled by FINRA), from October 2009 to June 2012.
• P. Turner & Company, L.L.C., from August 2006 to February 2009.
• GunnAllen Financial, Inc., from June 2004 to August 2006.
• Joseph Stevens & Company, Inc., from December 2001 to June 2004.

In February 2009, Mr. Cangialosi was “permitted to resign” from J.P. Turner & Company, L.L.C., after allegations of unauthorized trading in a customer’s account. Mr. Cangilosi denied the allegations.

In April 2013, Mr. Cangialosi entered into a Letter of Acceptance, Waiver and Consent with FINRA for violating NASD Conduct Rule 2110, IM-1000-I, and FINRA Rules 2010 and 1122. Between December 2008 and January 2013, Mr. Cangialosi failed to disclose, and in some instances to timely disclose, six unsatisfied judgments and/or liens on his Uniform Application for Securities Industry Registration. Cangialosi consented to a three-month suspension in all capacities and a $5,000 fine.

Between 2009 and 2018, Mr. Cangialosi has been the subject of seven customer complaints, several relating to allegations of excessive trading, churning, and unauthorized trading. Four of the disputes were resolved by paying a settlement to the harmed customer(s).

As mentioned above, excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

Excessive trading, churning, and unauthorized trading are unethical and illegal. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

FINRA’s BrokerCheck tool can be used to obtain Mr. Cangialosi’s complete and updated disclosure reports.

Worden Capital Management – A Duty to Supervise

Financial institutions like Worden Capital Management must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with John Cangialosi or Worden Capital Management or suspect other inappropriate activity occurred in your investment or retirement account, contact securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Earlier this year, FINRA has barred Christopher Orlando from the securities industry for excessively trading his customers’ accounts. In December 2020, Worden Capital Management LLC was sanctioned more than $1.5 million by FINRA for, among other things, failing to establish, maintain and enforce a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with FINRA’s suitability rule as it pertains to excessive trading.

Mr. Bones, who was associated with Worden Capital Management LLC from November 2016 to December 2019, has a history of associations with firms that have been expelled by FINRA. He is currently registered with SW Financial in New York, NY.

If you have lost money with Worden Capital Management, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

FINRA Letter of Acceptance, Waiver, and Consent No. 2017056432604

FINRA and Mr. Bones entered into a Letter of Acceptance, Waiver, and Consent on August 10, 2021, after FINRA alleged that between November 2016 and December 2018, Mr. Bonds, as a manager of a Worden Capital Management branch office, failed to reasonably supervise a former broker, Mr. Orlando, who excessively traded ten customers accounts. The ten accounts incurred realized losses of $415,626 while paying $423,987 in commissions.

Mr. Bones was aware of multiple red flags of excessive trading, including high cost-to-equity rations and high turnover ratios in Mr. Orlando’s customer accounts. According to FINRA, Mr. Bones did not reasonably investigate those red flags or otherwise take meaningful action to stop the misconduct. As a result, Mr. Bons violated FINRA rules 3110 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Excessive trading is unethical and illegal. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you or a loved one were a customer of Worden Capital Management LLC and either sustained financial losses or suspect that your broker did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Original Post:

Another Aegis Capital Corp. Broker (Douglas Szempruch) Suspended for Excessive Trading and Unauthorized Trading

The Financial Industry Regulatory Authority (“FINRA”) has suspended former Aegis Capital Corp. financial advisor Douglas Szempruch from the securities industry for 12 months. Mr. Szempruch consented to the suspension after FINRA alleged that between August 2014 and June 2017, while associated with Aegis Capital Corp., he (1) recommended and executed excessive and unsuitable trades in six customer accounts; (2) exercised discretionary authority without prior written authorization to effect trade in seven accounts; and (3) sent email communications containing misleading statements about an investment opportunity from his firm-approved email account. FINRA also ordered Mr. Szempruch to pay nearly $100,00 in restitution to customers. However, it is unclear whether Mr. Szempruch will be able to satisfy the restitution order.

Mr. Szempruch, who was associated with Aegis Capital Corp. (“Aegis Capital”) from June 2011 to June 2021, is the sixth Aegis broker, or former broker, to be disciplined by FINRA this year. Separately, in March 2021, the firm itself was sanctioned by FINRA and ordered to pay restitution to customers.

Customers of Mr. Szempruch or Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Douglas Szempruch or Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Aegis Capital Corp.

FINRA Letter of Acceptance, Waiver, and Consent No. 2017054317401

FINRA and Mr. Szempruch entered into a Letter of Acceptance, Waiver, and Consent No. 2017054317401 on July 9, 2021, after FINRA alleged that between August 2014 and June 2017, while associated with Aegis Capital Corp., he (1) recommended and executed excessive and unsuitable trades in six customer accounts; (2) exercised discretionary authority without prior written authorization to effect trade in seven accounts; and (3) sent email communications containing misleading statements about an investment opportunity from his firm-approved email account.

Specifically, with regard to excessive trading, FINRA alleged the following:

• Between August 2014 and September 2016, Mr. Szempruch engaged in quantitatively unsuitable trading in six customer accounts.
• Each customer had an investment objective of growth (five customers) or balanced growth (one customer) and a risk tolerance of moderate.
• Szempruch recommended the trading in the six customers’ accounts, and the customers routinely followed his recommendations.
• Additionally, Mr. Szempruch exercised discretion when executing trades in the six customers’ accounts. As a result, Mr. Szempruch exercised de facto control over the customers’ accounts.
• Szempruch’s trading in the six customers’ accounts was excessive and unsuitable given the customers’ investment profiles.

Accordingly, Mr. Szempruch violated FINRA Rules 2111 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had a turnover rate between 7.69 and 48.08.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had cost-to-equity ratios between 34.3% and 109.14%.

Specifically, with regard to exercising discretion without authorization, FINRA alleged the following:

• Between August 2014 and October 2016, Mr. Szempruch exercised discretion to execute 578 trades in seven customers’ accounts without prior written authorization.
• Six of the seven customer accounts were also excessively traded by Mr. Szempruch.
• None of the seven customers provided written authorization for Mr. Szempruch to exercise discretion in their accounts, and Aegis Capital did not accept any of the seven accounts as discretionary accounts.

Accordingly, Mr. Szempruch violated NASD Rule 2510(b) and FINRA Rule 2010.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

The practices of excessive trading customers’ accounts and placing unauthorized trade are unethical and illegal. Such conduct is also a violation of securities rules and regulations and can cause enormous harm to customers.

Finally, with regard to sending misleading statements by email, FINRA alleged:

• Between May 2017 and June 2017, Mr. Szempruch sent the same or similar email to 34 prospective customers, making misleading statements concerning investments in a certain company.
• Szempruch inaccurately represented that he: (1) had visited the company’s production facility: (2) had met with and was in direct communication with the company’s management; (3) was participating in weekly calls with the company’s management, and (4) had first-hand information about the company.
• Although Szempruch was invited to visit the company’s facilities, he did not attend and was instead briefed later by colleagues who did make the trip. He also did not directly communicate with the company’s management but instead closely followed the company. Although Mr. Szempruch understood that his Aegis colleagues (as opposed to Mr. Szempruch himself) had begun conducting periodic status conferences with the company’s management, the company’s management ceased participating in the conferences shortly after executing a March 2017 agreement with Aegis. Mr. Szempruch thus did not have direct or first-hand information about the company and misleadingly described his relationship and interactions with the company and its management.

Accordingly, Mr. Szempruch violated FINRA Rule 2210(d)(1)B) and 2010.

Aegis Capital Corp: 2021 Disciplinary Actions

Mr. Szempruch worked out of the firm’s branch office in Melville, New York, just like brokers Corey Johnson (suspended in March 2021 for engaging in discretionary trading without written authorization) and Steven Luftschein (barred from the securities industry in January 2021 for churning and excessively trading customers’ accounts).

In January 2021, FINRA also suspended former Aegis Capital Corp. broker Anthony (Tony) Tricarico from the securities industry for six months for excessively and unsuitably trading three clients’ accounts registered with Aegis.

In March 2021, FINRA also suspended former Aegis Capital Corp. broker Edmund Zack for excessive trading and using discretion without prior authorization.

