According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Stephen Sullivan (Sullivan), previously associated with Spartan Capital Securities, LLC, has been subject to at least one disclosable event. These events include one regulatory event. Several of those complaints against Sullivan concern allegations of high frequency trading activity also referred to as churning or excessive trading among other securities laws violations.
FINRA BrokerCheck shows a final customer complaint on April 30, 2024.
Sullivan was named a respondent in a FINRA complaint alleging that he failed to provide on-the-record testimony requested by FINRA in connection with its investigation into his potential churning and excessive trading in customers’ accounts while he was registered with a member firm. The complaint alleges that Sullivan terminated the on-the-record testimony before FINRA had completed its questioning and he failed to appear to complete his on-the-record testimony. The complaint also alleges that Sullivan failed to provide information and documents requested by FINRA in connection with its investigation. Sullivan’s refusal to appear to complete his on-the-record testimony and failure to respond to information and document requests significantly impeded the completion of FINRA’s investigation into his potential misconduct.
In a practice known as churning, brokers may execute numerous trades, occasionally involving the same stock, over a brief span. Often times the account will completely “turnover” every month with different securities. The only purpose of this investment trading activity in any client’s account is to generate commissions that benefit the broker, not the investor. Securities regulators consider churning to be a distinct form of investment fraud. The claim is based on excessive securities trading, the broker’s control over the account, and a fraudulent scheme to extract unlawful commissions from the investor. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.
According to newsources, a study revealed that 7.3% of financial advisors had a customer complaint on their record when records from 2005 to 2015 were examined. Brokers must publicly disclose reportable events on their BrokerCheck reports that include customer complaints, IRS tax liens, judgments, investigations, terminations, and criminal cases. In addition, research has shown a disturbing pattern with troublesome brokers where brokers with high numbers of customer complaints are not kicked out of the industry but instead these brokers are sifted to lower quality brokerage firms with loose hiring practices and higher rates of customer complaints. These lower quality firms may average brokers with five times as many complaints as the industry average.
Sullivan has been in the securities industry for more than 23 years. Sullivan has been registered as a Broker with Spartan Capital Securities, LLC since 2019.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.