Joseph C. DeSapio, of New York, New York, a stockbroker registered with Spartan Capital Securities LLC, has been suspended for 15 months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because DeSapio engaged in excessive and unsuitable trading in customer accounts and borrowed money from a customer. Letter of Acceptance, Waiver, and Consent No. 2022074025801 (March 8, 2024).
According to the AWC, unsuitable recommendations were made by DeSapio for three customers from June of 2017 to June of 2021. DeSapio excessively traded in four accounts belonging to these customers, leading to high turnover rates and cost-to-equity ratios. His actions resulted in substantial losses for the customers, contradicting their conservative investment objectives and limited experience.
Customer A, a 58-year-old paralegal, opened accounts with DeSapio in October of 2018 and September of 2019. DeSapio’s recommendations in one of Customer A’s accounts led to an annualized turnover rate of 33 and a cost-to-equity ratio of 145 percent, generating $82,626.00 in trading costs and $51,800.00 in losses. In another account, DeSapio’s trading resulted in $11,435.00 in trading costs and $8,193.00 in losses.
Customer B, a 57-year-old widowed yoga instructor, started investing with DeSapio in February of 2019. Her account saw an annualized turnover rate of eight and a cost-to-equity ratio of 44 percent, incurring $14,435.00 in trading costs and $8,099.00 in losses.
Customer C, a 71-year-old insurance agent, opened an account in May of 2017. DeSapio’s management of this account resulted in an annualized turnover rate of 12 and cost-to-equity ratio of 72 percent, leading to $27,527.00 in trading costs and $24,454.00 in losses.
FINRA stated that DeSapio violated Securities Exchange Act of 1934 Rule 15l-1, as well as FINRA Rules 2010 and 2111, by engaging in unsuitable and excessive trading, given the customers’ investment profiles.
The AWC also stated that DeSapio borrowed $20,000.00 from Customer A in September of 2019 without prior notice or approval from Spartan. Therefore, he violated FINRA Rules 2010 and 3240.
FINRA Public Disclosure also shows that on March 1, 2012, a customer initiated investment related complaint involving DeSapio’s conduct was settled for $6,000.00 in damages based upon allegations that DeSapio charged excessive commissions in connection with the sale of over-the-counter equities when DeSapio was associated with Brookstone Securities Inc. The complaint also alleged poor performance.
DeSapio is also referenced in a customer initiated investment related FINRA securities arbitration claim that was settled for $70,000.00 in damages based upon allegations that DeSapio was negligent, breached his fiduciary duties, breached a contract, and engaged in churning of the customer’s account when DeSapio was associated with Spartan. According to the claim, Spartan failed to supervise DeSapio’s activities. FINRA Arbitration No. 22-00245 (January 10, 2023).
DeSapio was associated with Spartan Capital Securities LLC in New York, New York from May 5, 2017, to July 27, 2022. Spartan discharged DeSapio as a stockbroker on June 28, 2022, based upon allegations that DeSapio was named in an arbitration claim and owed Spartan $22,992.38.
