Traderfield Securities Inc. and supervisor Mario Divita, of Flushing, New York, have been sanctioned by Financial Industry Regulatory Authority (FINRA) according to findings that Traderfield and Divita failed to supervise stockbrokers resulting in excessive trading in customer accounts. Letter of Acceptance, Waiver, and Consent No. 2018059045003 (November 24, 2021).
According to the AWC, from December of 2016 to June of 2018, Traderfield failed to create and maintain a supervision system or written supervisory procedures aimed at detecting and preventing stockbrokers’ excessive trades in customer accounts. The written supervisory procedures used by Traderfield only designated supervisors for some, but not all, stockbrokers.
The supervisors were required under these procedures to analyze the account statements, exception reports, trade blotters, and commission reports to identify if there were any stockbrokers excessively trading in customer accounts. However, there was no explanation in those procedures regarding the manner of supervision. Exception reports were not reviewed by supervisors at Traderfield, contrary to the procedures. FINRA found that the securities broker dealer violated FINRA Rules 2010 and 3110.
FINRA notes that from December of 2016 to June of 2018, a particular stockbroker was not supervised by Traderfield, resulting in customers’ accounts being excessively traded. From December of 2016 to May of 2017, there was no supervisory designation under the written supervisory procedures for this stockbroker. Divita was ultimately designated as the supervisor, but between September of 2017 and June of 2018, he failed to adequately supervise.
The regulator states that there were no reasonable steps taken by Divita to check if that stockbroker excessively traded. Divita knew about a large volume of trading occurring in this stockbroker’s accounts, but he did not look at the exception reports. The customers’ accounts were also not reviewed by Divita for losses. The high commissions charged by that stockbroker did not come off to Divita as a concern. The stockbroker’s trading activity was not reviewed by Divita for costs either. Divita did not comprehend cost-to-equity ratios and turnover rates.
The AWC states that the stockbroker’s trading in sixteen Traderfield accounts resulted in annualized cost-to-equity ratios ranging between twenty-seven percent and 173 percent and annualized turnover rates ranging from seven to forty. FINRA found that these trades did not reflect customers’ objectives and needs. Customers collectively incurred $538,057.00 in losses. They were charged $451,057.00 in commissions. FINRA determined that Traderfield and Divita violated FINRA Rules 2010 and 3110.
The regulator also mentions that from June of 2017 to April of 2018, information about five customer complaints had not been reported to FINRA by Traderfield. The complaints alleged that accounts that had been excessively traded by Divita resulted in account losses and high commissions. The complaints also alleged unauthorized trading.
Traderfield was censured by FINRA, and Divita was fined $5,000.00 and suspended for three months from associating with any FINRA member in any capacity.
FINRA Public Disclosure shows that Divita has been identified in three customer initiated investment related disputes regarding accusations of his harmful activities while registered with Traderfield. On August 15, 2020, a customer initiated investment related FINRA securities arbitration claim involving Divita’s conduct was resolved for $40,000.00 in damages based upon allegations of misrepresentation and fraud relating to the customer’s investments in over-the-counter equities and stocks between December of 2016 and March of 2018. FINRA Arbitration No. 19-02560 (August 30, 2019).
On February 22, 2021, another customer initiated investment related FINRA securities arbitration claim regarding Divita’s activities was settled for $24,500.00 in damages founded on accusations that stock and over-the-counter equities transactions were misrepresented and that the customer was defrauded. FINRA Arbitration No. 19-01849 (February 22, 2021).
Divita is also referenced in a customer initiated investment related FINRA securities arbitration claim in which the customer sought $19,510.00 in damages supported by allegations of them being overcharged in commissions on over-the-counter equities transactions when Divita was associated with Traderfield. FINRA Arbitration No. 21-00960 (April 30, 2021).
Divita has been registered with Traderfield as a stockbroker since October 13, 2016.
