Pasquale James Rappa (also known as James Rappa or PJ Rappa), of Miller Place, New York, a stockbroker formerly registered with First Standard Financial Company LLC, has been fined $5,000.00 and suspended for two months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon findings that he failed to supervise a stockbroker, resulting in unsuitable and excessive trades in three First Standard Financial Company customers’ accounts. Letter of Acceptance, Waiver, and Consent No. 2020065035202 (November 30, 2021).
According to the AWC, in December of 2016, Rappa was a branch manager in First Standard Financial Company’s Miller Place, New York office. Rappa was responsible as a supervisor for auditing the trade blotter. The securities broker dealer’s written supervisory procedures called for Rappa to review customers’ accounts for suitability.
The regulator also notes that in March of 2018, Rappa was required to supervise a specific stockbroker more closely, as that stockbroker had been placed on heightened supervision for complaints from customers of another securities broker dealer. The AWC states that trades made by this stockbroker were supposed to be analyzed by Rappa for possible excessive and unsuitable trading.
From March of 2018 to May of 2019, the stockbroker’s activities raised red flags, which Rappa became aware of, concerning the stockbroker’s unsuitable and excessive trading. The regulator notes that frequent, short-term trades were made in customer accounts. Rappa knew of 41 instances where the stockbroker bought and sold the same security (round trip trading) in a customer’s account. FINRA also notes that three accounts the stockbroker traded in were visible on the actively traded accounts list, which reflected the number of commissions and transactions in those accounts.
According to the AWC, customers listed on the actively traded accounts list were supposed to be contacted by Rappa. One of the customers complained to Rappa about the stockbroker’s margin use and the high commissions and losses that the customer sustained.
Rappa failed to supervise, according to FINRA. He did not take the proper steps to address the complaints or the clear concern of the stockbroker’s excessive and unsuitable trading. The AWC states that Rappa confronted the stockbroker, who convinced Rappa that the customers asked for their accounts to be aggressively traded. Customers’ accounts were excessively and unsuitably traded by the stockbroker, as shown by the high annualized cost-to-equity ratios and turnover rates in those accounts.
Rappa violated FINRA Rules 2010 and 3110 for failing to supervise at First Standard Financial Company.
Rappa is the subject of a customer initiated investment related FINRA securities arbitration claim where the customer was awarded $44,734.00 in compensatory damages supported by Rappa being found liable on the customer’s causes of action, including churning of their account, overconcentration, unsuitable trading, and failure to supervise at Brookville Capital Partners, resulting in stock and over-the-counter equities losses. FINRA Arbitration No. 15-02851 (July 29, 2016).
Rappa was registered with First Standard Financial Company between December 2, 2016, and September 17, 2019. Since August 19, 2019, he has been registered with SW Financial LLC. Since March 21, 2011, Rappa has been associated with six different securities broker dealers, three of which are defunct or expelled by regulators for violating federal securities laws or regulations.
