William King’s FINRA Sanction: A Closer Look

The Financial Industry Regulatory Authority (“FINRA”) has suspended former Merrill Lynch broker William King (CRD No. 1432593) for 30 days and assessed a $5,000 monetary fine. According to FINRA Letter of Acceptance, Waiver, and Consent No. 222077401201, between January 6, 2021, and January 5, 2023, William King exercised discretion over 204 trades across the accounts of four Merrill Lynch customers without prior written authorization. This conduct violated FINRA Rule 3260(b), which prohibits discretionary trading without explicit client consent, and Rule 2010, which mandates high standards of commercial honor.

FINRA and Mr. King entered into a Letter of Acceptance, Waiver, and Consent on March 3, 2025.

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.

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

Merrill Lynch terminated Mr. King in April 2026 following allegations of unsuitable and unauthorized trading. This came after he managed a reported $1.4 billion in client assets, raising questions about the firm’s oversight of such a high-profile broker.

A Troubling Pattern: Analyzing King’s Customer Disputes

A review of King’s FINRA BrokerCheck report reveals a staggering 29 customer disputes over his 30-year career, with 24 filed since 2022 alone. This surge in complaints coincides with his final years at Merrill Lynch and paints a troubling picture of systemic issues. Let’s break down the disputes and their outcomes:

• Total Disputes: Mr. King has been the subject of 29 customer complaints, with 24 initiated between 2022 and March 2025 (current date). These recent cases likely stem from the same period of unauthorized and unsuitable trading flagged by Merrill Lynch and FINRA.
• Settled Cases: 13 of the customer disputes have resulted in monetary settlements.
• Pending Cases: 1 dispute remains pending, where a customer has alleged an unsuitable investment strategy, unauthorized trading, misrepresentation, omission of material facts, and that the Financial Advisor was not acting in their best interest in 2020.
• Denied/Closed Without Action: 10 cases were denied or closed, often with no payout. Most of these complaints were direct written and verbal complaints made to Merrill Lynch, and no legal action was taken. These individuals may still be able to pursue recovery and should consult with an attorney.

Analysis of Settlements vs. Damages: In the settled cases with disclosed amounts, investors recovered an average of 28% to 30% of their requested damages. For example, the following settlements have been disclosed:

• • May 2023: Claimed damages of $300,000; settled for $85,000 (28% of requested).
  • August 2022: Claimed damages of $500,000; settled for $150,000 (30% of requested).
  • October 2022: Claimed damages of $1,000,000; settled for $275,000 (27.5% of requested).

What Went Wrong? The Role of Brokerage Oversight

King’s case raises red flags about Merrill Lynch’s supervision. How could a broker with a $1.4 billion book engage in 204 unauthorized trades across multiple accounts without detection? FINRA Rule 3110 requires firms to establish robust supervisory systems, yet King’s actions slipped through the cracks for two years. His resignation—framed as “voluntary” but tied to serious allegations—further suggests a pattern of firms distancing themselves from liability rather than addressing root causes.

The sheer volume of customer disputes since 2022 (24 in three years) is extraordinary, even for a seasoned broker. Compare this to the industry average: studies suggest only about 7-8% of brokers have misconduct disclosures over their careers. King’s record far exceeds this, signaling a chronic issue that Merrill Lynch arguably failed to curb.

Investor Takeaways: Protecting Your Portfolio

King’s case is a wake-up call for investors. Here’s how you can safeguard your financial future:

1. Vet Your Broker: Use FINRA’s BrokerCheck to review a broker’s history. King’s 29 disputes were public knowledge—red flags that savvy investors could have spotted.
2. Monitor Your Accounts: Unauthorized trading, like King’s 204 trades, often goes unnoticed without regular scrutiny. Demand written authorization for discretionary actions.
3. Know Your Rights: If you suspect misconduct, FINRA arbitration can recover losses from brokers and firms. Claims may include negligent supervision against firms like Merrill Lynch for failing to oversee their advisors.
4. Seek Legal Help: A securities arbitration attorney can analyze your case, quantify losses, and pursue maximum recovery—especially when settlements fall short, as seen in King’s disputes.

