First Standard Stockbroker Barred By FINRA For Obstruction
Philip Joseph Sparacino of Red Bank New Jersey a stockbroker formerly registered with First Standard Financial Company LLC has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity founded on findings that he neglected to comply with FINRA’s requests when under the regulator’s investigation for (1) effecting unauthorized trades in customer accounts (2) placing trades in excessive amounts and (3) trading in a manner which failed to comport with customers’ objectives for investing, risk tolerance or overall circumstances. Letter of Acceptance Waiver and Consent No. 2019063631801 (Nov. 11, 2019).
According to the AWC, allegations of Sparacino’s unsuitable, excessive, and unauthorized trading had been investigated by FINRA beginning in 2019. The investigation commenced following Sparacino’s termination from First Standard Financial on October 14, 2019. First Standard Financial referred to Sparacino’s stockbroker’s licensure being revoked by the New Jersey Bureau of Securities.
The AWC stated that Sparacino failed to provide information and documentation to FINRA after it was requested of him on October 28, 2018 under Rule 8210. Sparacino’s counsel then informed FINRA that the stockbroker would not cooperate in the investigation. FINRA determined that Sparacino’s conduct was violative of FINRA Rules 2010 and 8210.
Sparacino is also the subject of a Summary Penalty and Revocation Order issued by the Chief of the New Jersey Bureau of Securities which contained findings of the stockbroker, inter alia, engaging in fraudulent trades in the accounts of First Standard Financial customers. In the Matter of Philip J. Sparacino (Oct. 8, 2019).
According to the Order, Sparacino’s unsuitable, excessive, unauthorized and fraudulent trading began in June of 2019 when he assumed responsibility for servicing accounts that were previously serviced by now-terminated First Standard Financial stockbrokers. Between April of 2019 and May of 2019, prior to inheriting the customer accounts from former stockbrokers, Sparacino generated $24,258.00 through fees and commissions. Between June 1, 2019 and October 4, 2019, during the time Sparacino traded in the inherited accounts, the stockbroker generated a total of $1,452,514.00 in fees and commissions.
The Bureau indicated that Sparacino’s fraudulent trading became more evident following the departure of the securities broker dealer’s Chief Operating Officer in September 2019. Indeed, from September 19, 2019 and September 30, 2019, more than three hundred trades had been effected by Sparacino which generated $453,231.00 in fees and commissions. Sparacino generated this trading activity by, inter alia, falsifying information to customers about commissions, utilizing margin to effect transactions without authorization; and placing trades in customer accounts on an excessive basis.
The Order also stated that securities had been recommended to customers despite Sparacino failing to have an adequate basis to conclude that his recommended strategy was suitable for them. Sparacino’s trading strategy was geared towards maximizing commission for himself regardless of whether his trades were appropriate for the First Standard Financial customers.
The Bureau also indicated that trades had been executed by Sparacino in customers’ accounts on a short-term basis, causing them to pay hefty commissions for each transaction. The Order stated that the strategy Sparacino executed hampered his customers’ ability to generate profits, and it exacerbated losses incurred through unprofitable trades. In addition, Sparacino’s strategy focused on trading investments which were meant to be held long-term. The Bureau also noted that the cost-to-equity ratio for customers’ accounts ranged between ten percent and twenty-five percent, further evidencing Sparacino’s unsuitable trading.
The Order stated that by selling securities to customers without their authorization, and by charging excessive commission on unauthorized trades, Sparacino’s conduct was violative of N.J.S.A. 49:3-52(a). The Order also stated that false and misleading statements had been made by Sparacino to customers, leading them to believe that there would be no fees or commissions charged to them for transacting; and Sparacino neglected to properly inform investors about both the trades he placed on margin and the commissions he charged for trades. The Bureau found Sparacino’s activities in this regard to be violative of N.J.S.A. 49:3-52(b) and (c).
FINRA Public Disclosure confirms that Sparacino has been identified in three customer initiated investment related disputes containing accusations of his misconduct while employed with First Standard Financial. Specifically, a customer filed an investment related arbitration claim concerning Sparacino’s conduct in which the customer requested $90,198.00 in damages founded on allegations that stock transactions executed in the customer’s account failed to be suitable for the customer; and the customer’s account was churned. FINRA Arbitration No. 18-04014 (Dec. 3, 2018).
Another customer filed an investment related complaint involving Sparacino’s conduct on September 30, 2019 where the customer sought damages estimated to exceed $5,000.00 based upon accusations that the customer was charged commissions that were excessive; and unauthorized trades were effected by the stockbroker. Also, on October 18, 2019, a customer filed an investment related complaint concerning Sparacino’s activities in which the customer requested unspecified damages supported by allegations that trades Sparacino placed lacked authorization, and commissions were unreasonable and excessive.