A sixth broker, Kishan (Sean) Parikh, was suspended by FINRA earlier this month for both excessive and unauthorized trading.

Separately, the firm itself was sanctioned by FINRA and ordered to pay restitution to customers for a series of violations.

Unfortunately, this is not new. Aegis Capital Corp has a long history of allegations of wrongdoing.

In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure reports.

The alleged conduct by the brokers that have been sanctioned this year, such as excessive trading, churning, and unauthorized trading, are common practices for “boiler room” broker-dealers.

Aegis Capital Corp. – A Duty to Supervise

Financial institutions like Aegis Capital Corp. must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as annuity switches, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

Financial Advisor Douglas Edward Szempruch (CRD No. 4159318)

Douglas Edward Szempruch has 21 years of experience in the securities industry and has been associated with six different firms, including three firms that have been expelled from the industry by FINRA.

His public disclosure report also discloses two customer disputes:

• Customer Dispute (February 2018): A customer alleged that Mr. Szempruch made unsuitable recommendations. The dispute was settled by Szempruch for $30,000. Szempruch stated that the dispute arose as a result of “an unfortunate miscommunication between [himself] and the client.”
• Customer Dispute (May 2004): A customer alleged that Mr. Szempruch made unauthorized trades. Szempruch denied wrongdoing but settled the matter with the customer.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Douglas Szempruch or Aegis Capital Corp. or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

See Also: Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

Customers of Aegis Capital, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Aegis Capital, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

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Update: Former Aegis Capital Corp Broker, Kishan (Sean) Parikh, SUSPENDED by FINRA for Excessive Trading and Unauthorized Trading

The Financial Industry Regulatory Authority’s Office of Hearing Officers has suspended stockbroker Kishan (Sean) Parikh for excessive trading and unauthorized trading. Mr. Parikh, formerly of Aegis Capital Corp. (“Aegis Capital”), was suspended for 18 months and fined $5,000 for excessive trading. He was also suspended for six months and fined $5,000 for unauthorized trades. The suspensions will be served consecutively. He was also ordered to pay restitution to two customers in the total amount of $40,919. However, it is unclear whether he will be able to satisfy the restation order and repay customers.

Customers of Mr. Parikh, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of Sean Parikh, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and review of your legal rights.

To read our previous blog post about Mr. Parikh, please click on the following link: Former Aegis Capital Corp Broker, Kishan (Sean) Parikh, Facing Disciplinary Charges by FINRA for Unsuitable Investment Recommendations and Excessive Trading.

Aegis Capital Corp.

In March 2021, Aegis Capital was fined $80,000 and censured by FINRA over multiple FINRA and MSRB Rules violations. The firm was also ordered to pay restitution of $43,912 to customers.

The firm has a long history of sanctions. In 2017, Aegis was included in a Reuters study that analyzed FINRA data and identified 48 firms whose brokers have been flagged for serious incidents. The Reuters’ analysis showed that Aegis Capital had 39% of its brokers with at least one of the most serious red flags, per the study, on their public disclosure.

Brokerage firms like Aegis Capital must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise their financial advisors or the investment account activity, they may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you were a customer of Kishan Parikh or Aegis Capital and either sustained financial losses or suspect that Mr. Parkh did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

See also:
Another Day, Another Disciplinary Action Against Aegis Capital Corp.

Aegis Capital Fined and Censured by FINRA

Steven Robert Luftschein, Formerly with Aegis Capital Corp, Barred by FINRA

Financial Advisor Anthony Tricarico Suspended by FINRA for Excessive Trading While Employed at Aegis Capital Corp. – New York, NY

Iorio Altamirano LLP Files GPB Automotive Claim Against Aegis Capital Corp

As part of the settlement terms with FINRA, Mr. Orlando consented to a bar from associating with any FINRA member brokerage firm in any capacity.

If you have suffered financial losses investing with Christopher Orlando or Worden Capital Management LLC, or suspect that Mr. Orlando did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Worden Capital Management.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

FINRA Letter of Acceptance, Waiver, and Consent No. 2017056432603

FINRA and Mr. Orlando entered into a Letter of Acceptance, Waiver, and Consent No. 2017056432603 on July 1, 2021, after FINRA alleged that between October 2015 and December 2018, Mr. Orlando excessively traded 13 accounts of 12 customers in violation of Rules 2111 and Rule 2010. Specifically, FINRA alleged:

• During the relevant period, Mr. Orlando engaged in quantitatively unsuitable trading in 13 customer accounts held by a total of 12 customers (one customer held two accounts).
• Orlando recommended high-frequency trading in the 13 customer accounts, and he often recommended the sale of one security and the simultaneous investment of the sale proceeds into a new security within short time periods.
• Orlando’s customers routinely followed his recommendations, and as a result, Mr. Orlando exercised de facto control over the customers’ accounts.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the accounts at issue had annualized turnover rates of between 6.15 and 56.39.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the accounts at issue had annualized cost-to-equity ratios of between 26.12% and 215.61%.

Excessive trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

Mr. Orlando’s trading of the 13 accounts resulted in high turnover rates and cost-to equity ratios, as well as significant losses, as set forth below:

• From November 2016 to September 2017, while associated with Worden Capital Management LLC, Mr. Orlando effected 313 trades in Customer 1’s account, resulting in a turnover rate of 23.04 (equivalent to an annualized turnover rate of 25.13) and a cost-to-equity ratio of 94.57% (equivalent to an annualized cost-to-equity ratio of 103.17%). Mr. Orlando’s trading in Customer 1’s account generated total trading costs of $236,735, including $205,557 in commissions and $22,601 in margin interest, and caused $118,490 in realized losses.
• From October 2017 to August 2018, while associated with Worden Capital Management LLC, Mr. Orlando effected 29 trades in Customer 2’s account, resulting in a turnover rate of 34.57 (equivalent to an annualized turnover rate of 37.72) and a cost-to-equity ratio of 164.65% (equivalent to an annualized cost-to-equity ratio of 179.62%). Mr. Orlando’s trading in Customer 2’s account generated total trading costs of $14,293, including $10,175 in commissions and $429 in margin interest, and caused $34,983 in realized losses.
• From February 2016 to November 2016, while associated with Legend Securities, Inc., Mr. Orlando effected 50 trades in Customer 3’s account, resulting in a turnover rate of 46.99 (equivalent to an annualized turnover rate of 56.39) and a cost-to-equity ratio of 179.67% (equivalent to an annualized cost-to-equity ratio of 215.61%). Orlando’s trading in Customer 3’s account generated total trading costs of $16,345, including $13,565 in commissions and $320 in margin interest, and caused $12,799 in realized losses.
• From January 2016 to November 2016, while associated with Legend Securities, Inc., Mr. Orlando effected 42 trades in Customer 4’s account, resulting in a turnover rate of 43.04 (equivalent to an annualized turnover rate of 46.95) and a cost-to-equity ratio of 170.59% (equivalent to an annualized cost-to-equity ratio of 186.10%). Orlando’s trading in Customer 4’s account generated total trading costs of $14,524, including $12,055 in commissions and $403 in margin interest, and caused $14,816 in realized losses.
• From October 2016 to November 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 84 trades in Customer 5’s account, resulting in an annualized turnover rate of 27.46 and an annualized cost-to-equity ratio of 125.67%. Orlando’s trading in Customer 5’s account generated total trading costs of $53,118, including $45,767 in commissions and $3,590 in margin interest, and caused $34,216 in realized losses.
• From January 2017 through December 2018, while associated with Worden Capital Management LLC, Orlando effected 95 trades in Customer 6’s account, resulting in an annualized turnover rate of 30.10 and an annualized cost-to-equity ratio of 139.85%. Orlando’s trading in Customer 6’s account generated total trading costs of $64,647, including $57,052 in commissions, and caused $32,335 in realized losses.
• From April 2016 to December 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 76 trades in Customer 7’s account, resulting in an annualized turnover rate of 6.15 and an annualized cost-to-equity ratio of 26.12%. Mr. Orlando’s trading in Customer 7’s account generated total trading costs of $35,954, including $30,576 in commissions, and caused $47,377 in realized losses.
• From February 2016 to February 2017, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 76 trades in Customer 8’s account, resulting in an annualized turnover rate of 55.80 and an annualized cost-to-equity ratio of 202.11%. Mr. Orlando’s trading in Customer 8’s account generated total trading costs of $34,935, including $30,200 in commissions and $990 in margin interest, and caused $16,370 in realized losses.
• From July 2017 to February 2018, while associated with Worden Capital Management LLC, Mr. Orlando effected 27 trades in Customer 9’s account, resulting in a turnover rate of 53.22 (equivalent to an annualized turnover rate of 79.83) and a cost-to-equity ratio of 249.80% (equivalent to an annualized cost-to-equity ratio of 374.70%). Orlando’s trading in Customer 9’s account generated total trading costs of $13,390, including $10,330 in commissions and $225 in margin interest, and caused $15,777 in realized losses.
• From September 2016 through January 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 61 trades in Customer 10’s account, resulting in an annualized turnover rate of 35.32 and an annualized cost-to-equity ratio of 165.57%. Mr. Orlando’s trading in Customer 10’s account generated total trading costs of $30,641, including $26,866 in commissions and $1,304 in margin interest, and caused $28,018 in realized losses.
• From October 2015 to February 2018, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 66 trades in Customer 11’s Account A, resulting in an annualized turnover rate of 21.82 and an annualized cost-to-equity ratio of 105.72%. Mr. Orlando’s trading in Customer 11’s Account A generated total trading costs of $20,344, including $16,978 in commissions and $654 in margin interest, and caused $15,378 in realized losses.
• From August 2016 to December 2017, while associated with Legend Securities, Inc. and then Worden Capital Management LLC, Mr. Orlando effected 63 trades in Customer 11’s Account B, resulting in an annualized turnover rate of 9.89 and an annualized cost-to-equity ratio of 43.62%. Mr. Orlando’s trading in Customer 11’s Account B generated total trading costs of $29,523, including $26,381 in commissions, and caused $49,708 in realized losses.
• From January 2017 to December 2018, while associated with Worden Capital Management LLC, Mr. Orlando effected 41 trades in Customer 12’s account, resulting in an annualized turnover rate of 18.63 and an annualized cost-to-equity ratio of 85.54%. Mr. Orlando’s trading in Customer 12’s account generated total trading costs of $16,767, including $11,370 in commissions and $964 in margin interest, and caused $63,413 in realized losses.

