National investor fraud law firm KlaymanToskes is investigating former Woodstock Financial Services broker Leonard Joseph Marzocco (“Marzocco Woodstock Financial Investigation”) in light of his recent suspension from the securities industry for excessive and unsuitable trading.
According to an October 2021 FINRA Letter of Acceptance, Waiver and Consent, Marzocco excessive and unsuitably traded the account of one customer between June and December 2019.
During the period, Marzocco recommended more than 160 options transactions to Customer A. The transactions primarily involved call options with short-term expiration dates.
Customer A relied on Marzocco’s advice and accepted his recommendations. The advice caused Customer A to pay $27,078 in commission and other trading costs in around 6 months.
Marzocco consented to sanctions. Those included a 3-month suspension, $5,000 fine and restitution of $27,078 plus interest.
According to FINRA, brokerage firms and its financial advisors that excessively trade or “churn” a brokerage account are in violation securities industry rules and regulations.
In a FINRA arbitration claim of excessive trading or “churning” in a brokerage account, customers may allege a breach of fiduciary duty and conflict of interest for recommended investment strategies whose sole purpose is to enrich the brokerage firm and/or its financial advisor through excessive commissions, fees or costs.
FINRA arbitrations will generally be successful in an excessive trading or “churning” claim if a customer can prove two case facts. First, the panel must conclude the financial advisor controlled or solicited the activity in the account and second, the activity in the account was excessive based on the Claimant’s risk tolerance and investment objectives.
There are many factors an arbitration panel will consider to determine whether a financial advisor had control over the activity in a financial brokerage account. Several factors that may be considered include:
Arbitration panels must determine whether the financial advisor was in control of the transaction in the brokerage account at issue.
An analysis of statistical measures of account activity can help determine whether the transaction history for a brokerage account was excessive. The statistical measurements used are the turnover ratio and the cost-equity ratio of a trading strategy in a brokerage account.
The turnover ratio measures level of activity and is calculated based on total annual purchases divided by the average balance in the brokerage account during a year. The cost-equity ratio measures the total annual costs incurred from an investment strategy calculated based on total annual costs (commissions and margin interest) divided by the average balance in the financial brokerage account. This is frequently referred to as the “breakeven” rate of return.
An investor’s level of sophistication and their ability to understand the risks associated with the particular investment strategy will help determine whether the level of activity is considered excessive.
Marzocco was most recently registered with Woodstock Financial Group (Nesconset, NY) from June 2019 to December 2019. His previous registrations as a broker include:
Customer Disputes, Other Regulatory Discipline for Marzocco’s Excessive Trading Misconduct
According a July 2020 FINRA Letter of Acceptance, Waiver and Consent, Marzocco excessively traded three customer accounts between November 2015 and December 2017.
Specifically, one account incurred $135,800 in losses and $53,232 in commissions and fees, a second account incurred losses of $24,542 and $9,647 in commissions and fees, and a third account incurred $35,989 in losses and $18,644 in commissions and fees.
Marzocco was suspended for 11 months from associating with any FINRA member firm.
According to BrokerCheck, Marzocco settled a customer dispute in 2017 regarding excessive trading allegations.
Former customers of Leonard Marzocco with investment losses exceeding $100,000, and those with information about how he handled accounts, is encouraged to contact Lawrence L. Klayman, Esq. at (561) 542-5131.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. KlaymanToskes has recovered more than $225 million for investors in FINRA arbitrations. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
KlaymanToskes
Lawrence L. Klayman, Esq.
(561) 542-5131
lklayman@klaymantoskes.com
www.klaymantoskes.com