Holding Firms Accountable

Merrill Lynch’s role cannot be overlooked. Firms have a legal duty to supervise brokers and protect clients from harm. When they falter, investors can pursue claims for damages caused by inadequate oversight. King’s $5,000 fine and 30-day suspension may deter individual misconduct, but they do little to address systemic failures or compensate victims. Arbitration offers a path to hold both brokers and firms accountable, potentially yielding awards far exceeding FINRA’s sanctions.

Act Now: Don’t Let Misconduct Cost You

William King’s story—of unauthorized trades, a flood of customer disputes, and a quiet exit from Merrill Lynch—illustrates the risks of unchecked broker behavior. If you’ve worked with King or another advisor whose actions mirror this pattern, you may have a claim. At Iorio Law PLLC, we specialize in FINRA arbitration, fighting for investors against firms like Merrill Lynch. With 24 of King’s disputes arising since 2022 and settlements averaging just 28-30% of claimed damages, the need for skilled representation is clear.

Contact us today for a free consultation. Visit our website or call (646) 330-4624 to discuss how we can help you recover losses from broker misconduct. Don’t let your investments become another statistic—let us fight for the justice you deserve.

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.

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 Mr. Hajra or Wells Fargo who have suffered financial losses, or suspect that Mr. Hajra 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 Wells Fargo.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019064919301

FINRA and Mr. Hajra entered into a Letter of Acceptance, Waiver, and Consent on August 20, 2021, after FINRA alleged that Mr. Hajra executed nine unauthorized trades with a total principal value of $526,966 in his deceased customer’s account in June and July 2018.

The customer, who was elderly, maintained an account at Wells Fargo with Mr. Hajra assigned as her broker. The account had been a non-discretionary account since it was opened in 2014. At least eight days prior to her death, the customer met with Mr. Hajra and authorized him to make several trades in her account, primarily in unit investment trusts and bonds. On June 8, 2018, the customer passed away, and Mr. Hajra had not effectuated any of the trades. On June 26, 2018, 18 days after the customer’s death, Mr. Hajra executed the first of the transactions. Between June 28, 2018, and July 18, 2018, Mr. Hajra executed the eight remaining trades. The total value of the transactions was $526,966.

As a result, Mr. Hajra violated 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.

Financial Advisor Debasish Hajra (CRD No. 2212337)

Debasish Hajra has 29 years of experience in the securities industry and has been associated with the following firms:

• Benjamin F. Edwards & Company, Inc. in Alpharetta, GA, from December 2019 to the present.
• Wells Fargo Clearing Services, LLC in Marietta, GA, from January 2008 to December 2019.
• G. Edwards & Sons, Inc. in Atlanta, GA, from April 2005 to January 2008.
• McLaughlin, Piven, Vogel Securities, Inc. in New York, NY, from April 1992 to March 2001.

In 2019, Mr. Hajra was discharged by Wells Fargo for allegedly effecting trades in a client’s account based upon prior written authorization while unaware that the client had died.

In 2001, Mr. Hajra was discharged by McLaughlin, Piven, Vogel Securities, Inc. for a violation of firm policy.

According to his public disclosure report with FINRA, Mr. Hajra has been the subject of at least one customer dispute, which included allegations of unauthorized trades.

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

Wells Fargo – A Duty to Supervise

Financial institutions like Wells Fargo must properly supervise financial advisors and customer accounts. Brokerage firms must 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 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 Debasish Harja or Wells Fargo 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.

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.

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

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.

If you have suffered financial losses investing with Alex Perry or Stifel, Nicolaus & Company, Incorporated, 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 Stifel, Nicolaus & Company, Incorporated.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019062348301

Alex Perry and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on June 28, 2021, after Mr. Perry refused to provide documents and information connected with FINRA’s investigation. The investigation originated after Stifel, Nicolaus & Company, Incorporated filed a Form U5 amendment disclosing a customer complaint alleging failure to follow the customer’s state goals and failure to disclose risks associated with options trading. Subsequently, Stifel, Nicolaus & Company, Incorporated filed several additional U5 amendments disclosing additional customer complaints.

Initially, Mr. Perry cooperated with FINRA’s investigation by responding to FINRA’s requests in June 2019 and March 2021 for documents and information. However, Mr. Perry ceased cooperating with FINRA in May and June 2021.