Mr. Orlando’s trading in these customers’ accounts was excessive and unsuitable given the customers’ investment profiles. As a result of Mr. Orlando’s excessive trading, the customers suffered collectively realized losses of $483,680 while paying total trading costs of $581,216, including commissions of $496,872.

Financial Advisor Christopher George Orlando (CRD No. 4136262)

Martin Christopher Orlando had 18 years of experience in the securities industry and has been associated with ten different broker-dealers, including two firms that FINRA has expelled:

• Spartan Capital Securities, LLC, from July 2020 to May 2021.
• Bernard Financial Services, Inc., from December 2019 to January 2020.
• Worden Capital Management LLC, from November 2016 to December 2019.
• Legend Securities, Inc. (expelled by FINRA), from July 2015 to November 2016.
• National Securities Corporation, from December 2013 to July 2015.
• Joseph Gunnar & Co. LLC, from June 2012 to December 2013.
• Brookstone Securities, Inc. (expelled by FINRA), from October 2009 to June 2012.
• P. Turner & Company, L.L.C., from August 2006 to November 2009.
• Gunnallen Financial, Inc., from August 2005 to August 2006.
• Joseph Stevens & Company, Inc., from December 2002 to August 2005.

FINRA’s BrokerCheck tool can be used to obtain Mr. Orlando’s complete and updated disclosure reports.

Worden Capital Management LLC – A Duty to Supervise

Financial institutions like Worden Capital Management LLC must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Christopher George Orlando or Worden Capital Management LLC or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

FINRA previously suspended the broker in 2019 after FINRA alleged that he exercised discretion in customers’ accounts without prior authorization from the customers and without seeking or obtaining approval from his firm.

If you have suffered financial losses investing with Joseph Stone Capital L.L.C., or suspect that Joseph Stone Capital L.L.C. did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your legal rights.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Joseph Stone Capital.

Joseph Stone Capital L.L.C.

According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that seventy-six percent (76%) of Joseph Stone Capital’s brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Joseph Stone Capital L.L.C. Reveals Troubling Pasts for Owners, Executives, and Brokers

The suspended broker was one of the brokers who had serious incidents reported on his BrokerCheck report.

FINRA Letter of Acceptance, Waiver, and Consent No. 2020066888001

FINRA and the Joseph Stone Capital broker entered into a Letter of Acceptance, Waiver, and Consent No. 2020066888001 on June 29, 2021, after FINRA alleged that between May 2018 and March 2019, the financial advisor excessively and unsuitably traded a customer’s account in violation of FINRA Rules 2111 and 2010. Specifically, FINRA alleged:

• Between May 2018 and March 2019, while he was registered through Joseph Stone Capital, the broker engaged in excessive and unsuitable trading in a customer’s account.
• During the relevant period, the broker recommended that the customer place 33 trades in his account, and the customer accepted the broker’s recommendations.
• Although the customer’s account had average monthly equity of approximately $33,600, the broker recommended trades with a total principal value of more than $588,000, which resulted in an annualized turnover rate of more than 15.
• Collectively, the trades that the broker recommended caused the customer to pay $7,653.21 in commissions and other trading costs, which resulted in an annualized cost-to-equity ratio in excess of 20 percent—meaning that the customer’s account would have had to grow by more than 20 percent annually just to break even.
• The broker’s recommended securities transactions in the customer’s account were excessive and unsuitable. Therefore, the broker violated FINRA Rules 2111 and 2010.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. According to FINRA, the account at issue had a turnover rate of 15.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. According to FINRA, the account at issue had a cost-to-equity ratio of 20%.

Excessive trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.

Joseph Stone Capital – A Duty to Supervise

Financial institutions like Joseph Stone Capital must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Joseph Stone Capital or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

The recommended strategy and its high total costs allegedly harmed his customers. The complaint alleges that across 66 customer accounts in which Mr. Reda executed ten or more trades connected with his unsuitable investment strategy, Mr. Reda charged $952,764 in commissions and fees, while the customers lost $934,482.

If you or a loved one were a customer of broker Marc Augustus Reda or Spartan Capital Securities, LLC, contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your legal rights.

FINRA Disciplinary Proceeding No. 2019063526901

On June 15, 2021, the FINRA Department of Enforcement filed a complaint against broker Marc Augustus Reda. The complaint includes the following allegations:

