The State of New Jersey Bureau of Securities has suspended the registration of stockbroker Roy Joseph Failla for 45-days and fined him $15,000.
The New Jersey regulator alleged that between October 27, 2014, through September 25, 2019, while employed by First Standard Financial Company in New York, NY, Roy Failla excessively and unsuitably traded two customers’ accounts.
Mr. Failla has since been associated with Arive Capital Markets, LLC (“Arive Capital Markets) in Staten Island, NY as a financial advisor and the firm’s Senior Vice President of Business Development. Also, according to public records, Mr. Failla has an indirect ownership interest in Arive Capital Markets.
According to a 2017 investigation by Reuters, Arive Capital Markets hired more brokers with a history of significant disclosures than all but two other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.
The investigation revealed that eighty percent (80%) of Arive Capital Markets’ brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:
- regulatory sanctions,
- terminations of employment after allegations of misconduct,
- customer disputes that result in an award or settlement, and
- prior association with a firm that FINRA has expelled.
You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Arive Capital Markets Reveals Troubling Pasts for Owners, Executives, and Brokers.
If you have suffered financial losses investing with Roy Failla or suspect inappropriate activity in your account(s), such as excessive trading or unauthorized trades, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account.
Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Arive Capital Markets.
State of New Jersey Bureau of Securities Consent Order
The New Jersey Bureau of Securities conducted an investigation into certain activities of Mr. Failla and concluded that between October 27, 2014, through September 25, 2019, while employed by First Standard Financial Company in New York, NY, Roy Failla excessively and unsuitably traded two customers’ accounts.
Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker. Excessive trading is unethical and illegal.
Specifically, the New Jersey securities regulator concluded:
- Failla excessively traded the account of two customers.
- Failla executed short-term trade for customers in commission-based accounts, where the customers incurred commission charges on both the securities’ purchases and sales. As a result, the strategy resulted in excessive commissions at the expense of customers.
- The trading strategy reduced the potential gains of any profitable trades and exacerbated the losses on unprofitable trades.
- The transaction costs and fees incurred from the active trading strategy exceeded any potential benefit to the customers.
- The high cost-to-equity ratio for one of Mr. Failla’s customers demonstrated that the strategy was unsuitable.
- The result of the excessive short-term trading was significant realized and unrealized losses suffered by Mr. Failla’s customers, despite the relevant time period coinciding with one of the longest bull markets in history.
- Failla had no reasonable basis for the trading strategy.
- One of his customers is a 72-year-old widowed rancher who resides in California. Failla cold-called the customer’s husband and established an investment relationship many years ago. After the customer’s husband passed away in April 2016, the widow, an unsophisticated investor, stayed with Mr. Failla and allocated all of her retirement savings to him. Mr. Failla allocated nearly 40% of her investment portfolio into CCC rated corporate bonds. From March 28, 2016, to November 2016, Mr. Failla purchased and sold these bonds in short succession at a loss, which generated significant commissions for himself.
- The second customer is a tree farmer who resides in Michigan, with no prior investment experience. The customer allocated approximately $200,000 of his corporation’s assets (believed to represent his retirement savings) to Mr. Failla following a cold call. Mr. Failla employed a short-term aggressive trading strategy, which resulted in an annualized cost-to-equity ratio of more than 18 percent. The trading also resulted in aggregate commissions and fees of $62,709 and net losses in the investment account of $178,866.
A cost-to-equity ratio is one of the primary indicators used to evaluate whether a financial advisor excessively traded an account. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break-even. Mr. Failla employed a short-term aggressive trading strategy, which resulted in an annualized cost-to-equity ratio of more than 18 percent. Thus, the customer’s investments had to grow by more than 18 percent just to break even.
The State of New Jersey concluded that Mr. Failla engaged in dishonest or unethical practices in the securities industry by inducing trading in his clients’ accounts that were excessive in size and given the financial resources and character of the accounts. The regulator also concluded that Mr. Failla’s recommended securities transactions were excessive and unsuitable given the customers’ investment profiles.
Financial Advisor Roy Joseph Failla (CRD No. 2786551)
Mr. Failla has 22 years of experience in the securities industry with a history of working at unreputable brokerage firms that are often referred to as “boiler rooms.” Mr. Failla has worked at nine different broker-dealers, averaging less than 2.5 years at each firm. Of the nine different firms, only two still exist. The rest have been expelled by FINRA or have terminated their registration after a series of regulatory actions and customer complaints. Throughout his career, Mr. Failla has been associated with the following firms:
- Arive Capital Markets from 2019 to the present.
- First Standard Financial Company LLC from 2014 – 2019 (FINRA canceled the firm’s license 1/2020).
- Alexander Capital, L.P. from 2012 – 2014 (common indirect ownership with Arive Capital Markets; 6 regulatory actions disclosed).
- Brookstone Securities, Inc. from 2009 – 2012 (expelled by FINRA 10/2012).
- P. Turner & Company, L.L.C. from 2006 – 2009(Not currently registered as broker-dealer; 30 regulatory actions disclosed).
- GunAllen Financial, Inc. from 2004 – 2006 (Not currently registered as broker-dealer; 17 regulatory actions disclosed).
- Joseph Stevens & Company, Inc. from 2000 – 2004 (FINRA canceled the firm’s license 7/2008).
- LCP Capital Corp. from 1998 – 2000 (expelled by FINRA 7/2002).
- Shamrock Partners, Ltd in 1998 (FINRA canceled the firm’s license 3/2002).
Mr. Failla’s BrokerCheck report also discloses at least three customer complaints, which includes recurring allegations of excessive trading and unauthorized trading:
- In or around 2018, a customer alleged unauthorized trading and unsuitable investments that resulted in damages of $1.5 million. Alexander Capital, L.P. settled this dispute.
- In or around 2010, a customer alleged churning/excessive trading, unsuitable trades, and misrepresentation that resulted in $417,000 in damages. P. Turner & Company LLC settled this dispute.
- In or around 2010, a customer alleged excessive and unauthorized trading, fraud, breach of fiduciary duty, misrepresentation, and unsuitability, resulting in nearly $300,000 in damages. P. Turner & Company LLC settled this dispute.
Arive Capital Markets, LLC & First Standard Financial Company – Supervisory Duties
Brokerage firms like Arive Capital Markets, LLC and First Standard Financial Company must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise their financial advisors or the investment account activity, they may be liable for investment losses sustained by customers.
How to Recover Financial Losses or Obtain a Free Consultation
Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who understands the FINRA forum and can navigate the arbitration process to effectively advocate on their behalf.
If you or a loved one were a customer of Roy Failla and either sustained financial losses or suspect that Mr. Failla did not have your best interest in mind when recommending investments or account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at firstname.lastname@example.org or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.