By refusing to cooperate with FINRA’s investigation, Mr. Perry violated FINRA Rules 8210 and 2010.

Financial Advisor Matthew A. Perry (CRD No. 5985300)

Alex Perry had seven years of experience in the securities industry and has been associated with two different firms:

• Stifel, Nicolaus & Company, Incorporated in Columbia, Missouri, from June 2016 until March 2019.
• Wells Fargo Advisors, LLC in Jefferson City, Missouri, from November 2011 until June 2016.

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

• Customer Dispute (March 2020): A customer filed a written complaint with Stifel, Nicolaus & Company, Incorporated, alleging that Mr. Perry made unauthorized and unsuitable trades related to options trading. The customer alleged $77,000 in damages. Stifel, Nicolaus & Company, Incorporated settled the matter for $45,000.
• Customer Dispute (December 2019): A customer filed a written complaint with Stifel, Nicolaus & Company, Incorporated, alleging that Mr. Perry made unauthorized trades related to equities. The matter was settled for monetary compensation.
• Customer Dispute (April 2019): A customer filed a written complaint with Stifel, Nicolaus & Company, Incorporated, alleging that Mr. Perry did not follow the customer’s stated goals and did not disclose risks associated with options traded. Stifel, Nicolaus & Company, Incorporated settled the matter for $138,000.

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.

Stifel, Nicolaus & Company, Incorporated – Supervisory Duties

Brokerage firms like Stifel, Nicolaus & Company, Incorporated 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 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 Alex Perry or Stifel, Nicolaus & Company, Incorporated, 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 legal rights.

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.

Additionally, FINRA alleged that during the same period, Mr. McCallum sent emails to customers about the BDC that contained unwarranted and exaggerated claims, opinions, and forecasts, did not provide fair and balanced treatment of the risks and benefits of the investment, and contained promissory statements in violation of FINRA rules.

In addition to the suspension, Mr. McCallum was ordered to pay a $25,000 fine, disgorge $14,231 of commissions, and pay over $1.2 million in restitution to customers. However, it is unclear whether he will be able to satisfy the restation order and repay customers.

Customers of Mr. McCallum, 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 Kevin McCallum, 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 LPL Financial LLC.

FINRA Letter of Acceptance, Waiver, and Consent No. 2019062569501

FINRA and Mr. McCallum entered into a Letter of Acceptance, Waiver, and Consent No. 2019062569501 on June 17, 2021, after FINRA alleged that between May 2017, and June 2019, while associated with LPL Financial, Mr. McCallum made unsuitable recommendations to 12 customers, resulting in their overconcentration in a high-risk, publicly-traded business development company (BDC). As a result, Mr. McCallum violated FINRA Rules 2111 and 2010. Specifically, FINRA alleged:

• From May 2017 through June 2019, Mr. McCallum recommended concentrated investments to 12 customers in a high-risk and highly speculative publicly traded BDC that exhibited signs of financial distress, even though his customers had low or moderate risk tolerances and investment objectives and lacked any prior experience investing in BDCs.
• BDCs are a type of closed-end investment fund. BDCs typically invest in debt and equity of small and medium-sized companies that do not have ready access to public capital markets or other forms of conventional financing. The companies may be in their early stages of development or may be distressed companies that are not able to obtain bank loans or raise money from other investors. BDCs are required to distribute 90% of their ordinary taxable income as dividends to shareholders in return for favorable tax treatment.
• The BDC that Mr. McCallum recommended held first and second lien secured loans, unsecured loans, and equity in small and medium-sized companies in a variety of industries, including construction, banking, telecommunications, pharmaceutical, and oil and gas companies.
• The risk of loss for investments in this BDC was magnified because it borrowed money.
• Additionally, the illiquidity of the BDC’s investments presented the risk that it would be difficult for the BDC to sell such investments if required, causing it to realize significantly less than the value at which the BDC recorded the investments.
• Further, the BDC was exposed to interest rate risk that could affect its investment returns.
• From May 2017 through June 2019, the BDC’s net asset value (NAV) declined steadily as a result of write-downs to its loan portfolio. Likewise, the BDC’s share price and the percentage of NAV at which it traded declined throughout the period.
• During the period between May 2017 and June 2019, Mr. McCallum’s recommendations resulted in the 12 customers concentrating as much as approximately 17% to over 60% of their liquid net worth in the BDC.
• Four of the customers were over the age of 60, and seven of the customers invested retirement funds in the BDC.
• McCallum’s recommendations generated commissions to LPL totaling $37,492.78, $14,231.61 of which was paid to Mr. McCallum.
• After June 2019, the BDC’s stock price continued to decline.
• In November 2019, Mr. McCallum’s customers began to file arbitration claims against LPL concerning McCallum’s recommendations of the BDC, which precipitated FINRA’s investigation.
• One customer who realized losses from the sale of her positions obtained payment from LPL in connection with resolving her arbitration claims.
• Four other customers also sold their positions and realized losses totaling $1,222,092.29.
• By virtue of the foregoing, McCallum violated FINRA Rules 2111 and 2010.