• From January 2017 to December 2019, while associated with Spartan Capital Securities, LLC, Mr. Reda recommended a highly speculative investment strategy to his customers that involved active trading of a company’s stock in anticipation of corporate announcements that could potentially impact the price of the company’s stock.
• Reda typically recommended that hat his customers acquire a position shortly before the anticipated corporate announcement and then sell the position shortly after the announcement. Mr. Reda would then recommend the customer use the proceeds of the sale to repeat the process and purchase one or more new positions in one or more other companies with pending announcements.
• Reda primarily implemented his strategy in two ways. For one, he purchased the common stock of biotech companies in his customers’ accounts in anticipation of public announcements regarding, for example, drug trial results or U.S. Food and Drug Administration (FDA) approval.
• For example, Mr. Reda recommended that many of his customers acquire a position in Histogenics Corporation from October to December 2018 in advance of an anticipated public announcement on the company’s discussions with the FDA on a clinical trial of a knee replacement product in development. When Histogenics announced in late December 2018 that it would the discontinue development of the product in response to discussions with the FDA, Mr. Reda recommended his customer sell their positions at a significant loss and reinvest the proceeds in Novavax Inc.
• Reda also implemented his strategy by recommending that his customers purchase the common stock of public companies in advance of quarterly earnings announcements.
• For example, in July and August 2019, Mr. Reda recommended that certain of his customers acquire positions in large-cap companies such as CSX Corporation, PayPal Holdings Inc., Avis Budget Group Inc., Cisco Systems Inc. on, or shortly before, the day of each company’s scheduled quarterly earnings call and then sell the positions (at a loss, as it relates to the companies previously identified) after the earnings announcement to acquire positions in other companies with pending earnings announcements.
• Reda’s recommended strategy often involved the use of in-and-out, active trading.
• Based on Mr. Reda’s recommendations, his customers’ accounts were actively traded and generally concentrated in one or two positions at any given time.
• Reda did not conduct any diligence and did not consider how the costs associated with his active trading strategy would affect the performance of his customers’ accounts.
• The active trading strategy he recommended to customers resulted in customers paying Mr. Reda and Spartan Capital substantial commissions and fees and caused his customers to almost always lose money.
• Indeed, during the relevant period, aggregate customer losses closely mirrored aggregate commissions and fees paid to Reda and Spartan Capital. Across the 66 customer accounts in which Mr. Reda executed ten or more trades in connection with his unsuitable investment strategy during the relevant period, Mr. Reda charged $952,764 in commissions and fees while the customers lost $934,482.
• Fifty-four of those 66 accounts, or 82 percent, experienced cost-to-equity ratios (annualized when account funded for at least one year, otherwise non-annualized) of 20 percent or more during the relevant period.
• In executing his investment strategy, Mr. Reda churned and excessively traded 21 customer accounts he controlled, causing the customers to pay $264,734 in commissions and fees. Accounts funded for one year or more experienced annualized cost-to-equity ratios of 30 percent to 130 percent with annualized turnover rates of 4.6 to 23.5, while those accounts funded for less than one year experienced non-annualized cost-to-equity ratios of 74 percent to 334 percent and non-annualized turnover rates of 11.2 to 100.6 (or, if annualized, cost-to-equity ratios of 88 percent to 717 percent and turnover rates of 13.4 to 276.7).
• Reda’s investment strategy and the trades he recommended to implement the strategy were also unsuitable for three of his customers based on their specific investment objectives, risk tolerances, and financial needs.
• Reda also executed 98 trades in connection with his strategy in the accounts of six customers without first obtaining authorization from the customers.
• In September 2018, when executing buy transactions in 22 customer accounts using the proceeds of sale transactions three days earlier, Mr. Reda charged excessive commissions averaging 8.6 percent on the “proceeds” transactions. Mr. Reda intentionally waited three days to execute the buy transactions to circumvent his firm’s supervisory review of commissions of more than five percent on proceeds transactions.
• Over the course of his association with Spartan Capital, Mr. Reda willfully failed to disclose eight customer complaints alleging sales practice violations on his Uniform Application for Securities Industry Registration or Transfer (Form U4).
• Reda also willfully failed to timely amend his Form U4 to disclose an unsatisfied tax lien and an unsatisfied tax warrant, totaling $225,929.49.
• Based on the foregoing conduct, Reda willfully violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Exchange Act Rule 10b-5, and violated FINRA Rules 2020 and 2010 [Churning]; FINRA Rules 2111(a) and 2010 [Quantitative Suitability / Excessive Trading]; FINRA Rules 2111(a) and FINRA Rule 2010 [Reasonable Basis Suitability]; FINRA Rules 2111(a) and FINRA Rule 2010 [Customer-Specific Suitability]; FINRA Rule 2010 [Unauthorized Trading]; FINRA Rules 2121 and 2010 [Excessive Commissions]; and Article V, Section 2(c) of FINRA’s By-Laws and FINRA Rules 1122 and 2010 [Form U4 Disclosure Failures].

FINRA’s current enforcement complaint is not the first time that Mr. Reda has been the subject of regulatory sanctions. In 2017, Mr. Reda consented to a three-month suspension after FINRA alleged that he exercised discretion in customers’ accounts without written authorization from the customers and without having obtained his firm’s approval to treat those accounts as discretionary. FINRA’s findings also stated that Mr. Reda failed to timely disclose on this Form U4 a federal tax lien against him in the amount of $575,101.

Financial Advisor Marc Augustus Reda (CRD No. 2757330)

Mr. Reda had 21 years of experience in the securities industry and has been associated with 15 different firms, including three firms that have been expelled from the industry by FINRA:

• Johnson Thomas Financial.
• Prestige Financial Center, Inc.
• Clark Street Capital, Inc.

According to his public disclosure report, Mr. Reda’s employment has also been terminated at least twice after allegations of wrongdoing. In January 2016, Mr. Reda was “permitted to resign” from PHX Financial, Inc. after the firm alleged that he violated the firm’s cell phone policy. In 2001, Mr. Reda “voluntarily resigned” after a customer complaint. Mr. Reda denied that a customer complaint existed.

Mr. Reda’s public disclosure report also discloses that he has been the subject of at least 12 customer disputes, including:

• Customer Dispute (January 2020): A customer filed a securities arbitration complaint alleging $72,026 in damages as a result of misrepresentations and unsuitable investment recommendations. The alleged conduct occurred when Mr. Reda was employed by Spartan Capital Securities, LLC. The dispute is pending.
• Customer Dispute (January 2018): A customer filed a securities arbitration complaint that alleged unauthorized trading and churning. An arbitration panel found Spartan Capital Securities, LLC liable and awarded the customers monetary compensation.
• Customer Dispute (July 2017): A customer filed a complaint with PHX Financial, Inc. alleging that Mr. Reda inappropriately managed the customer’s account and charged excessive commissions. The matter was settled by PHX Financial, Inc. for monetary compensation.
• Customer Dispute (June 2016): A customer filed a securities arbitration complaint against Mr. Reda and PHX Financial, Inc., alleging that Mr. Reda made unsuitable investment recommendations and breached his fiduciary duty. The customer alleged $100,000 in damages. The matter was reportedly settled by PHX Financial, Inc. for $26,000.
• Customer Dispute (April 2016): A customer filed a complaint with PHX Financial, Inc. alleging $580,0000 in damages as a result of unauthorized trading. The firm settled the matter for $85,000.
• Customer Dispute (March 2016): A customer filed a complaint with PHX Financial, Inc. alleging that Mr. Reda did not place two stop-loss orders as had been instructed. The customer alleged $31,250 in damages. The firm settled the matter for $14,800.
• Customer Dispute (March 2016): A customer filed a complaint with Phoenix Financial Services. alleging $500,000 in damages. The complaint alleged unauthorized trades, poor communication, and overconcentration of investments. The firm settled the matter for $112,500.
• Customer Dispute (January 2016): A customer filed a complaint with Phoenix Financial Services. alleging $400,000 in damages. The complaint alleged unauthorized trades. The firm settled the matter for $120,000.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

Excessive trading, churning, and unauthorized trading are unethical and illegal practices. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

Spartan Capital Securities, LLC – Supervisory Duties

Brokerage firms like Spartan Capital Securities, LLC must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, churning, and unauthorized trades, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you or a loved one were a customer of broker Marc Augustus Reda or Spartan Capital Securities, LLC, and either sustained financial losses or suspect that Mr. Reda did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account or annuity.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-three other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

If you have suffered financial losses investing with Salvatore Pizzimenti or Worden Capital Management, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Worden Capital Management.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019060753501

Salvatore Pizzimenti and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on June 11, 2021, after Mr. Pizzimenti refused to provide on-the-record testimony connected with FINRA’s investigation. The investigation concerned Mr. Pizzimenti’s trading of customer accounts while he was associated with Worden Capital Management.

On May 26, 2021, in connection with FINRA’s investigation, FINRA sent a request to Mr. Pizzimenti for on-the-record testimony pursuant to FINRA Rule 8210. On May 26, 2021, Mr. Pizzimenti, through counsel, stated on a phone call that he would not appear for on-the-record testimony at any time.

By refusing to testify, Mr. Pizzimenti violated FINRA Rules 8210 and 2010.

