A broker with a record of 11 customer complaints, judgments and liens has agreed to a suspension and $140,000 in penalties for excessive trading in five customers accounts that cost them $205,523 in losses and $240,331 in commissions, Finra said.
John LoPinto, who was registered as a representative with his seventh broker-dealer, Worden Capital Management (WCM) LLC in Rockville Centre, N.Y., from 2016 to 2019, also exercised discretion in a customer account, which is prohibited unless the customer gives a rep prior written authorization and broker-dealer provides written acceptance, Finra said.
Worden also worked for two firms that were expelled from the industry because of their histories of customer abuses, including LoPinto’s former broker-dealer before WMC, Legend Securities Inc., which was expelled by Finra in June 2018 for failing to supervise a rep who sold unregistered securities.
Finra was alerted to customer complaints lodged against LoPinto when WMC filed an amended Uniform Termination Notice disclosing a new customer arbitration that was filed against the broker alleging, among other things, excessive trading, Finra said.
The settlement LoPinto signed with Finra suspends him for nine months and orders him to pay $135,333 plus interest in customer restitution and a $7,500 fine.
“From November 2016 through September 2019, LoPinto engaged in quantitatively unsuitable trading in five customer accounts. LoPinto recommended high frequency trading in the five customer accounts. LoPinto’s customers routinely followed his recommendations and, as a result, LoPinto exercised de facto control over the five customers’ accounts,” Finra found.
As a result, LoPinto’s trading resulted in high turnover rates and cost-to-equity ratios as well as significant losses, the regulator said.
In one case, LoPinto also “effected 53 trades in one customer account using discretion without the customer’s prior written authorization and without the firm accepting that account as discretionary in writing,” Finra said.
For instance, LoPinto’s trading in one customer's account generated total trading costs of $40,932, including $28,290 in commissions, and caused $37,822 in realized losses, Finra said.
From November 2016 to July 2018, LoPinto made 68 transactions in another client account, resulting in an annualized turnover rate of 24.88 and an annualized cost-to-equity ratio of 124.96%, Finra said. LoPinto’s trading in the account generated total trading costs of $51,033, including $44,855 in commissions, and caused $44,927 in realized losses, Finra said.