Additionally, FINRA alleged that during the same period, Mr. McCallum sent emails to customers about the BDC that contained unwarranted and exaggerated claims, opinions, and forecasts, did not provide fair and balanced treatment of the risks and benefits of the investment, and contained promissory statements in violation of FINRA Rules 2210 and 2010. Specifically, FINRA alleged:

• Between October 2015 and June 2019, Mr. McCallum sent seventeen emails about the BDC to 19 customers, including eight of the customers to whom he made the unsuitable recommendations that violated the content standards of FINRA Rule 2210.
• All of the emails were unbalanced, in violation of FINRA Rule 2210(d)(1)(A), and 11 of the emails failed to provide a sound basis for evaluating the facts, also in violation of FINRA Rule 2210(d)(1)(A).
• Thirteen of the emails contained unwarranted and promissory statements in violation of FINRA Rule 2210(d)(1)(B).
• Finally, in 15 of the emails, Mr. McCallum provided impermissible projections and/or exaggerated or unwarranted claims, opinions, or forecasts in violation of FINRA Rule 2210(d)(1)(F).
• For example, in a March 2018 email to a customer, Mr. McCallum discussed the customer’s account performance, including the purported benefits of continuing to hold a position in the BDC, but failed to explain the associated risks, in violation of FINRA Rule 2210(d)(1)(A).
• McCallum also made statements that were promissory and unwarranted in violation of FINRA Rule 2210(d)(1)(B), by stating that the stock price of the BDC would increase to 80% to 90% of the NAV, stating that he did not anticipate further downside in the customer’s portfolio, stating that he was confident that the portfolio would rise back to previous levels and higher, and predicting that the Federal Reserve would raise interest rates three times in the year, which would benefit the BDC.
• Finally, McCallum also included an impermissible projection of the anticipated 12-month dividend cash flow from the BDC, in violation of FINRA Rule 2210(d)(1)(F).

Financial Advisor Kevin Marshall McCallum (CRD No. 2222586)

Kevin McCallum has 26 years of experience in the securities industry and has been associated with the following firms in Birmingham, AL:

• LPL Financial LLC, from May 2012 to July 2019.
• NBC Securities, Inc., from October 2009 to May 2012.
• Colonial Brokerage, Inc., from April 2007 to November 2009.
• Amsouth Investment Services, Inc., from May 1993 to March 2007.

Mr. McCallum, who is currently not registered with any broker-dealer, may also have been affiliated with Glacier Point Advisors, LLC.

According to his public disclosure report with FINRA, Mr. McCallum has been the subject of at least five customer disputes:

• Customer Dispute (February 2021): A customer filed a complaint alleging that between August 2019 and October 2019, Mr. McCallum unsuitable investment recommendations and concentrated the customer’s account in Medley Capital Corporation. The dispute is pending.
• Customer Dispute (December 2020): A customer filed a securities arbitration complaint alleging $4.8 million in damages. The complaint alleged that between October 2017 through December 2018, Mr. McCallum made discretionary investments and concentrated the customers’ accounts in a non-diversified, closed-end management company that was not consistent with their investment objectives. The dispute is pending.
• Customer Dispute (October 2020): A customer filed a securities arbitration complaint alleging that between February 2018 and December 2018, Mr. McCallum made unsuitable investment recommendations and concentrated the customer’s accounts in Medley Capital Corporation, a closed-end business development corporation. The dispute is pending.
• Customer Dispute (November 2019): A customer filed a securities arbitration complaint alleging that between 2011 and 2019, Mr. McCallum made unauthorized and unsuitable purchases of thinly traded shares of Medley Capital Corporation, resulting in more than 50% concentration in the customer’s account. The dispute was settled by LPL Financial for $70,000.
• Customer Dispute (April 2019): A customer filed a securities arbitration complaint alleging that beginning in 2012, Mr. McCallum engaged in fraudulent transactions in unsuitable and risky investments, including the unauthorized use of margin. LPL Financial paid the customer $500,000 to settle the dispute.