Financial Advisor Salvatore Pizzimenti (CRD No. 2879580)

Salvatore Pizzimenti had 15 years of experience in the securities industry and has been associated with seven different firms, including two firms that have been expelled by FINRA:

• Worden Capital Management, from November 2016 to December 2019.
• Legend Securities, Inc. (expelled by FINRA), from August 2011 to November 2016.
• P. Turner & Company, L.L.C., from February 2010 to August 2011.
• National Securities Corporation, from January 2009 to February 2010.
• Pointe Capital, Inc., from January 2007 to January 2009.
• Great Eastern Securities, Inc., from September 2005 to January 2007.
• Salomon Grey Financial Corporation (expelled by FINRA), from November 2004 to September 2005.

According to his BrokerCheck report, Mr. Pizzimenti has been the subject of at least five customer complaints, including a pending dispute. The pending dispute was filed in January 2021 by a customer alleging that Mr. Pizzimenti, while associated with Worden Capital Management, caused nearly $90,000 in damages. The customer filed a securities arbitration complaint, which included the following causes of action: churning and quantitative suitability, and misrepresentation, and unsuitability.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest. Churning is unethical and illegal and can cause enormous harm to customers.

Three of the other four customer disputes also involved allegations of churning. All four of the other disputes have been resolved by settlement:

• Customer Dispute (January 2013): A customer filed a securities arbitration complaint alleging $500,000 in damages as a result of churning and unsuitable recommendations. The dispute was settled by Mr. Pizzimenti.
• Customer Dispute (August 2012): A customer filed a securities arbitration complaint alleging $1 million in damages. The complaint alleged negligence, churning, unsuitability, fraud, breach of contract, and breach of fiduciary duty. The dispute was settled by J.P. Turner & Company and Mr. Pizzimenti for $240,000. Mr. Pizzimenti contributed $120,000.
• Customer Dispute (July 2012): A customer filed a securities arbitration complaint alleging $4 million in damages. The complaint alleged negligence, breach of fiduciary duty, breach of contract, misrepresentation, and unsuitable and excessive trading. The dispute was settled by National Securities Corporation and Mr. Pizzimenti for $70,000.
• Customer Dispute (April 2008): A customer filed a securities arbitration complaint alleging that Mr. Pizzimenti failed to follow instructions related to the recommendation and purchase of technology stocks. The dispute was settled for $130,000 by Mr. Pizzimenti.

Supervisory Duties

Brokerage firms like Worden Capital Management must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as churning, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have lost money with financial advisor Salvatore Pizzimenti or Worden Capital Management, LLC, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

Mr. Flower was also ordered to pay restitution plus prejudgment interest to harmed customers. However, it is unclear whether he will be able to satisfy the judgment.

Mr. Flower was associated with Spartan Capital Securities, LLC since June 2019. Previously, he was associated with SW Financial from December 2015 to June 2019.

Customers of Mr. Flower, including customers that have been notified that they may be receiving restitution, should consult with a securities arbitration law firm. If you or a loved one were a customer of James Flower, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Spartan Capital Securities, LLC and SW Financial.

FINRA Disciplinary Proceeding No. 2017052701101

Mr. Flower was a registered representative with SW Financial, from January 1, 2016, through July 31, 2018. He is now registered with another FINRA member firm. Although he is in New York, he generates business by cold calling people all over the country, focusing primarily on older customers who are small business owners and retirees.

The five customers involved in this case resided in Louisiana, Maryland, Oklahoma, and Texas when they started working with Flower. They ranged in age from mid-fifties to late-seventies. Four of the customers own small businesses; the fifth is a retired aircraft maintenance worker.

After a six-day hearing conducted in January 2021, the FINRA Hearing Officers “Hearing Officers” held that Mr. Flower excessively traded in five customers’ accounts, executed 17 unauthorized trades, and mismarked 58 transactions:

Excessive Trading and Churning

The FINRA Hearing Officers “Hearing Officers” concluded that Mr. Flower engaged in excessive trading and churning in five customers’ accounts for his own benefit in reckless disregard for his customers’ interests.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. The Hearing Officers found that the accounts at issue had annualized turnover rates ranging from 16 to 33.

The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. The accounts examined by FINRA had cost-to-equity ratios ranging from 69% to 176%.

The Hearing Officers also found that Mr. Flower engaged in in-and-out trading in the accounts, buying and then selling the same stock in a matter of days. In-and-Out trading is a hallmark sign of excessive trading. For example, in one account, Mr. Flower bought 5,000 shares of Advanced Micro Devices, Inc. on November 13, 2017, but then sold all the shares two days later, on November 15, 2017, for a realized loss of $2,668. Among others, he made similar trades in stocks of Cirrus Logic Inc. and OPKO Health Inc.

Further, the Hearing Officers found that the customers were unsophisticated investors. None of the investors had actively traded securities before; none of them tracked what was happening in their accounts in any meaningful way, and none of them had much of an understanding about the way securities brokers are paid or, or Mr. Flower was paid. They had no idea of the costs they were incurring from the frequent trading and use of margin in the accounts. In fact, the Hearing Officers concluded that Mr. Flower discouraged the customers from trying to understand what was going on in their accounts.

Mr. Flower’s accounts decimated the value of the customers’ accounts. The five customers together suffered realized losses (including all trade costs, fees, and margin interest) totaling roughly $223,000. During the same period, Mr. Flower charged commissions on the trading in the five accounts of nearly $185,000, of which he received 70%, or nearly $130,000.

FINRA’s investigation began in September 2017, then a nephew of one of Mr. Hicks’ customers called FINRA’s Senior Helpline. The customer was 90 years old, suffering from dementia, and needed to sell her shares to help pay for the cost of her nursing home care. Mr. Hicks had sold the customer two REITs, one when she was 87 years old and the second when she was 88.

In April 2018, the Senior Helpline received another call. This time, the call came from the son of an 85-year-old woman who had 90 percent of her investment in non-traded REITS.

Unauthorized Trading

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion. In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

The account of the retired aircraft maintenance worker was a non-discretionary account. The Hearing Officers held that Mr. Flower did not seek prior authorization from the retired aircraft maintenance worker for 17 trades. Mr. Flower executed 16 of those trades while the customer was experiencing serious medical issues that interfered with his daily living. The unauthorized trading resulted in more than $30,000 in market losses. The Hearing Officers concluded that the misconduct aided Mr. Flower’s excessive trading and churning.

Excessive trading, churning, and unauthorized trading are unethical and illegal practices. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

Mismarked Orders

A “solicited” trade is a trade that was the broker’s idea. It is a trade where the financial advisor initiated and recommended the buy or sell transaction to the client. An “unsolicited” trade is a trade that the customer initiated. It is a trade made by the client on their own initiative, without recommendations, suggestions, or prompting from the broker.

The distinction between solicited and unsolicited is important to determine whether the broker’s suitability and best interest duties arise. If the trade is solicited, or recommended by the broker, the broker has a duty to make a suitable recommendation that is in the best interest of the customer. Click here to read more about solicited v. unsolicited trades.

The Hearing Officers found that Mr. Flower mismarked 58 sales in various accounts as unsolicited, when in fact, the trades were solicited. According to the Hearing Officers, Mr. Flower’s own testimony revealed that he prompted the customers to act. The trades occurred after he called his customers to tell them a stock in their portfolio was losing value, to suggest that there was a profit to be taken, or to recommend a purchase that would require the sale of an existing position. Most of the purported unsolicited trades were sales at a loss. The mismarking of the sales as unsolicited made it seem that the customers had chosen to take the losses and helped obscure Mr. Flower’s excessive trading and churning. This misconduct caused SW Financial’s books and records to be false and inaccurate.

