Securities Lawyers Blog
In December 2025, FINRA filed a sweeping enforcement action against Spartan Capital Securities, alleging that the New York–based broker dealer built its business on systematic churning and excessive trading that generated millions in revenue while inflicting massive losses on customers.
According to FINRA’s complaint, 114 customer accounts incurred nearly $10 million in trading costs and almost $8 million in losses between January 2018 and April 2022. More than half of those accounts belonged to senior investors.
FINRA’s conclusion was blunt: “Spartan’s business model depended on this misconduct.”
What FINRA Means by Churning
Churning occurs when a broker excessively trades a customer’s account primarily to generate commissions, rather than to serve the client’s investment goals. It is a long-standing violation of federal securities laws and FINRA rules.
One of the most important metrics regulators use is the cost-to-equity ratio—the percentage return an account must earn just to break even after commissions and fees.
In Spartan’s case, FINRA alleges:
Cost-to-equity ratios as high as 491%
One-third of Spartan’s revenue came from accounts with ratios above 20%, a level that often signals churning
Customers were losing money even in favorable market conditions
At those levels, profitability for the client is mathematically implausible.
Allegations of Firm-Wide Failure to Supervise
FINRA did not limit its charges to individual brokers. The regulator alleges that Spartan:
Ignored obvious red flags
Failed to meaningfully supervise dozens of brokers
Allowed excessive trading to continue despite mounting customer harm
FINRA specifically named five brokers and executives and alleged that 36 additional representatives failed to take meaningful steps to prevent the misconduct.
This is critical. FINRA rules impose direct supervisory responsibility on broker-dealers, not just on individual advisors.
Reg BI and Suitability Violations
FINRA alleges that Spartan and certain representatives violated:
Regulation Best Interest (Reg BI)
FINRA Rule 2111 (Suitability)
FINRA Rules 2010 and 2020
The Securities Exchange Act of 1934
These rules require brokers to place client interests ahead of their own, ensure recommendations are suitable, and avoid deceptive or unethical conduct. FINRA’s allegations suggest those obligations were routinely ignored.
Why This Matters to Spartan Capital Customers
If you were a Spartan Capital customer—especially a senior investor—this enforcement action matters because FINRA findings often mirror what arbitration panels later confirm.
Key red flags include:
High turnover or constant trading
Large commission charges
Losses despite frequent activity
Accounts that never seemed to “catch up”
Pressure to keep trading
Importantly, you do not need to wait for FINRA to finish its case to pursue recovery. Investors can bring claims through FINRA arbitration, which focuses on your individual account, not the regulator’s penalties.
Potential Recovery Through FINRA Arbitration
FINRA enforcement actions do not compensate investors directly. Recovery typically comes from:
FINRA arbitration claims
Claims for churning and excessive trading
Failure to supervise
Reg BI and suitability violations
Many investors recover substantial portions of their losses through arbitration, even when the firm disputes wrongdoing.
What to Do If You Suspect Churning
If your Spartan Capital account shows:
Heavy trading
High commissions
Persistent losses
Little connection to your goals or risk tolerance
You should have the account reviewed by a securities attorney experienced in FINRA arbitration.
Time limits apply, and evidence matters.
Bottom Line
FINRA’s complaint alleges that Spartan Capital’s profits came at the direct expense of its customers. When a broker-dealer’s revenue depends on excessive trading, the harm to investors is not accidental—it is structural.
If you invested with Spartan Capital and suffered losses, you deserve answers and accountability. Call 800-810-4262 or reach out to us at agana@ganallp.com