LPL Financial, LLC – A Duty to Supervise

Financial institutions like LPL Financial, 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 suitable investment recommendations, 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 Kevin McCallum or LPL Financial 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.

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FINRA Files Enforcement Action Against Financial Broker Michael Giovannelli, Formerly of Spartan Capital Securities, for Unauthorized Trades in an Elderly Customer’s Account

The Financial Industry Regulatory Authority’s Department of Enforcement has filed a disciplinary proceeding complaint against financial advisor Michael Giovannelli, who also goes by the name Michael Anthony. The complaint alleges that between February and April 2020, while associated with Spartan Capital Securities, LLC, Mr. Giovannelli made 12 unauthorized transactions in the account of an elderly customer. The complaint also alleges that Mr. Giovannelli attempted to conceal the unauthorized trades from FINRA and testified falsely at his on-the-record interview.

Separately, FINRA alleged that between September 2018 and March 2019, while registered with Richard James & Associates Inc. (“Richard James”), Mr. Giovannelli made 100 trades in the accounts of four Richard James’ customers without obtaining the customers’ prior authorization for the trades. Mr. Giovannelli did not have written authorization to make discretionary trades in the four customers’ accounts from either the customers or Richard James.

If you or a loved one were a customer of broker Michael Giovannelli, Spartan Capital Securities, LLC, or Richard James & Associates, Inc., contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your legal rights.

FINRA Disciplinary Proceeding No. 2019061941101

On June 17, 2021, the FINRA Department of Enforcement filed a complaint against broker Michael J. Giovannelli. The complaint includes the following allegations related to the unauthorized trades at Spartan Capital Securities:

• On September 6, 2019, at the age of 87, an elderly customer opened an account with Spartan Capital Securities through Mr. Giovannelli. The customer is a farmer from Oklahoma.
• Spartan Capital Securities did not allow discretionary accounts, and the customer did not authorize Mr. Giovannelli to make discretionary trades in his account.
• The elderly customer authorized two transactions in his account that were executed on January 31, 2020, through Mr. Giovannelli: a sale of 275 American Depository Receipts of BP, PLC, and a purchase of 200 shares of Advanced Micro Devices.
• Between February 1 and early May 2020, Customer A did not authorize Mr. Giovannelli to place any trades in his account.
• However, during that period, Mr. Giovannelli executed 12 unauthorized transactions in the account of an elderly customer.
• The unauthorized trades Mr. Giovannelli made in the customer’s account generated trading costs of approximately $2,281, including $1,380 in commissions.
• Giovannelli’s unauthorized trading in the customer’s account caused $1,494 in realized losses.
• The customer filed a complaint with Spartan Capital on April 29, 2020.
• Spartan Capital’s phone records did not reflect phone calls between Mr. Giovannelli and the elderly customer’s phone number that demonstrated the customer could have authorized the trades in his account between February and April 2020.
• In connection with Spartan Capital’s investigation of the matter, Mr. Giovannelli provided his telephone records for January through June 2020, containing records for four different cellular telephone numbers.
• The telephone records Mr. Giovannelli provided to Spartan Capital do not show any calls to the customer’s phone number between February and April 2020.
• After investigating the matter, Spartan Capital reversed the unauthorized trades in the customer’s account and discharged Mr. Giovannelli.
• On October 29, 2020, as part of its investigation into Mr. Giovannelli’s unauthorized trading in the elderly customer’s account, FINRA staff requested that Mr. Giovannelli provide to FINRA, among other things, copies of itemized telephone records and any related documents showing all incoming and outgoing calls he made between January and July 2020.
• On November 29, 2020, Mr. Giovannelli produced five pages of telephone records for the cellular phone number ending in 1594, which included calls made on February 4, February 24-28, April 13-14, and April 16-21, 2020, but no calls made on any other dates.
• Before providing the February and April 2020 phone records to FINRA on November 29, Giovannelli altered them to make it appear as though he made calls to the customer from the cellular telephone number ending in 1594 on five of the six dates that the unauthorized trades occurred.
• Specifically, Mr. Giovannelli altered the phone records to falsely reflect calls to the customer on: February 4, 2020, at 4:01 PM; February 25, 2020, at 12:16 PM; February 27, 2020, at 1:36 PM; April 14, 2020, at 11:43 AM; and April 20, 2020, at 2:50 PM.
• Giovannelli never made these telephone calls.
• On two dates (February 4 and 27, 2020), the altered records purport to show telephone calls between Mr. Giovannelli and the customer after the trades were executed on those dates.
• In fact, Mr. Giovannelli placed and received other telephone calls on those dates and times, as is clear from the unaltered telephone records that he provided to Spartan during its investigation.
• On December 21, 2020, Mr. Giovannelli appeared for and provided on-the-record testimony, where he falsely testified that he did not alter any of the telephone records that he provided to FINRA.

