Spartan Capital Broker, Marc Reda, Subject of FINRA Complaint Alleging Excessive Trading
On June 15, 2021, Spartan Capital Securities, LLC (Spartan Capital) financial advisor, Marc Reda (Reda, CRD No. 2757330), was named as a Respondent by Financial Industry Regulatory Authority (FINRA) Enforcement in a Complaint alleging, in relevant part, that he “recommended to all of his customers an investment strategy – actively trading in anticipation of corporate announcements – that was unsuitable because he failed to consider that the substantial commissions and costs associated with his investment strategy made it unlikely his customers could profit from it.” Specifically, FINRA’s findings of fact determined that, from January 2017 to December 2019, Reda’s purported unsuitable investment strategy impacted “… 66 customer accounts in which Reda executed ten or more trades… charg[ing] $952,764 in commissions and fees while the customers lost $934,482.”
As alleged by FINRA in its Complaint, Reda “recommended a highly speculative investment strategy to his customers that involved active trading of a company’s stock in anticipation of a corporate announcement…” that might favorably impact the company’s stock price. Based on this speculative trading strategy, FINRA further determined that Reda’s customers’ accounts “were actively traded and generally concentrated in [only] one or two positions at any given time.” Mr. Reda’s career in the securities industry began in 1999, when he was affiliated with Dalton Kent Securities Group, Inc. Most recently, from May 2016 until present, Mr. Reda has been employed by Spartan Capital in that brokerage firm’s New York, NY office. As of the date of this writing, FINRA BrokerCheck discloses that Mr. Reda has been the subject of twelve customer complaints during the course of his career, including a currently pending customer dispute alleging “misrepresentation and unsuitable investments” and seeking damages of $72,026.
Excessive trading occurs where (1) a financial advisor exercises control over a customer’s account, and (2) the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading constitutes a violation of industry standards under FINRA Rule 2111 (Suitability). In determining whether trading is excessive, the use of certain factors and corresponding statistical formulas is commonplace, including analyzing an account’s turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account.
Furthermore, under applicable FINRA rules, brokerage firms like Spartan Capital have a legal duty to supervise their employees and affiliated persons. Specifically, under FINRA Rule 3110 (NASD Rule 3010), firms like Spartan Capital must “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance” with applicable FINRA rules, in addition to state and federal securities laws. It is critical for broker-dealers to not only establish such a supervisory system, but to also maintain their supervision by periodically meeting with individual financial advisors to discuss, among other things, the products they are selling and their sales methods. Account activity including trading activity relative to a customer’s investment objectives, stated risk tolerance, and financial situation and needs should also be addressed.
The attorneys at Giarrusso Law Group LLC have significant experience in working closely with investors to resolve all manner of issues concerning investment losses, including losses suffered due to misconduct or negligence by a broker or financial advisor. Investors may pursue a claim to recover monies through securities arbitration before FINRA, or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and no-obligation consultation.