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Another Rep Suspended by FINRA Over Reg BI Violation

Another Rep Suspended by FINRA Over Reg BI Violation. Broker-dealer, brokerage, Financial Industry Regulatory Authority, financial services, FINRA, RIA
Another Rep Suspended by FINRA Over Reg BI Violation. Broker-dealer, brokerage, Financial Industry Regulatory Authority, financial services, FINRA, RIA

The Financial Industry Regulatory Authority suspended Joao A. Pinto after he recommended a series of trades in one senior customer’s account that were “excessive, unsuitable, and not in the customer’s best interest,” and thereby “willfully” violated Reg BI’s best interest obligation.

In November 2019, a 68-year-old retired customer opened an account at Spartan Capital Securities with Pinto. FINRA says that from January 2020 through June 2021, Pinto engaged in quantitatively unsuitable trading in the customer’s account. Pinto recommended high frequency trading in the customer’s account, and the customer routinely followed his recommendations.

As a result, Pinto exercised “de facto control” over the customer’s account. According to FINRA, Pinto’s trading resulted in a high turnover rate and cost-to-equity ratio, as well as significant losses.

In particular, Pinto effected 130 transactions in the customer’s account, resulting in an annualized turnover rate of 14 and an annualized cost-to-equity ratio of 55%. Pinto’s trading in the customer’s account generated total trading costs of $92,237, including $83,484 in commissions, and caused $141,051 in realized losses.

FINRA says the high cost-to-equity ratio meant the customer’s account would have to grow by 55% annually just to break even.

Pinto consented to a three-month suspension from associating with any FINRA member in all capacities.

According to BrokerCheck, Pinto was affiliated with Newbridge Securities Corp. for four years prior to joining Spartan.

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