The complaint includes the following allegations related to Mr. Giovannelli’s discretionary trading without written authorization at Richard James & Associates Inc.:

• Between September 2018 and March 2019, Richard James’ written supervisory procedures provided that “registered representatives will not exercise any discretionary power in a customer’s account unless the customer has given prior written authorization to a stated individual and the account has been accepted by the Firm,” as a discretionary account.
• Giovannelli did not have any discretionary accounts at Richard James.
• No customer gave Mr. Giovannelli written authorization to exercise discretionary power in their account, and Richard James did not accept any Mr. Giovannelli customer account in writing as a discretionary account.
• Giovannelli exercised discretion in the accounts of four Richard James’ customers between September 2018 and March 2019.
• Specifically, Mr. Giovannelli made 100 trades in the accounts of Richard James’ customers without receiving the customers’ prior authorization.

Financial Advisor Michael John Giovannelli (CRD No. 4989449)

Mr. Giovannelli has 14 years of experience in the securities industry and has been associated with 12 different firms, including four firms that have been expelled from the industry by FINRA.

Since January 2014, Mr. Giovannelli has been associated with the following brokerage firms:

• Spartan Capital Securities, LLC in Garden City, NY, from July 2019 until August 2020.
• Richard James & Associates, Inc. in Syosset, NY, from May 2017 until April 2019.
• Salomon Whitney Financial in Melville, NY, from August 2015 to May 2017.
• Legend Securities, Inc. (expelled by FINRA) in Melville, NY, from April 2015 to August 2015.
• Brookville Capital Partners (expelled by FINRA) in Melville, NY, from January 2014 to March 2015.

Spartan Capital terminated Mr. Giovannelli in July 2020 for engaging in unauthorized trading.

Mr. Giovannelli public disclosure report also discloses that he has been the subject of at least three customer disputes, including:

• Customer Dispute (April 2020): A customer filed a securities arbitration complaint alleging $97,292 in damages. The complaint alleged the following causes of action: unsuitability, over-concentration, churning, excessive trading, commission abuse, failure to supervise, breach of fiduciary duty, negligence, fraudulent misrepresentation, breach of contract, respondeat superior, lost opportunity damages, and California Elder Abuse and Dependent Adult Civil Protection Act. The causes of action related to investments in Square, Inc. and Barclays IPATH S&P 500 VIX Short Term ETN. The alleged conduct occurred while Mr. Giovannelli was employed by SW Financial. An arbitration panel held Mr. Giovannelli jointly and severally liable and awarded the customer $97,292.
• Customer Dispute (November 2017): A customer filed a complaint with Salomon Whitney Financial, the firm that employed Mr. Giovannelli at the time of the allegations. The customer alleged $15,000 in damages as a result of unauthorized trades. The firm settled the matter for $5,000. Mr. Giovannelli continues to deny wrongdoing.

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.

Spartan Capital Securities, LLC and Richard James & Associates, Inc. – Supervisory Duties

Brokerage firms like Spartan Capital Securities, LLC and Richard James & Associates, Inc. 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 broker Michael Giovannelli, Spartan Capital Securities, LLC, or Richard James & Associates, Inc., and either sustained financial losses or suspect that Mr. Giovannelli 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.

