Joseph Scott Audia, of Hauppauge, New York, a stockbroker formerly registered with Joseph Stone Capital LLC, has been fined $5,000.00 and suspended for two months from associating with any Financial Industry Regulatory Authority (FINRA) member in any principal capacity based upon findings that he failed to supervise a stockbroker, resulting in excessively trading in a Joseph Stone Capital customer’s account. Letter of Acceptance, Waiver, and Consent No. 2019063821604 (December 20, 2021).
According to the AWC, between December of 2017 and May of 2020, Audia was a branch manager in Hauppauge, and his responsibilities included overseeing a particular stockbroker’s trades. FINRA notes that Audia was supposed to check if the stockbroker engaged in excessive trading in violation of FINRA’s quantitative suitability rule. Joseph Stone Capital indicated in its written supervisory procedures that cost-to-equity ratios, turnover rates, and in-and-out trading serve as an adequate basis for finding if a stockbroker makes quantitatively unsuitable trades.
FINRA states that Audia reviewed trade blotters on a daily basis. He used active account reports, which Joseph Stone Capital generated. He flagged accounts on active account reports if there were high cost-to-equity ratios and turnover rates. Still, Audia did not investigate concerns that the stockbroker under his watch might have been excessively trading. The active account reports showed ways that the stockbroker’s commissions could be restricted. Audia was supposed to enforce those restrictions. He failed to do so.
In one instance, in March of 2018, Audia was provided with an active account report which showed that Joseph Stone Capital disallowed the stockbroker from charging markups or commissions in a customer’s account for three months. That customer’s account had a cost-to-equity ratio of 78 percent because of the stockbroker. The customer was still charged a markup when these prohibitions were in place. Audia did not enforce Joseph Stone Capital’s rules.
In another instance, in July 2018, Audia was provided with an active account report by Joseph Stone which relayed that for three months, the stockbroker was not allowed to charge more than 1.5 percent in markups or commissions in a different customer’s account. He was also prohibited from charging markups or commissions on sales that produce losses for the customer. The customer was charged excessive markups anyway. The customer was charged commissions on four sales that produced losses. FINRA states that Audia failed to address the stockbroker’s trading and enforce the company’s restrictions. The regulator notes that this customer’s account contained a cost-to-equity ratio of 49 percent.
Audia violated FINRA Rules 2010 and 3110 for his failure to supervise.
Audia has been identified in three customer initiated investment related disputes regarding accusations of his wrongdoing during the period that he was registered with securities broker dealers, including Joseph Gunnar Co. and American Capital Partners. FINRA Public Disclosure shows that a customer filed an investment related complaint concerning Audia’s conduct where the customer requested $45,000.00 in damages supported by allegations that Audia failed to follow instructions relating to over-the-counter equities transactions when he was employed by Joseph Gunnar.
Another customer initiated investment related NASD arbitration claim regarding Audia’s conduct was resolved for $24,000.00 in damages founded on accusations of unauthorized and unsuitable trading by Audia while he was registered with American Capital Partners. According to the claim, the customer’s account was churned. The claim also alleges negligence by the stockbroker relating to financial futures.
Audia is also the subject of a customer initiated investment related arbitration claim which was settled for $5,000.00 in damages based upon allegations of negligence and unsuitable over-the-counter equities transactions in the customer’s American Capital Partners account. The claim also contains accusations of fraud and breach of fiduciary duty resulting in damages to the customer.
Audia’s stockbroker registration with Joseph Stone Capital was terminated on September 27, 2021. Since September 10, 2021, he has been registered with VCS Venture Securities.
