Joseph Stone Capital Sanctioned by FINRA For Excessive Trading

• October 13, 2022
• Joseph Stone Capital

In September 2022, the Financial Industry Regulatory Authority settled allegations against member firm Joseph Stone Capital, LLC (CRD No. 159744). The Mineola, NY-based firm is concentrated in the New York metro area and has less than 50 registered representatives among four offices. Joseph Stone Capital, LLC has been a member of FINRA since 2012, according to FINRA records.

Current And Past Allegations Of Conduct Leading To Investment Loss

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in September 2022, FINRA sanctioned Joseph Stone Capital, LLC. The firm is censured and must pay restitution of $825,607.59. In addition, the firm has 90 days to develop and implement a heightened supervision plan over the registered representatives involved in the allegations.

The FINRA sanction states, “From January 2015 through June 2020, Joseph Stone 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 they pertain to excessive trading. As a result, Joseph Stone failed to identify or reasonably respond to red flags of excessive trading in 25 customer accounts that caused the customers to pay more than $1,037,000 in commissions, fees, and margin interest. By this conduct, Joseph Stone violated FlNRA Rules 31 lO(a) and (b) and FINRA Rule 2010.”

For a copy of the FINRA sanction, click here.

We Help Investors Recover Investment Losses

Excessive trading often occurs when a Financial Advisor puts his or her interests ahead of the clients and makes transactions solely for the purpose of generating commissions. Financial Advisors have a regulatory duty to recommend suitable investment strategies. One of the components of the suitability analysis is quantitative suitability.

Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation. Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

The Wolper Law Firm, P.A. represents investors nationwide in securities litigation and arbitration on a contingency fee basis.  Matt Wolper, the Managing Principal of the Wolper Law Firm, P.A., is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.