Stephen James Sullivan of Garden City, New York, a stockbroker registered with Salomon Whitney LLC, has been fined $10,000.00 and suspended for nine months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Sullivan engaged in unsuitable trading. Letter of Acceptance, Waiver, and Consent No. 2019061952601 (October 21, 2022).
FINRA Rule 2111(a) provides in pertinent part that “[a] member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile.” As explained in the Supplementary Material found at 2111.05(c):
Quantitative suitability requires a member or associated person who has actual or de facto control over a customer account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, are not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile, as delineated in Rule 2111(a).
According to the AWC, from May 2018 through November 2019, during the time that he was associated with SW Financial, Sullivan engaged in excessive trading in the accounts of three customers. For example, Sullivan executed 33 transactions in a customer’s account over the span of approximately one year, resulting in a turnover rate of 20.45 and a cost-to-equity ratio of 76.55 percent in that account. Collectively, customers realized $72,476.00 in losses while having to pay $49,696.00 in trading costs because of Sullivan’s trading. Therefore, Sullivan violated FINRA Rules 2010 and 2111.
This is not the first time that Sullivan has been the subject of a regulatory action concerning Sullivan’s conduct in the securities industry. FINRA Public Disclosure shows that Sullivan was fined $5,000.00 and suspended by FINRA because Sullivan engaged in unauthorized trading. Letter of Acceptance, Waiver, and Consent No. 2014039219802 (February 3, 2016).
According to the AWC, between January 2011 and July 2012, during the time that he was associated with First Midwest Securities Inc., Sullivan exercised discretion in the accounts of two customers without Sullivan having prior written authorization from the customers or First Midwest Securities Inc. Therefore, Sullivan violated FINRA Rules 2010 and NASD Rule 2510(b).
FINRA Public Disclosure shows that Sullivan is referenced in three customer initiated investment related disputes concerning Sullivan’s conduct while associated with securities broker dealers, including First Midwest Securities Inc., Newbridge Securities Corporation, and SW Financial. On November 5, 2010, a customer filed an investment related complaint involving Sullivan’s conduct in which the customer requested $27,592.10 in damages based upon allegations that Sullivan engaged in the unauthorized trading of stocks when Sullivan was associated with First Midwest Securities Inc.
Sullivan was also referenced in a complaint that was settled on October 10, 2019, for $39,998.00 in damages based upon allegations that Sullivan was negligent, made unsuitable recommendations, engaged in excessive and unauthorized trading, committed fraud, breached a contract, and breached his fiduciary duties in connection with the sale of stocks when Sullivan was associated with SW Financial.
On December 2, 2021, another customer initiated investment related FINRA securities arbitration claim involving Sullivan’s conduct was settled for $30,000.00 in damages based upon allegations that Sullivan engaged in excessive and unauthorized trading, made unsuitable recommendations, breached a contract, breached his fiduciary duties, and was negligent in connection with the sale of stocks when Sullivan was associated with Newbridge Securities Corporation. FINRA Arbitration No. 21-01811.
Sullivan was associated with Spartan Capital Securities LLC in Garden City, NY, from November of 2019 to October of 2022; SW Financial in Melville, NY, from May of 2018 to December of 2019; and Worden Capital Management LLC in Melville, NY, from November of 2017 to May of 2018.