Financial Advisor James William Flower (CRD No. 2817701)

James Flower had 23 years of experience in the securities industry and has been associated with 16 different firms, including eight firms that have been expelled by FINRA:

• Spartan Capital Securities, LLC in Garden City, NY, from June 2019 to the present.
• SW Financial in Melville, NY, from December 2015 to June 2019.
• Laidlaw & Company (UK) Ltd. in Melville, NY, from May 2014 to December 2015.
• Global Arena Capital Corp (expelled by FINRA) in Melville, NY, from November 2010 to May 2014.
• Prestige Financial Center, Inc. (expelled by FINRA) in Melville, NY, from October 2009 to November 2010.
• Brookstone Securities, Inc. (expelled by FINRA) in Garden City, NY, from August 2009 to November 2009.
• Prestige Financial Center, Inc. (expelled by FINRA) in Garden City, NY, from April 2008 to September 2009.
• Obsidian Financial Group, LLC (expelled by FINRA) in Woodbury, NY, from April 2008 to May 2008.
• Westrock Advisors, Inc. (expelled by FINRA) in Woodbury, NY, from April 2006 to April 2018.
• P. Turner & Company, L.L.C. in Garden City, NY, from August 2004 to May 2006.
• Westrock Advisors, Inc. (expelled by FINRA) in New York, NY, from August 2004 to August 2004.
• Granite Associates, Inc. in Delray Beach, FL, from January 2007 to July 2004.
• Continental Broker-Dealer Corp. in Carle Place, NY, from April 2003 to January 2004.
• Harrison Securities, Inc. (expelled by FINRA) in Port Washington, NY, from January 2001 to May 2003.
• Whitehall Wellington Investments, Inc. in Port Washington, NY, from September 1998 o December 2000.
• Tasin & Company, Inc. (expelled by FINRA) in Hauppauge, NY, from January 1998 to September 1998.
• Duke & Co., Inc. in New York, NY, from December 1997 to January 1998.
• Gaines, Berland Inc. in Bethpage, NY, from September 1997 to November 1997.

Historically, Long Island, New York, has been a haven for boiler-room brokerage firms. This notoriety has inspired blockbuster movies such as “Boiler Room” and “The Wolf of Wall Street.” The Wolf of Wall Street was based on the true story of broker Jordan Belfort and his firm, Stratton Oakmont. Jordan Belfort pleaded guilty to securities fraud and money laundering in 1999.

The term “boiler room” often refers to an outbound call center that sells questionable investments through unfair, dishonest, and high-pressure sales tactics.

Many broker-dealers still use boiler room tactics such as cold-calling customers and high-pressure or aggressive sales tactics. Other modern-day boiler room brokerage firms have a propensity for broker misconduct, such as excessive trading, churning, and unauthorized trades. Mr. Flower has been accused of doing all of the above.

Regulatory Disclosure

In 2017, Mr. Flower was suspended for three months by FINRA for recommending that 13 of his customers invest in a highly volatile exchange-traded note without having a reasonable basis for recommending the transactions. The findings stated that at the time Mr. Flower was recommending the exchange-traded note, Mr. Flower incorrectly believed that it traded inverse to the S&P 500 index. This erroneous perception led him to recommend that customers purchase and hold the exchange-traded note as a hedge to an anticipated overall market decline. Based on Mr. Flower’s recommendations, 13 customers suffered losses in excess of $249,000 after holding their shares for periods ranging from two weeks to over one year. Mr. Flower lacked a sufficient understanding of the mechanics of the exchange-traded note to form a reasonable basis upon which to recommend the purchase of it to his customers.

Customer Disputes

According to his BrokerCheck report, Mr. Flower has been the subject of at least three customer complaints:

• Customer Dispute (September 2015): A customer submitted a written complaint to Laidlaw and Company (UK) Ltd alleging that Mr. Flower churned the customer’s account and made unsuitable investment recommendations. The complaint alleged $90,000 in damages. The firm settled the matter for $45,000.
• Customer Dispute (September 2015): A customer filed a securities arbitration complaint alleging $250,000 in damages. The customer alleged over-concentration, unsuitability, excessive use of margin, and churning. The dispute was stayed due to Mr. Flower filing for bankruptcy in 2016.
• Customer Dispute (April 2010): A customer filed a securities arbitration complaint alleging $100,000 in damages. The customer alleged that Mr. Flower misrepresented the characteristics and risks associated with multiple purchases of an Exchange-Traded Fund and that he failed to execute a stop-loss order. The customer also alleged that Mr. Flower made misrepresentation in connection with using margin in the account. The dispute settled for $67,500.

Spartan Capital Securities, LLC and SW Financial – Supervisory Duties

Brokerage firms like Spartan Capital Securities, LLC and SW Financial must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, churning, and unauthorized trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have lost money with financial advisor James William Flower, Spartan Capital Securities, LLC, or SW Financial, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

The sixteen customers experienced total losses of $814,509.

If you have suffered financial losses investing with Ross Barish or Joseph Stone Capital L.L.C., or suspect that Mr. Barish did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account or annuity contract.

Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Joseph Stone Capital.

Joseph Stone Capital L.L.C.

According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that seventy-six percent (76%) of Joseph Stone Capital’s brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Joseph Stone Capital L.L.C. Reveals Troubling Pasts for Owners, Executives, and Brokers

Mr. Barish is one of the brokers who had serious incidents reported on his BrokerCheck report.

Financial Ross Adam Barish (CRD No. 3094364)

Mr. Barish has 22 years of experience in the securities industry and has been associated with seven broker-dealers. He averages just over three years at each stop. In February 2013, he was hired by Joseph Stone Capital.

Prior Associations

Mr. Barish has been affiliated with the following brokerage firms:

• Joseph Stone Capital L.L.C. in Mineola, New York, from February 2013 to the present.
• First Midwest Securities, Inc. in Garden City, New York, from October 2008 to February 2013.
• J.P. Turner & Company, L.L.C. in Westbury, New York, from February 2008 to October 2008.
• Ladenburg Thalmann & Co. Inc. in Princeton, New Jersey, from September 2006 to February 2008.
• Broadwall Capital LLC in New York, New York, from September 2004 to September 2006.
• Ladenburg, Thalmann & Co, Inc. in New York, New York, from November 2002 to September 2004.
• Ladenburg Capital Management Inc. in Bethpage, New York, from January 2000 to November 2002.
• Sands Brothers & Col. in New York, New York, from March 1999 to January 2000.

SEC Investigation

The SEC’s complaint alleged that Mr. Barish defrauded sixteen retail customers by executing a high-cost, in-and-out pattern of trading that lost his customers over $800,000 while generating commissions and fees for him of more than $400,000. Although Mr. Barish told customers that he was an experienced broker, Mr. Barish did nothing more than buy stocks and sell them after a brief holding strategy. According to the complaint, his “strategy” amounted to a scheme to enrich himself while persuading customers that profits were just around the corner.

According to the SEC’s complaint, Mr. Barish’s conduct in relation to these sixteen customers, whose accounts were active during different periods of time between 2013 and July 2019, violated the antifraud provisions of the federal securities laws in four respects:

• Mr. Barish had a duty to have a reasonable basis for recommendations that he made of his customers. In violation of this duty, Mr. Barish recommended to sixteen customers a high cost, in-and-out trading strategy without any reasonable basis to believe that these recommendations were suitable for anyone. The recommended trading strategy resulted in losses for the customers and ill-gotten gains for Mr. Barish. Mr. Barish knew or recklessly disregarded that his recommendations, for which he had no reasonable basis, were not suitable for anyone.
• Mr. Barish’s recommended trading strategy was unsuitable for his customers in light of those customers’ financial needs, investment objectives, and circumstances.
• Mr. Barish made material misrepresentations to and omitted material information from his customers. By making a recommendation to purchase or sell a security to a customer, Mr. Barish implicitly represented that he had a reasonable basis for that recommendation. As Mr. Barish failed to have a reasonable basis for his recommendations to the sixteen customers, these recommendations constituted misrepresentations because Mr. Barish knew that the excessive costs which accumulated from the frequency trading made even a minimal profit all but impossible.
• Mr. Barish engaged in unauthorized trading by placing trades in customer accounts without obtaining their authorization to do so.

As a result of these violations, Mr. Barish received more than $400,00 in commissions and fees. The sixteen customers experienced total losses of $814,509.

