Adam Maggio, of Mineola, New York, a stockbroker currently registered with Joseph Stone Capital LLC, has been fined $5,000.00 and suspended for five months from associating with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity supported by findings that he failed to supervise a stockbroker which resulted in excessive trading in customer accounts. Letter of Acceptance, Waiver, and Consent No. 2019063821601 (December 10, 2021).
According to the AWC, Maggio was made responsible under Joseph Stone Capital’s written supervisory procedures for reviewing accounts that were actively traded to ensure that transactions were suitable. Maggio failed to supervise customer accounts for excessive trading.
The AWC states that between January of 2015 and November of 2017, Maggio had the ability to review exception reports, some of which identified accounts with high commission-to-equity ratios. Those reports were not generally reviewed by Maggio. He instead used manual calculations to determine excessive trading, but his manual reviews were inadequate, as he did not review accounts that posed concerns of excessive trading.
The AWC notes an October 2017 active account report indicating that Customer A’s account had a cost-to-equity ratio exceeding 27. The report was made available to Maggio, but he did not review it. Maggio manually calculated the cost-to-equity ratio at 14 percent. He did not address trading concerns until March of 2018. By the time that the customer closed their account in April of 2018, they were charged $10,000.00 more in commissions. FINRA states that the stockbroker’s trading over the lifetime of the account resulted in an annualized turnover rate exceeding 13 and a cost-to-equity ratio exceeding 44.
In another instance, Customer B was charged $7,800.00 in commissions in the first six months of their account being opened, resulting in a cost-to-equity ratio that exceeded 25 percent. The trading report was made available to Maggio, but he did not review it. Maggio instead manually calculated the customer’s cost-to-equity ratio at 10 percent. Maggio failed to take meaningful steps to address the concerns about commissions and trading in that account until after the customer was charged an additional $3,500.00 in commissions.
FINRA states that the exception reports were reviewed by Maggio starting in November of 2017. But he still failed to adequately respond to concerns of excessive trading by stockbrokers. There were no steps taken by Maggio to limit the total commissions and costs charged to customers. This resulted in stockbrokers making more frequent trades.
The regulator also notes that Maggio failed to place any restrictions on commissions for trades in which a customer had a realized gain. As an example, FINRA states that Maggio never restricted the commissions that a stockbroker could charge when it came to sales producing a realized gain. From January of 2017 to November of 2019, $70,000.00 in commissions had been charged to a customer. This caused the customer’s account to have an annualized cost-to-equity ratio exceeding 34 percent.
FINRA found that Maggio violated FINRA Rules 2010 and 3110.
Maggio has been identified in three customer initiated investment related disputes regarding accusations of his wrongdoing while he was registered with JP Turner Company LLC. FINRA Public Disclosure shows that a customer filed an investment related complaint regarding Maggio’s activities where the customer requested $131,929.00 in damages based upon allegations of Maggio failing to follow instructions relating to over-the-counter equities transactions.
Maggio is referenced in a different customer initiated investment related FINRA securities arbitration claim which was resolved for $14,999.99 in damages founded on accusations that unauthorized transactions were executed in the customer’s account and that misrepresentations were made by Maggio at JP Turner Company. According to the claim, the customer sustained damages from unsuitable transactions. The claim also contains allegations of breach of fiduciary duty resulting in damages.
Another customer initiated investment related FINRA securities arbitration claim concerning Maggio’s conduct was resolved for $43,750.00 in damages supported by accusations of excessive and unsuitable trading by the stockbroker.
