Finra alleged that Leahy failed to supervise Sparacino as he “engaged in a pattern of unauthorized trading, using margin without authorization, recommending excessive and otherwise unsuitable transactions, and charging excessive commissions in dozens of customer accounts.”
Leahy allegedly was aware of this behavior, Finra said, because of red flags that “included: daily trade blotters that showed frequent in-and-out trading and commissions often exceeding 5%; numerous customer complaints alleging unauthorized trading, unauthorized use of margin, and excessive commissions; and notification from the firm's clearing firm of potential unauthorized trading” by Sparacino. This went on until Oct. 8, 2019, when the New Jersey Bureau of Securities revoked Sparacino’s registration, the filing said.
“Leahy never questioned [Sparacino] about why he was recommending that some customers buy, and other customers sell, the same security on the same day. Leahy never placed [Sparacino] on heightened supervision or contacted the affected customers. Nor did Leahy take any steps to reduce the frequency with which [Sparacino] was recommending in-and-out trading, usually combined with commissions exceeding 4%,” that filing stated.