Stewart Ginn (also known as Stewart Taylor and as Paxton Ginn Jr.), of Santa Maria, California, a stockbroker registered with Independent Financial Group LLC, has been fined $50,000.00 and suspended for 18 months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Ginn engaged in excessive and unauthorized trading in customer accounts, resulting in losses in Independent Financial Group customer accounts. Letter of Acceptance, Waiver, and Consent No. 2021072167901 (August 29, 2024).
Regulation BI (Best Interest Obligation Rule 15l-1(a) requires stockbrokers to act in the best interest of their customers when recommending securities transactions or strategies. The stockbroker must ensure that recommendations align with the customer’s financial profile, risk tolerance, and goals, without prioritizing the stockbroker’s own financial gain. Also, FINRA Rule 2111 requires stockbrokers to have a reasonable basis for believing that a recommendation is suitable for the customer based on their financial situation, risk tolerance, and investment goals. Stockbrokers must ensure that transactions are appropriate for the individual customer.
According to the AWC, Ginn engaged in excessive trading in the accounts of five customers. Excessive trading refers to a stockbroker conducting a large number of transactions in a customer’s account, sometimes to generate high commissions, regardless of whether it benefits the customer.
Between July 2020 and December 2022, Ginn engaged in frequent trades in these customer accounts, generating more than $2,240,000.00 in commissions for himself and Independent Financial Group. Many of these customers were elderly, including some in their 70s and 80s, with no history of aggressive investing, according to the regulator. One customer was in her late 80s and suffering from Alzheimer’s disease. FINRA stated in the AWC that Ginn’s excessive trading resulted in realized losses of over $2,220,000.00 for the customers, while he profited from the commissions charged on buy and sell transactions.
FINRA stated that Ginn recommended that his customers buy large positions in stocks, which he often sold shortly after purchasing, even when the price changes were minimal. Because the commissions on these transactions were very high—three percent on purchases and two percent on sales—the customers consistently lost money on these trades. Still, Ginn persisted in trading excessively in their accounts. FINRA found that Ginn violated the Best Interest Obligation (Regulation BI) for four customers and violated FINRA Rule 2111 by engaging in unsuitable trading in the account of a fifth customer.
In addition, FINRA stated that Ginn exercised discretion by making trades in at least four of these customers’ accounts without obtaining written permission from customers. Under FINRA Rule 3260, stockbrokers must obtain written authorization from customers before exercising discretion in their accounts. This means that without prior written permission, a stockbroker cannot buy or sell securities on behalf of the customer without their explicit consent for each transaction. FINRA found that Ginn violated FINRA Rule 3260 and 2010.
FINRA Public Disclosure also shows that Ginn has been identified in six customer initiated investment related disputes containing allegations of Ginn’s conduct while associated with securities broker dealers. Ginn is the subject of a customer initiated investment related FINRA securities arbitration claim in which the customer requested $250,000.00 in damages based upon alleged unsuitable investment advice in structured notes during the time that Ginn was associated with Independent Financial Group. FINRA Arbitration No. 23-03073.
Another customer initiated investment related FINRA securities arbitration claim involving Ginn’s conduct was settled for $700,000.00 in damages based upon alleged unsuitable recommendation in over-the-counter equities during the time that Ginn was associated with Independent Financial Group. FINRA Arbitration No. 23-02504 (May 23, 2024).
On September 6, 2024, a different customer initiated investment related FINRA securities arbitration claim involving Ginn’s conduct was settled for $1,100,000.00 in damages based upon alleged fraud, excessive trading, churning, breach of contract, negligent supervision, misrepresentations of material fact, and breach of fiduciary duty. FINRA Arbitration No. 23-03531.
Ginn has been associated with Independent Financial Group LLC in Santa Maria, California, since September 3, 2015. Ginn was associated with Navian Capital Securities LLC in Cincinnati, Ohio, from February 18, 2021, to March 10, 2023.