If you have suffered financial losses investing with Marc R. Lippman or Folger Nolan Fleming Douglas Incorporated, contact 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 Folger Nolan Fleming Douglas Incorporated.

FINRA Letter of Acceptance, Waiver, and Consent No. 2021071514101

Marc R. Lippman and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on June 17, 2021, after FINRA alleged that Mr. Lippman provided false information to FINRA during on-the-record testimony regarding whether he was aware that his customer was deceased at the time of entering a securities transaction in the customer’s account. Specifically, FINRA alleged:

• On February 25, 2017, Mr. Lippman’s customer died.
• On February 27, 2017, Mr. Lippman was aware that the customer had died and placed a trade in the customer’s account, selling approximately $80,000 in securities.
• Despite knowing that the customer died, Mr. Lippman effectuated this transaction without permission or consent.
• Following the transaction, Lippman distributed the funds to one of the customer’s family members.
• FINRA investigated Mr. Lippman concerning whether he knew a customer was deceased at the time he entered a securities order in the customer’s account.
• Pursuant to FINRA Rule 8210, FINRA took his on-the-record testimony under oath.
• During his on-the-record testimony, Mr. Lippman falsely stated that he was unaware of his customer’s death at the time of entering a securities transaction in the customer’s account.

Accordingly, Mr. Lippman violated FINRA Rule 2010 for placing unauthorized trades, and FINRA Rules 8210 and 2010 for providing false testimony.

Financial Advisor Marc Romeyn Lipman (CRD No. 1575995)

Marc Lippman had 33 years of experience in the securities industry and has been associated with seven different firms. In December 2009, Mr. Lippman became affiliated with Folger Nolan Fleming Douglas Incorporated in Washington, DC. Folger Nolan Fleming Douglas Incorporated terminated Mr. Lippman’s employment in December 2020. In connection with the termination, the firm alleged that it had learned that statements made by Mr. Lippman regarding the date he became aware of a client’s death were inconsistent with an email he had written prior to making such statements.

According to his BrokerCheck report, Mr. Lippman was the subject of a customer dispute in February 2020. The customer alleged that Mr. Lippman breached his fiduciary duty and caused $686,000 in damages related to a mutual fund. The matter was settled by Folger Nolan Fleming Douglas Incorporated and Mr. Lippman for $326,500. Mr. Lippman personally contributed $75,000.

Supervisory Duties

Brokerage firms like Folger Nolan Fleming Douglas Incorporated 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 have lost money with financial advisor Marc R. Lippman or Folger Nolan Fleming Douglas Incorporated, 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 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.

If you have lost money with broker Philip Connors or Worden Capital Management, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential review 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. Connors is one of the brokers who had serious incidents reported on his BrokerCheck report.

Financial Advisor Phillip Michael Connors (CRD No. 5274094)

Prior Associations

Mr. Connors has ten years of experience in the securities industry and has been associated with five different broker-dealers. He averages two years at each brokerage firm.

Throughout his career, Mr. Connors has been associated with the following firms:

• Worden Capital Management LLC, from August 2017 to the present.
• Laidlaw & Company (UK) Ltd., from December 2013 to September 2017.
• Ariston Wealth Management, L.P., from February 2013 to July 2013.
• Meyers Associates, L.P. (expelled by FINRA), from October 2012 to December 2013.
• Buckman, Buckman & Reid, Inc., from January 2011 to October 2012.

Customer Complaints

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

• Customer Dispute (March 2019): A customer filed a securities arbitration complaint alleging excessive and unsuitable trading in a retirement account, false and misleading statements, fraud, negligent misrepresentation, and breach of fiduciary duty. The customer alleged $50,000 in damages. The alleged conduct occurred when Mr. Connors was employed by Worden Capital Management, LLC. Connors settled the matter for $14,999.
• Customer Dispute (November 2017): A customer submitted a written complaint directly to Worden Capital Management LLC alleging the unauthorized use of margin for three trades. The customer did not file a securities arbitration complaint. Worden Capital Management, LLC denied the complaint, stating that it appears that the complaint was due to a miscommunication and that the client withdrew the complaint.
• Customer Dispute (February 2014): A customer filed a written complaint alleging the unauthorized use of margin and sought $20,000 in damages. The alleged conduct occurred when Mr. Connors was employed by Meyers Associates, L.P. Connors settled the matter for $1,373. Mr. Connors denies wrongdoing. His full broker statement regarding the allegations can be read on his BrokerCheck report.