Customer Complaints

According to his BrokerCheck report, Mr. Barish has been the subject of two customer lawsuits, in the form of FINRA securities arbitrations, since 2017:

• Customer Dispute (April 2017): A customer filed a securities arbitration complaint alleging $48,000 in damages as a result of unsuitable investment recommendations, excessive trading, breach of fiduciary duty, and breach of contract. The matter was settled by Joseph Stone Capital, LLC and Mr. Barish for monetary compensation.
• Customer Dispute (February 2017): A customer filed a securities arbitration complaint alleging $50,000 in damages as a result of unsuitable investment recommendations, churning, and excessive margin. The matter was settled by Joseph Stone Capital, LLC and Mr. Barish for monetary compensation.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

Excessive trading and churning are unethical and illegal practices in the securities industry. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

Joseph Stone Capital – A Duty to Supervise

Financial institutions like Joseph Stone Capital must properly supervise financial advisors and customer accounts. Brokerage firms must establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to supervise its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you have suffered investment losses with Ross Barish or Joseph Stone Capital or suspect other inappropriate activity occurred in your investment or retirement account, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential review of your legal rights.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

**Corrections and Clarifications: June 30, 2021**

• An earlier version of this blog post incorrectly stated that according to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the most brokers with a history of significant disclosures. According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures, not the most.

The former stockbroker, Lawrence (Larry) Fawcett, was barred from the securities industry by FINRA in March 2018 for failing to cooperate with a FINRA investigation into his outside business activities. FINRA subsequently revoked Mr. Fawcett’s securities license for failing to pay a fine and suspended him for failing to comply with an arbitration award. Mr. Fawcett, who had only been in the securities industry for five years, had an extensive history of customer complaints, regulatory sanctions, associations with disreputable brokerage firms, and an employment termination after allegations of wrongdoing.

If you have lost money with Lawrence Fawcett or Westpark Capital, Inc., contact FINRA arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.

Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms, such as Westpark Capital, Inc.

Charles A. Hailey and Karen G. Hailey v. Westpark Capital, Inc., FINRA Case No. 20-00320

On May 25, 2021, a FINRA Dispute Resolution Services arbitration panel awarded customers Charles A. Hailey and Karen G. Hailey nearly $800,000.

In the Statement of Claim, filed in January 2020, Claimants asserted the following causes of action: breach of fiduciary obligations; breach of contract; negligence/professional negligence; violations of the Virginia Securities Act and blue sky statutes; violations of federal securities law; common law fraud/ misrepresentations and, omissions; unsuitability, including both quantitative and qualitative, specifically including overconcentration and use of significant margin; failure to supervise; violations of state and federal rules and regulations; agency, respondeat superior and control person liability; and general equitable principle that apply in arbitration.

The causes of action related to private placement investments in Monster Digital, Inc., Miramar Labs, Inc., Protagenic Therapeutics, Inc. stock, the volume of trading (i.e., excessive trading/churning) in other securities. In addition, the claim sought damages for the recommended purchase of gold, through GFS Associates, and precious metals, through Omega Knight 2 LLC. In 2018, Omega Knight 2, LLC was charged by the Commodity Futures Trading Commission for fraud. The investments in GFS Associates and Omega Knight 2 LLC were private securities transactions sold by Mr. Fawcett without the approval of his firm, Westpark Capital, Inc.

In a rare occurrence, the arbitration panel devoted uncompensated time to drafting and issuing an explained decision which the parties did not request. A summary of the panels’ findings are below:

Private Placements:

The arbitration panel found that Mr. Fawcett had no prior experience in recommending private placement investments to customers prior to joining Westpark Capital, Inc. in June 2015. The panel also found that the customer, Mr. Hailey, had invested in only one private fund prior to following Mr. Fawcett’s recommendations and investing in the subject private placements. The prior private fund related to real estate and was recommended by people whom Mr. and Mrs. Hailey had known well from their years of experience in the Richmond, Virginia scene. Accordingly, the arbitration panel concluded that the three private placement investments recommended by Mr. Fawcett were far outside of Mr. Hailey’s range of sophistication, and therefore unsuitable for him. The panel also concluded that the illiquid private placement investments were unsuitable given the Hailey’s advanced age and lack of liquidity in their assets. Ultimately, the panel determined that the recommendations to invest in the private placements were made for Mr. Fawcett’s best interests, not those of the customers.

Private placements are private securities offerings exempt from registration with the Securities and Exchange Commission (SEC). There are significant risks associated with investments in private placements, particularly their lack of liquidity and speculative nature.

Churning:

The arbitration panel concluded that the level of activity in the customers’ accounts was unsuitable for any investor and that it was done in order to generate commissions. The panel held Westpark Capital, Inc. liable for permitting the churning and responsible for returning the commissions to the Haileys.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

Excessive trading and churning are unethical and illegal practices in the securities industry. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

Failure to Supervise:

The customers argued that Westpark Capital, Inc. failed to adequately supervise Mr. Fawcett and their accounts. They argued that Westpark Capital, Inc. took a laissez-faire approach to supervision, ignoring warning signs of trouble. Their expert concluded that Westpark Capital, Inc.’s failure to follow up on these “red flags” was negligent. The incidents that the panel found the most troubling included the following:

• Westpark Capital, Inc. hired Mr. Fawcett without an in-person interview, despite his brief and checkered history as a broker. Mr. Fawcett twice failed his Series 7 (General Securities Representative Qualification Examination), then moved from firm to firm six times in four years. One of the firms terminated him for “failure to provide services to the firm for he was engaged.” Another was subsequently expelled by FINRA. Although members of the five-person hiring committee testified, they never made clear why they hired someone with such a weak track record in the first place.
• Westpark Capital, Inc. permitted Mr. Fawcett to work from his home in Queens, New York, even though Westpark Capital, Inc. maintained an office in Manhattan. The two members of Westpark Capital, Inc.’s office in Boca Raton, Florida, assigned to supervise Mr. Fawcett had FINRA infractions on their records that did not inspire confidence.
• Six months after Westpark Capital, Inc. hired Mr. Fawcett, FINRA required him to participate in an in-person interview. Two months later, Mr. Fawcett settled an arbitration claim filed by a client at Salomon Whitney by agreeing to pay $30,000.00 out of personal funds. Westpark Capital, Inc. evidently did not regard the claim, interview, or settlement as cause for concern.
• For its only in-home inspection of Mr. Fawcett, Westpark hired Bernard E. Young, who had been banned from the securities industry for participating in a Ponzi scheme. Not surprisingly, Mr. Young noted that Mr. Fawcett had a personal fax machine but did not inquire how it was being used. Nor did he follow up when Mr. Fawcett described Bullhammer, which he listed on his application as an account used for tax purposes, as a software program. No one from Westpark followed up either. Mr. Fawcett used the fax machine to send false information to Mr. Hailey. He used the back account to accept funds from Mr. Hailey for purchases of gold from other firms.

The arbitration panel held that Westpark Capital, Inc. accorded Mr. Fawcett far more freedom and trust than he had earned and that the consequences were predictable.

Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

Selling Away:

The arbitration panel concluded that Westpark Capital, Inc. was not liable for Mr. Fawcett selling the gold and precious metal securities that were not approved by the firm.

When a financial advisor participates in a private securities transaction that is not approved by a firm, it is referred to as “selling away.” The prohibitions on selling away are designed to protect investors by ensuring that all brokers’ activities are reasonably supervised by firms that employ them. Further, securities that are sold away from a firm have not been vetted by the firm.

Financial Advisor Lawrence John Fawcett Jr. CRD No. 5851474

Lawrence John Fawcett Jr., who also goes by Larry, was barred from the securities industry in December 2020. Mr. Fawcett’s license was revoked by FINRA for failing to comply with another arbitration award.

Mr. Fawcett, who had only been in the securities industry for five years, had an extensive history of customer complaints, regulatory sanctions, associations with disreputable brokerage firms, and an employment termination after allegations of wrongdoing.

Past Associations:

Mr. Fawcett entered the securities industry in 2012. During the course of his brief 5-year career as a broker, Mr. Fawcett was associated with five different brokerage firms, including two firms that have been expelled from the securities industry by FINRA:

• Westpark Capital, Inc., from June 2015 to March 2018.
• Salomon Whitney Financial, from September 2013 to June 2015.
• Rockwell Global Capital LLC, from June 2013 to September 2013.
• John Thomas Financial (expelled by FINRA), from April 2013 to June 2013.
• Rockwell Global Capital LLC, from August 2012 to April 2013.
• EKN Financial Services Inc. (expelled by FINRA), from April 2012 to August 2012.

