James Pecoraro Sanctioned by Regulator Over Excessive Trading

shutterstock_29356093-300x214According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker James Pecoraro (Pecoraro), associated with Spartan Capital Securities, LLC (Spartan Capital) has been subject to at least 11 customer complaint, six regulatory actions, and one judgement or liens during his career.  Some of the complaints against Pecoraro concern allegations of high frequency trading activity also referred to as churning or excessive trading among other securities laws violations.

In August 2022, FINRA found Pecoraro consented to sanctions and findings that he excessively traded in customers’ accounts. FINRA found that Pecoraro recommended a pattern of high-cost and high-velocity trading in the customers’ accounts. FINRA alleged that Pecoraro’s customers routinely followed his recommendations and exercised de facto control over their accounts. The findings state that Pecoraro effected a total of 325 trades resulting in annual turnover rates ranging from 13.47 to 57.97 and annualized cost-to-equity ratios ranging from 57.58 percent to 175.19 percent. FINRA found that Pecoraro’s trading was excessive and unsuitable for the customers’ investment profiles and the customers suffered losses of $166,018, total trading costs of $184,053, and commissions of $165,437.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  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 show 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.

Pecoraro entered the securities industry in 1999.  An examination of Pecoraro’s employment history reveals that Pecoraro moves from troubled firm to troubled firm.  The pattern of brokers moving in this way is sometimes called “cockroaching” within the industry.  Over 23 years Pecoraro has been associated with a 10 different broker-dealers.  Many of these firm’s have been expelled from the industry by FINRA and in many instances for securities laws violations for mistreating their customers.  From September 2016 until December 2019 Pecoraro was associated with SW Financial.  Since November 2019, Pecoraro has been registered with Spartan Securities out of the firm’s Garden City, New York office location.

At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to excessive trading and churning violations.  Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation.  Claims may be brought in securities arbitration before FINRA.  Our consultations are free of charge and the firm is only compensated if you recover.

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