Joao Amorim Pinto of New York, New York, a stockbroker registered with Spartan Capital Securities LLC, has been suspended for three months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Pinto engaged in unsuitable trading in customer accounts. Letter of Acceptance, Waiver, and Consent No. 2018056490307 (November 21, 2023).
Pinto’s trading was brought to light following FINRA’s 2018 examination of Spartan Capital Securities LLC. According to the AWC, from January 2020 through June 2021, Pinto recommended a series of trades in a senior customer’s account that were considered excessive and not in the customer’s best interest.
FINRA stated that Regulation Best Interest (Reg BI), effective June 2020, requires that stockbrokers act in the best interest of their customers when recommending securities or investment strategies, prioritizing the customer’s interest above their own. FINRA Rule 2111 requires that a stockbroker’s recommendations to a customer align with the customer’s financial situation, objectives and needs. The regulator indicated that stockbrokers are supposed to ensure that the quantity of transactions within a certain timeframe is appropriate for the customer, considering factors like the account’s turnover rate and the cost-to-equity ratio, to prevent excessive and unsuitable trading in the accounts of customers.
The main issue was Pinto’s recommendation of high-frequency trading in the customer’s account, leading to an annualized turnover rate of 14 and an annualized cost-to-equity ratio of 55 percent. These figures indicated that the customer’s account had to grow by 55 percent annually just to cover trading costs. The total trading costs amounted to $92,237.00, which included $83,484.00 in commissions. The AWC stated that the customer faced $141,051.00 in realized losses because of these trades. He violated Securities Exchange Act of 1934 Rule 15l-1 (Regulation BI) and FINRA Rules 2111 and 2010.
FINRA Public Disclosure additionally shows that on October 7, 2022, a customer filed an investment related FINRA securities arbitration claim involving Pinto’s conduct, requesting $268,386.00 in damages. The claim alleged that Pinto was negligent, churned the customer’s account, and misrepresented and omitted material facts in connection with the sale of common and preferred stocks and over-the-counter equities during the time that Pinto was associated with Spartan Capital Securities LLC. FINRA Arbitration No. 22-02144. The claim also alleged that the securities broker dealer failed to supervise certain representatives.
Pinto has been associated with Spartan Capital Securities LLC in New York, New York, since October 22, 2019. Prior to this, Pinto was registered with Benchmark Investments Inc. in New York, New York, from February 23, 2019, to October 29, 2019. He was also associated with Newbridge Securities Corporation in New York, New York, from September 4, 2014, to February 21, 2019.