One of the firms terminated him for “failure to provide services to the firm for he was engaged.”

Mr. Fawcett was fired from Westpark Capital, Inc. in March 2018 for conducting business from a non-disclosed location and making false representations to the firm.

Regulatory Sanctions:

In November 2017, Mr. Fawcett and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”), after FINRA alleged that Mr. Fawcett recommended unsuitable mutual fund transactions to a customer. Mr. Fawcett consented to a 15-business day suspension and a fine of $2,500.

In March 2018, FINRA barred Mr. Fawcett from the securities industry after he refused to cooperate with FINRA’s investigation regarding Mr. Fawcett’s outside business activities.

In June 2018, FINRA revoked Mr. Fawcett’s license pursuant to FINRA Rule 8320 for failing to pay the monetary fine that was issued in 2017.

In December 2020, FINRA suspended Mr. Fawcett for failing to comply with an arbitration award.

Customer Complaints:

In just five years, Mr. Fawcett racked up numerous customer complaints:

• Customer Dispute (October 2020): A customer filed a securities arbitration complaint alleging nearly $85,000 in damages as a result of unsuitable investment recommendations related to equity positions (common or preferred stock) and private securities. The claim alleged the following causes of action: suitability, churning, unauthorized trading, fraud, negligent misrepresentation, breach of fiduciary duty, breach of covenants of good faith, breach of fair dealing, negligent supervision, breach of contract, Section 20 violations, failure to supervise, unjust enrichment, and lost opportunity. The dispute is pending.
• Customer Dispute (March 2020): A customer filed a securities arbitration complaint alleging negligence, qualitative and quantitative unsuitability, failure to supervise, breach of fiduciary duty, breach of contract, negligent misrepresentation and omissions, and lost opportunity damages. The causes of action related to BlackBerry Ltd. stock and the customer sought $15,633 in damages. An arbitrator found Mr. Fawcett to be liable and ordered him to pay $5,663 in compensatory damages and $30,0000 in punitive damages. As of December 2020, Mr. Fawcett has not paid the arbitration award to the customer.
• Customer Dispute (February 2020): Westpark Capital, Inc. was found liable, and the Haileys were awarded nearly $800,000 in damages, including over $545,000 in compensatory damages, $33,500 in costs, and $215,000 in attorneys’ fees.
• Customer Dispute (May 2018): A customer filed a securities arbitration complaint seeking $33,271 in damages as a result of excessive trading, churning, and unsuitable transactions. The dispute is pending.
• Customer Dispute (April 2018): A customer filed a securities arbitration complaint seeking $260,038 in damages as a result of churning, negligence, unsuitability, unauthorized trading, and breach of contract. The causes of action related to equities (common or preferred stock). The alleged conduct occurred when Mr. Fawcett was employed by SW Financial. The dispute is pending.
• Customer Dispute (June 2017): A customer submitted a written complaint to Westpark Capital Inc. alleging that Mr. Fawcett purchased 1000 shares of Blackberry stock without his knowledge. According to Westpark Capital, Inc., Mr. Fawcett’s supervisor contacted the client, where the client “changed his tone” and stated that he was “sill” for writing the note and that it was “mainly due to buyer remorse.” The client supposedly apologized for the letter and misunderstanding. The dispute was marked closed and withdrawn.
• Customer Dispute (September 2015): A customer filed a FINRA arbitration claim against Salomon Whitney and Mr. Fawcett for unauthorized trading. The claim alleged $20,000 in damages. Salomon Whitney and Mr. Fawcett settled the matter for $13,500.
• Customer Dispute (November 2014): A customer filed a FINRA securities arbitration claim against Salomon Whitney and Mr. Fawcett for unauthorized trading, unsuitable investments, and an unsuitable investment strategy. The claim alleged $214,000 in damages. The parties entered into an agreement to present to the arbitration panel a Stipulated Award. The panel accepted the award and found Mr. Fawcett liable for $30,000.
• Customer Dispute (April 2013): A customer submitted a written complaint to Rockwell Global Capital, LLC alleging unauthorized trades. The customer did not file a securities arbitration complaint. The firm denied the customer any compensation.

How to Recover Losses or Obtain a Free Consultation

If you have lost money with financial advisor Lawrence (Larry) Fawcett Jr. or Westpark Capital, Inc., contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

If you have lost money with broker Robert Yasnis or Worden Capital Management, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.

Worden Capital Management

According to a 2017 investigation by Reuters, Worden Capital Management hired more brokers with a history of significant disclosures than all but twenty-four other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.

The investigation revealed that fifty-four percent (54%) of Worden Capital Management’s brokers and supervisors have significant “red flag” public disclosures. Significant red flag disclosures include:

• regulatory sanctions,
• terminations of employment after allegations of misconduct,
• customer disputes that result in an award or settlement, and
• prior association with a firm that FINRA has expelled.

You can read the full investigative report here: Investigative Report: Worden Capital Management LLC’s Owners, Executives, and Brokers Have Concerning Red Flag Disclosures

Mr. Yasnis is one of the brokers who had serious incidents reported on his BrokerCheck report.

Financial Advisor Robert Ruvein Yasnis (CRD No. 2399141)

Mr. Yasnis has 25 years of experience in the securities industry and has been associated with 19 different broker-dealers. He averages just over a year and three months at each stop. In October 2017, he was hired by Worden Capital Management.

Regulatory Disclosures

On July 25, 2013, Florida’s Office of Financial Regulation issued a final order denying Mr. Yasnis’s application for registration as an associated person of Meyers Associates, L.P. after he allegedly made a material misrepresentation or misstatement on his application for registration.

In 1997, the Virginia State Corporation Commission Division of Securities alleged that Mr. Yasnis offered for sale and sold unregistered securities. Mr. Yasnis agreed to a fine.

On December 22, 1994, The Texas State Securities Board issued a consent order denying Mr. Yasnis application for registration after he allegedly represented that he was registered to sell securities in Texas and had been for over a year, when in fact he was not.

Prior Associations

Since 2013, Mr. Yasnis has been affiliated with the following brokerage firms:

• Worden Capital Management, from October 2014 to the present.
• Laidlaw & Company (UK) Ltd., from February 2013 to July 2013.

Prior to February 2013, Mr. Yasnis was associated with 16 other brokerage firms, including the following four firms which have been banned from the securities industry by FINRA:

• Meyers Associates, L.P. (expelled by FINRA), from October 2012 to January 2014.
• Hallmark Investments, Inc. (expelled by FINRA), from February 2007 to July 2009.
• Kirlin Securities, Inc. (expelled by FINRA), from November 1997 to December 1997.
• Fletcher And Faraday, Inc. (expelled by FINRA), from November 1994 to April 1995.

Customer Complaints

According to his BrokerCheck report, Mr. Yasnis has been the subject of several customer complaints. Since 2016, Mr. Yasnis has been the subject of the following customer disputes:

• Customer Dispute (December 2020): A customer filed a securities arbitration complaint alleging overconcentration, unsuitability, and excessive trading. The customer is seeking $148,119 in damages. The alleged conduct occurred when Mr. Yasnis was employed by Laidlaw & Company (UK) Ltd. The dispute is pending.
• Customer Dispute (January 2021): A customer filed a securities arbitration complaint alleging $76,300 in damages. The customer alleged that Mr. Yasnis churned and excessively traded the customer’s account and also made unsuitable investment recommendations. The alleged conduct occurred when Mr. Yasnis was employed by Laidlaw & Company (UK) Ltd. The dispute was settled by Mr. Yasnis for $20,000.

Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.

Churning is a more egregious variation of excessive trading. Churning refers to a situation where the broker executed an excessive number of trades and did so with the intent to defraud or reckless disregard for the customer’s interest.

Excessive trading and churning are unethical and illegal practices in the securities industry. They are all also violations of securities rules and regulations and can cause enormous harm to customers.

Worden Capital Management LLC – Supervisory Duties

Brokerage firms like Worden Capital Management LLC must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you or a loved one were a customer of Robert Yasnis or Worden Capital Management LLC and either sustained financial losses or suspect that Mr. Yasnis did not have your best interest in mind when recommending investments or account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (646) 330-4624 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.