investment stockbroker stock trading

Troy Allen Orlando of New York, New York, a stockbroker registered with Spartan Capital Securities LLC, has been fined and suspended for 20 months from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity because Orlando engaged in excessive and unsuitable trading in customer accounts. Letter of Acceptance, Waiver, and Consent No. 2019060753505 (November 22, 2023).

According to the AWC, from January 2018 to November 2020, when Orlando was associated with  Spartan Capital Securities LLC and Worden Capital Management LLC, Orlando recommended a series of trades in customers’ accounts that were excessive, unsuitable, and not in the customers’ best interest.

FINRA stated that since June 30, 2020, stockbrokers have needed to follow a new rule called Regulation Best Interest (Regulation BI) under Securities Exchange Act of 1934. This rule says that during the time that they recommend a stock or investment strategy to customers, they must put the customer’s interests first. They can’t prioritize their own money or benefits over what’s best for the customer. They also need to be skilled in making these recommendations, making sure that recommended transactions are not too excessive and are still in the best interest of the customer based on their financial goals and situation.

Before this new rule came along, stockbrokers had to comply with FINRA Rule 2111, which was about making sure that the recommended investments were suitable for the customer. It included checking if the amount and frequency of the trades were appropriate for the customer’s financial condition and goals. Certain factors like how often investments are changed and the ratio of costs to the value of the account help identify excessive trading. FINRA also notes that if the trading happens more than six times a year or the costs are more than 20% of the account’s value, it’s usually considered excessive.

According to the AWC, from January 2018 through November 2020, Orlando advised five of his customers to engage in frequent trading. Orlando’s influence and the trust his clients placed in him meant he had substantial control over their accounts.

Customer A, a 49-year-old accountant, experienced a turnover rate of 20 and a cost-to-equity ratio of 87 percent in their account due to Orlando’s trading. This high turnover rate indicated that the investments in the account were bought and sold 20 times. The cost-to-equity ratio meant that the account had to increase in value by 87 percent just to cover the costs of these trades. The result of this excessive trading was a loss of $80,072.00 for Customer A.

Similarly, Customer B, a 63-year-old real estate executive, saw an annualized turnover rate of 32 and a cost-to-equity ratio of 172 percent in their account. These figures suggested even more frequent trading and higher costs relative to the account value, leading to a loss of $12,818.00. Customer C, a 67-year-old car dealership owner with limited investment knowledge, faced an annualized turnover rate of 62 and a cost-to-equity ratio of 221 percent in their account. The frequency of trades and high costs resulted in a loss of $37,998.00.

In the case of Customer D, a 48-year-old engineer, the trading in their account resulted in an annualized turnover rate of 93 and a cost-to-equity ratio of 279 percent, resulting in a loss of $40,710. Finally, Customer E, a 71-year-old truck salesperson, experienced an annualized turnover rate of 37 and a cost-to-equity ratio of 132 percent. This led to a loss of $26,852.00.

FINRA stated that Orlando’s trading strategy across these five customer accounts was characterized by excessively high turnover rates and cost-to-equity ratios, well above usual levels, which resulted in losses for each of the clients. Therefore, Orlando violated Regulation BI and FINRA Rules 2010 and 2111.

FINRA Public Disclosure additionally shows that on February 22, 2022, a customer initiated investment related FINRA securities arbitration claim involving Orlando’s conduct was settled to resolve allegations that Orlando made misrepresentations and unsuitable recommendations during the time that Orlando was associated with Spartan Capital Securities LLC. FINRA Arbitration No. 19-03740.

Orlando is also referenced in a customer initiated investment related FINRA securities arbitration claim that was settled for $17,587.00 in damages based upon allegations that Orlando engaged in unauthorized trading in stocks and inappropriately used margin for securities transactions when Orlando was associated with Spartan Capital Securities LLC. FINRA Arbitration No. 19-01393 (July 5, 2019).

Orlando was most recently associated with Craft Capital Management LLC in New York, New York, from March 23, 2022, to November 15, 2023. He was previously associated with Joseph Gunnar Co. LLC  from September 29, 2021, to March 3, 2022; Joseph Stone Capital LLC  from December 22, 2020, to October 1, 2021; Worden Capital Management LLC  from July 8, 2019, to December 23, 2020; and Spartan Capital Securities LLC from November 11, 2015, to July 18, 2019.