National investor fraud law firm, KlaymanToskes (“KT”), has commenced an investigation (“Stephen Sullivan Spartan Capital Investigation”) into Spartan Capital Securities broker Stephen James Sullivan in light of a recent preliminary determination by FINRA to recommend disciplinary action to be brought against him relating to, in part, churning, excessive trading and unsuitable recommendations.
Stephen Sullivan Spartan Capital Investigation and FINRA’s Preliminary Determination
According to FINRA BrokerCheck, on August 10, 2021, FINRA made a preliminary determination to recommend that disciplinary action be brought against Stephen Sullivan alleging violations of Section 10(b) of the Exchange Act, Exchange Act Rule 10b-5, and FINRA Rules 2020 and 2010 for churning customer accounts; violations of FINRA Rules 2111(a) and 2010 for quantitative suitability and/or excessive trading in customer accounts; and violations of FINRA Rules 2111(a) and 2010 for reasonable basis suitability for recommending an unsuitable investment strategy to customers.
What is Churning?
According to FINRA, brokerage firms and its financial advisors that excessively traded 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, Claimants 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:
- Client Level of Sophistication;
- Unsuitable Investment Strategy Based on Objectives;
- Prior Transactions of a Similar Nature and Frequency;
- Client Trust and Reliance Upon a Financial Advisor;
- Time Client Devotes to Independent Research;
- Number of Transactions Solicited vs. Unsolicited;
- Similar Positions with Different Brokerage Firms; and
- Client Understanding of Investment Strategy.
Investment Losses with Stephen Sullivan at Spartan Capital?
Former customers of Spartan Capital Securities broker Stephen Sullivan with investment losses that exceed $100,000, and those who may have information relating to the manner in which the broker handled their accounts, are encouraged to contact Lawrence L. Klayman, Esq., at (561) 542-5131, and download our Special Investor Report.
KT 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. KT has recovered more than $220 million for investors in FINRA arbitrations. KT has office locations in California, Florida, New York, and Puerto Rico.
Lawrence L. Klayman, Esq. (561) 542-5131