Marc Augustus Reda of New York, New York, a stockbroker formerly registered with Spartan Capital Securities, has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based on findings that he churned investor accounts and made unauthorized trades when he was employed by Spartan Capital Securities. Department of Enforcement v. Marc Augusta Reda, Order Accepting Offer of Settlement, Disciplinary Proceeding No. 2019063526901 (March 21, 2022).
According to the Order, between January 2017 and December 2019, Reda told his customers to place their money in his investment strategy, one that entailed trading activity before corporate announcements were made. FINRA states that the strategy was not suitable for investors, as the substantial costs and commissions tied to this strategy made it highly unlikely that investors could turn any profit.
The strategy was implemented in 66 customer accounts. Collectively, customers were charged fees and commissions of $952,764.00 but sustained losses of $934,482.00. The regulator notes that 54 of the accounts had cost-to-equity ratios of 20 percent or more between January 2017 and December 2019.
FINRA states that twenty-one customer accounts had been excessively traded and churned by Reda as part of the investment strategy. Those customers had to pay fees and a commission of $264,734.00. In accounts that had been funded for at least a year, customers suffered from annualized turnover rates ranging from 4.6 to 23.5 and annualized cost-to-equity ratios of 130 percent. The results were worse with investors holding accounts for less than a year, as customers sustained the equivalent of annualized turnover rates ranging from 13.4 to 276.7 and annualized cost-to-equity ratios ranging from 88 to 717 percent. He violated Securities and Exchange Act of 1934 Section 10(b), SEC Rule 10b-5, and FINRA Rules 2010 and 2020 for churning customer accounts.
The Order states that Reda recommended unsuitable trades not just because of them being excessive but also because of his failure to align those trades with customers’ financial needs, tolerances for risk, and objectives for investing. He violated FINRA Rules 2010 and 2111(a) for this reason.
Six customer accounts collectively contained 98 trades where Reda failed to get authorization at the time of the trade. The stockbroker violated FINRA Rule 2010 for unauthorized trading.
The regulator also notes that Reda took steps to bypass his firm’s review of commissions, enabling him to charge excessive commissions in 22 customer accounts in September of 2018 in violation of FINRA Rule 2010 and 2121.
Reda also failed to report customer complaints relating to his trading, violating FINRA Rules 2010 and 1122.
Reda has been identified in thirteen customer initiated investment related disputes regarding accusations of his activities while employed by securities broker dealers, including PHX Financial and Spartan Capital. FINRA Public Disclosure shows that a customer initiated investment related FINRA securities arbitration claim concerning Reda’s activities was settled for $26,000.00 in damages founded on allegations of unsuitable recommendations and breach of fiduciary duty by Reda at PHX Financial. FINRA Arbitration No. 16-01461 (July 13, 2016).
Reda is referenced in a customer initiated investment related written complaint on August 11, 2017, that was resolved for $45,000.00 in damages supported by accusations of excessive commissions charged by Reda at PHX Financial relating to exchange-traded funds and over-the-counter equities trades.
Reda is also identified in a customer initiated investment related FINRA securities arbitration claim where the customer was awarded $15,381.44 in compensatory damages. FINRA Arbitration No. 18-04117 (June 27, 2019). The Statement of Claim alleges churning and unauthorized trading at Spartan Capital Securities.
On February 22, 2022, another customer initiated investment related FINRA securities arbitration claim regarding Reda’s activities was settled for $5,700.00 in damages based upon allegations of unsuitable investment recommendations by Reda at Spartan Capital Securities. FINRA Arbitration No. 19-03740. The claim alleges misrepresentation by the stockbroker.
Reda is additionally the subject of a customer initiated investment related FINRA securities arbitration claim in which the customer sought $83,086.81 in damages founded on accusations including misrepresentation, unauthorized trading, unsuitable transactions, and breach of contract concerning private placement and over-the-counter equities by Reda at Spartan Capital Securities. FINRA Arbitration No. 21-02950 (December 10, 2021). The claim alleges that between 2013 and 2021, Spartan Capital Management failed to supervise Reda’s activities.
Reda was associated with Spartan Capital Securities between May 12, 2016, and March 22, 2022. Of the fifteen brokerage firms whom Reda has been associated, eleven have been expelled by regulators or are otherwise defunct.
