Securities Lawyers Blog
According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Scott Martinson (Martinson), previously associated with Arive Capital Markets, has been subject to at least 2 disclosable events. These events include one customer complaint, one regulatory event. Several of those complaints against Martinson 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 December 22, 2021.
Without admitting or denying the findings, Martinson consented to the sanctions and to the entry of findings that he failed to reasonably supervise a former registered representative at his member firm who, while under Martinson\\u2019s heightened supervision, excessively and unsuitably traded in customer accounts. The findings stated that Martinson became aware of red flags that the registered representative was recommending excessive and unsuitable securities transactions but failed to reasonably investigate the red flags or take appropriate action in response to them. Although Martinson discussed the affected accounts with the registered representative, he accepted the registered representative\\u2019s explanations that the customers understood and desired an aggressive trading strategy. When Martinson spoke with the affected customers, he did not ask them whether they understood the amount of commissions they were being charged, whether they wanted aggressive trading as the representative claimed, or whether the trading in their accounts was consistent with their investment objectives. Martinson failed to take other steps to reasonably investigate whether the trading in the customers\\u2019 accounts was suitable for them, such as calculating the turnover rate or cost-to-equity ratio. Had he done so, Martinson would have learned that the trades the registered representative recommended to the affected customers resulted in cost-to-equity ratios exceeding 25 percent, meaning that the accounts would have had to grow by 25 percent just to cover the commissions and other costs charged to the accounts.