Joseph Stone Capital to Pay Restitution for Excessive Trading

The Financial Industry Regulatory Authority Inc. (FINRA) announced in a news release that it has ordered Joseph Stone Capital LLC to pay restitution of approximately $825,000 to clients whose accounts were excessively traded by the firm’s registered representatives. In related settlements, FINRA suspended eight current or former Joseph Stone representatives and required them to pay an additional $211,000 in restitution to the firm’s clients. Also, FINRA suspended three supervisors at Joseph Stone Capital for failing to reasonably identify or respond to red flags of excessive trading, and barred two representatives for refusing to respond to FINRA’s requests for information in connection with the investigation.

According to the FINRA news release, they found that from January 2015 to June 2020, Joseph Stone Capital allegedly failed to implement a supervisory system designed to comply with FINRA’s rules relating to excessive trading. According to FINRA, Joseph Stone Capital failed to identify or address representatives’ excessive and unsuitable trading in 25 client accounts, causing the clients to pay approximately $1 million in commissions and other trading costs.

The trading in the accounts generated cost-to-equity ratios, which means the amount the accounts would have to increase in value to cover commissions and other trading expenses, ranged from 21% to 96%, according to FINRA.

“Excessive costs and commissions make it more difficult for customers to realize a positive return. FINRA is committed to investigating when firms fail to reasonably supervise the suitability of recommended securities transactions, and to providing restitution to harmed investors,” said Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement. “Firms must ensure that they establish systems and procedures to supervise recommendations to retail customers; supervisors must use available tools to identify and address red flags of excessive trading; and representatives must ensure that the costs and commissions they charge are reasonable and not excessive.”

According to a recent article in InvestmentNews, the Mineola, New York, firm, which opened in 2013, allegedly churned the accounts from January 2015 to June 2020.  The brokers who remain at Joseph Stone will work under a heightened supervision program for two years. As part of the settlement, the firm, supervisors and brokers agreed to FINRA’s findings and neither admitted nor denied the charges.

If you or a loved one experienced financial losses due to the actions or recommendations of broker/dealer, Joseph Stone Capital LLC, contact Soreide Law Group and speak at no cost with an experienced securities lawyer regarding the possible recovery of your investment losses through a FINRA arbitration at:  888-760-6552.

Soreide Law Group works on a contingency basis, no fee to you if no recovery.  We represent our clients nationwide before FINRA.