Stephen Sloane of New York New York a stockbroker formerly registered with WestPark Capital Inc. and Morgan Stanley has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity founded on a Decision issued by FINRA’s Office of Hearing Officers who found that Sloane made unsuitable investment recommendations to customers and had overcharged them on securities transactions effected in their accounts. Department of Enforcement v. Stephen Sloane Disciplinary Proceeding No. 2016049414401 (Dec. 8, 2020).
According to the Decision, between January of 2014 and January of 2018, 14 customers had been unsuitably advised by Sloane. Those customers were told to invest in a strategy which entailed the short-term trading of long-term investments including 10-year and 30-year Treasuries. Customers were told to buy those Treasuries in the secondary market and then stand by for a market event to occur that would somehow cause the prices of Treasuries to rise. Sloane would tell customers to sell securities and then use the proceeds for the purchase of additional Treasuries.
The Hearing Officer stated that 40 percent of customers’ sales of Treasuries came within three months of purchasing those products. 75 percent of sales took place within nine months and 80 percent occurred in less than a year from purchase dates.
Sloane’s activities were reviewed by Morgan Stanley and scrutinized after the securities broker dealer noticed the costs associated with his strategy. The stockbroker was instructed by his supervisors to reduce the frequency and the costs pertaining to his trading. Sloane failed to comply which led to his termination from Morgan Stanley.
FINRA stated that in Sloane’s final two years at Morgan Stanley, 332 trades were made in the 14 customers’ accounts in which customers were collectively charged $316,236.00 in markdowns and markups. All but two of those customers were over the age of 65 when Sloane engaged in his trading scheme. The 14 investors collectively lost $88,400.00 during that period.
The AWC stated that 12 customers moved accounts from Morgan Stanley to WestPark when Sloane became associated with that securities broker dealer in March of 2016. The same trading strategy was implemented by Sloane. Between March of 2016 and January of 2018, he executed 214 transactions in customer accounts. Those customers were charged markdowns and markups totaling $193,789.00 and charged $9,737.00 in service fees. A total of $241,411.00 in trading losses were incurred by customers during this period.
Customers who invested in Sloane’s trading strategy collectively lost $329,811.00 while Sloane took in $220,000.00 in commissions. The Hearing Officer found that Sloane did not understand the risks relating to his recommended investment strategy. His conduct was violative of FINRA Rules 2010 and 2111(a).
FINRA also noted that Sloane overcharged customers in January of 2017. Five customers of WestPark were charged for both the purchases and sales of Treasuries. These total markdowns and markups ranged between 6.11 and 7.92 percent in customer accounts. FINRA determined that these charges were unfair, unreasonable and excessive given the circumstances. Sloane violated FINRA Rules 2010 and 2121 in this respect. The Hearing Officer found there to be no excuse or justification for Sloane’s actions.
Sloane has been identified in four customer initiated investment related disputes pertaining to his alleged misconduct while associated with Morgan Stanley Dean Witter, Solomon Smith Barney and Citigroup Global Markets. FINRA Public Disclosure reveals that a customer initiated investment related arbitration claim concerning Sloane’s activities was settled to resolve accusations of unsuitable stock transactions in the Morgan Stanley customer’s account.
Another customer initiated investment related arbitration claim regarding Sloane’s conduct was resolved for $25,000.00 in damages supported by allegations that Sloane placed the Salomon Smith Barney customer in Unsuitable mutual funds and over-the-counter equities.
Sloane is also referenced in a customer initiated investment related arbitration claim which was settled for $55,000.00 in damages based upon accusations that misrepresentations had been made to the customer and that the customer had been defrauded as it pertained to mutual fund sales initiated by Sloane at Salomon Smith Barney. The claim also alleges unsuitable advice and negligence on the stockbroker’s part. Another customer initiated investment related arbitration claim involving Sloane’s activities was resolved for $78,500.00 in damages founded on allegations of Sloane’s poor advice to the Citigroup Global Markets customer regarding exchange traded funds.
Sloane’s registration with WestPark was terminated on August 21, 2020.