Worden Capital Management LLC & Laidlaw & Company (UK) Ltd. – Supervisory Duties

Brokerage firms like Worden Capital Management LLC and Laidlaw & Company (UK) Ltd. 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 Philip Connors, Worden Capital Management LLC, or Laidlaw & Company (UK) Ltd. and either sustained financial losses or suspect that Mr. Connors 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.

If you have lost money with broker David Murray or Worden Capital Management, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential review 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. Murray is one of the brokers who had serious incidents reported on his BrokerCheck report.

Financial Advisor David Michael Murray (CRD No. 1870050)

Prior Associations

Mr. Murray has 22 years of experience in the securities industry and has been associated with 14 different broker-dealers. He averages less than two years at each stop.

Worden Capital Management hired Mr. Murray in August 2017. Before joining Worden Capital Management, Mr. Murray was associated with Laidlaw & Company (UK) Ltd. from January 2014 until August 2017.

Throughout his career, Mr. Murray has been associated with three firms that have been expelled from the securities industry by FINRA:

• Meyers Associates, L.P. (expelled by FINRA), from September 2012 to January 2014.
• Chicago Investment Group, LLC (expelled by FINRA), from March 2003 to September 2003.
• Investors Associates, Inc. (expelled by FINRA), from May 1993 to July 1997.

Customer Complaints

According to his BrokerCheck report, Mr. Murray has been the subject of several customer complaints, including two pending complaints that were filed in December 2020:

• Customer Dispute (December 2020): A customer filed a securities arbitration complaint alleging overconcentration, unsuitability, and excessive trading. The customer is seeking $157,588 in damages. The alleged conduct occurred when Mr. Murray was employed by Laidlaw & Company (UK) Ltd. The dispute is pending. Mr. Murray denies the allegations and claims that he was not the client’s broker. Mr. Murray’s full broker statement regarding the allegations can be read on his BrokerCheck report.
• Customer Dispute (December 2020): A customer filed a securities arbitration complaint alleging overconcentration, unsuitability, and excessive trading. The customer is seeking $278,274 in damages. The alleged conduct occurred when Mr. Murray was employed by Laidlaw & Company (UK) Ltd. The dispute is pending. Murray denies the allegations and claims that he was not the client’s broker. Mr. Murray’s full broker statement regarding the allegations can be read on his BrokerCheck report.
• Customer Dispute (April 2001): A customer filed a complaint directly to HD Brous & Co. Inc., the firm that employed Mr. Murray when the alleged conduct occurred. The customer alleged that Mr. Murray made misrepresentations and sought $46,744. The customer did not file a securities arbitration complaint and instead complained directly to the firm. The firm denied paying the customer any compensation.
• Customer Dispute (June 1999): A customer filed a lawsuit against HD Brous & Co., Inc., and Mr. Murray in California. The customer alleged $70,000 in damages as a result of unauthorized trades. Murray and HD Brous & Co., Inc. settled the matter for $79,452. Mr. Murray continues to deny wrongdoing. Mr. Murray’s full broker statement regarding the allegations can be read on his BrokerCheck report.
• Customer Dispute (March 1999): A customer made an oral complaint to HD Brous & Co. Inc. that Mr. Murray engaged in unauthorized trading. According to the firm’s statement, the customer subsequently retracted the complaint in writing. Murray also claims that the trade was canceled and denies wrongdoing. Mr. Murray’s full broker statement regarding the allegations can be read on his BrokerCheck report.

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.

Worden Capital Management LLC & Laidlaw & Company (UK) Ltd. – Supervisory Duties

Brokerage firms like Worden Capital Management LLC and Laidlaw & Company (UK) Ltd. 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 David Murray, Worden Capital Management LLC, or Laidlaw & Company (UK) Ltd. and either sustained financial losses or suspect that Mr. Murray 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.

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.