Frank Anthony Spadaro, of Mineola, New York, a stockbroker currently registered with Joseph Stone Capital L.L.C., has been named in a Notice of Proposed Agency Action and Opportunity for Hearing by the Office of the Commissioner of Securities and Insurance, Montana State Auditor, in which Spadaro was alleged to have utilized customers’ margin accounts in an unauthorized and fraudulent manner, and effected unauthorized and excessive trades in customer accounts. In the Matter of Joseph Stone Capital, LLC, et al., No. SEC-2016-124 (June 8, 2016).
According to the Notice, customer CG made a $533,348.48 investment with the firm, in which Spadaro was CG’s account representative. Apparently, one-hundred and fifty-five transactions involving thirty securities had been effected by Spadaro CG’s investment account, where CG was not consulted with prior to most trades having been placed.
The Notice stated that the same equities were purchased and sold in CG’s account on several occasions. For example, shares in OPKO Health Inc. were reportedly bought and sold on twenty-two occasions within a twelve-month period; shares in Tower SemiConductor LTD were bought and sold on seventeen occasions over a four-month period; Corporate Resources Services Inc. shares were bought and sold on seven occasions in a one month period; and GLU Mobile Inc. shares were bought and sold on twelve occasions over a thirty-six month period.
Moreover, the Notice indicated that CG’s account transactions involved sales of $3,747,491.70 and purchases of $4,052,938.36, in which the Looper turnover rate was 28.22 on sales and 30.52 for purchases; securities were held on CG’s account for fifty-one days on average. The Notice stated that $114,858.44 in commissions were accumulated by Spadaro and Joseph Stone Capital; however, CG sustained $94,726.00 in losses. The Notice alleged that Spadaro’s conduct was violative of Adin R. Mont 6.10.401(1)(b) based upon CG’s accounts having been traded with a 30.52 Looper turnover rate. Further,
Spadaro was alleged to have effected excessive and unauthorized margin trades in CG’s investment account in violation of Adin R. Mont. 6.10.401(1)(d).
Additionally, the Notice stated that Spadaro traded on margin in CG’s account despite not having CG’s authorization to do so. As a result, Spadaro received commissions pertaining to margin calls in CG’s account. Consequently, the Office of the Commissioner of Securities and Insurance alleged that Spadaro’s conduct constituted deceptive or fraudulent conduct in violation of Section 30-10-301(1)(c).
Four out of the last five firms, Spadaro has been associated have been expelled by securities regulators for violation of federal securities laws or are otherwise defunct. #cockroach
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