Donald Bartelt, of West Palm Beach, Florida, a stockbroker formerly registered with Newport Coast Securities has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member firm in any capacity per a FINRA Office of Hearing Officers’ Default Decision containing findings that Bartelt effected unsuitable trades and churned customer accounts. Department of Enforcement v. Bartelt, No.2012030564701 (Oct. 17, 2016).
According to the Decision, Bartelt was responsible for faulty investment decisions in the account of MG, an eighty-seven-year-old widow. Apparently, between June of 2010 through December of 2012, MG’s individual account was subject to $436,000.00 in purchases, $445,000.00 in sales, a cost/equity percentage of 52.96%, and a 22.74 annual turnover rate. MG reportedly suffered $22,000.00 in losses in this account.
Further, MG’s individual retirement account was apparently subject to an estimated $3,000,000.00 in purchases and sales, a cost/equity percentage of 57.425, a 27.60 annual turnover rate. MG’s IRA was subject to $63,000.00 in total costs, causing MG to experience approximately $45,000.00 in losses. MG’s trust account was subject to $2,900,000.00 in purchases and an estimated $3,000,000.00 in sales; a cost/equity percentage of 67.26%, and annual 31.01 turnover rate. MG reportedly faced more than $63,000.00 in costs in this account, and sustained losses of nearly $42,000.00.
Bartelt also managed the account of inexperienced investor LW, who was MG’s daughter. Apparently, Bartelt never discussed trades with LW prior to effecting such. The Decision indicated that LW complained to Bartelt of effecting excessive trades, but his trading persisted. Apparently, between June of 2010 and January of 2013, an estimated $357,000.00 in purchases were made in LW’s account, and nearly $368,000.00 in sales. LW’s account was reportedly subject to a cost/equity percentage of 60.86%, an 18.93 annual turnover rate, and $11,500.00 in total costs. LW reportedly sustained losses of $8,000.00. The Decision stated that LW lost nearly her entire balance in her IRA due to Bartelt’s trading.
The Decision stated that Bartelt was also responsible for unsuitable trading in the account of customer LAC. The Decision indicated that between June of 2010 through May of 2013, LAC’s account was subject to approximately $2,000,000.00 in purchases, and $2,000,000.00 in sales. LAC’s account was also reportedly subject to a cost/equity percentage of 60.35% and a 28.48 annual turnover rate. The Decision stated that LAC suffered from $46,000.00 in total costs, and sustained $40,000.00 in investment losses.
The Decision stated that Bartelt effected trades in customer accounts in a manner which was inconsistent and excessive when considering the investment objectives and financial circumstances of each of his affected customers. Particularly, customers dealt with cost/equity percentages ranging from 52.96% to 200.49%. Further, the affected customers dealt with turnover rates ranging from 18.93 to 72.22.
FINRA stated that Bartelt’s trading activity was not capable of being suitable for any customers, regardless of financial circumstances and investment objectives. The Decision additionally stated that customers who authorized such aggressive active trading did not authorize the depletion of their accounts through excessive margin charges, markups and other commissions. FINRA found that Bartelt violated FINRA Rules 2010, 2111, as well as NASD Rules 2110, 2310 and IM-2310-2.
The Decision also stated that Bartelt’s trading was indicative of churning. Particularly, the benefits afforded to Bartelt from such trading reportedly stripped away the customer’s expected returns. FINRA found that Bartelt’s reckless disregard of the affected customers constituted violations of Securities Exchange Act of 1934 Section 10(b), Rule 10b-5, FINRA Rules 2010 and 2020, and NASD Rules 2110 and 2120.
FINRA Public Disclosure reveals that Bartelt has been subject to five incidents, two of which involve customer initiated investment related arbitration actions. On May 28, 2013, Bartelt became subject to a pending customer initiated investment related arbitration action, in which the customer requested $113,000.00 in damages based upon allegations of Bartelt’s misconduct. Further, on September 22, 2008, Bartelt settled a customer initiated investment related arbitration action for $70,000.00 based upon allegations against Bartelt of making unsuitable investment recommendations.
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