FINRA Files Enforcement Action Against Financial Broker Michael Giovannelli, Formerly of Spartan Capital Securities, for Unauthorized Trades in an Elderly Customer’s Account

The Financial Industry Regulatory Authority’s Department of Enforcement has filed a disciplinary proceeding complaint against financial advisor Michael Giovannelli, who also goes by the name Michael Anthony.  The complaint alleges that between February and April 2020, while associated with Spartan Capital Securities, LLC, Mr. Giovannelli made 12 unauthorized transactions in the account of an elderly customer.   The complaint also alleges that Mr. Giovannelli attempted to conceal the unauthorized trades from FINRA and testified falsely at his on-the-record interview.

Separately, FINRA alleged that between September 2018 and March 2019, while registered with Richard James & Associates Inc. (“Richard James”), Mr. Giovannelli made 100 trades in the accounts of four Richard James’ customers without obtaining the customers’ prior authorization for the trades.  Mr. Giovannelli did not have written authorization to make discretionary trades in the four customers’ accounts from either the customers or Richard James.

If you or a loved one were a customer of broker Michael Giovannelli, Spartan Capital Securities, LLC, or Richard James & Associates, Inc.,  contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your legal rights.

FINRA Disciplinary Proceeding No. 2019061941101

On June 17, 2021, the FINRA Department of Enforcement filed a complaint against broker Michael J. Giovannelli. The complaint includes the following allegations related to the unauthorized trades at Spartan Capital Securities:

  • On September 6, 2019, at the age of 87, an elderly customer opened an account with Spartan Capital Securities through Mr. Giovannelli. The customer is a farmer from Oklahoma.
  • Spartan Capital Securities did not allow discretionary accounts, and the customer did not authorize Mr. Giovannelli to make discretionary trades in his account.
  • The elderly customer authorized two transactions in his account that were executed on January 31, 2020, through Mr. Giovannelli: a sale of 275 American Depository Receipts of BP, PLC, and a purchase of 200 shares of Advanced Micro Devices.
  • Between February 1 and early May 2020, Customer A did not authorize Mr. Giovannelli to place any trades in his account.
  • However, during that period, Mr. Giovannelli executed 12 unauthorized transactions in the account of an elderly customer.
  • The unauthorized trades Mr. Giovannelli made in the customer’s account generated trading costs of approximately $2,281, including $1,380 in commissions.
  • Giovannelli’s unauthorized trading in the customer’s account caused $1,494 in realized losses.
  • The customer filed a complaint with Spartan Capital on April 29, 2020.
  • Spartan Capital’s phone records did not reflect phone calls between Mr. Giovannelli and the elderly customer’s phone number that demonstrated the customer could have authorized the trades in his account between February and April 2020.
  • In connection with Spartan Capital’s investigation of the matter, Mr. Giovannelli provided his telephone records for January through June 2020, containing records for four different cellular telephone numbers.
  • The telephone records Mr. Giovannelli provided to Spartan Capital do not show any calls to the customer’s phone number between February and April 2020.
  • After investigating the matter, Spartan Capital reversed the unauthorized trades in the customer’s account and discharged Mr. Giovannelli.
  • On October 29, 2020, as part of its investigation into Mr. Giovannelli’s unauthorized trading in the elderly customer’s account, FINRA staff requested that Mr. Giovannelli provide to FINRA, among other things, copies of itemized telephone records and any related documents showing all incoming and outgoing calls he made between January and July 2020.
  • On November 29, 2020, Mr. Giovannelli produced five pages of telephone records for the cellular phone number ending in 1594, which included calls made on February 4, February 24-28, April 13-14, and April 16-21, 2020, but no calls made on any other dates.
  • Before providing the February and April 2020 phone records to FINRA on November 29, Giovannelli altered them to make it appear as though he made calls to the customer from the cellular telephone number ending in 1594 on five of the six dates that the unauthorized trades occurred.
  • Specifically, Mr. Giovannelli altered the phone records to falsely reflect calls to the customer on: February 4, 2020, at 4:01 PM; February 25, 2020, at 12:16 PM; February 27, 2020, at 1:36 PM; April 14, 2020, at 11:43 AM; and April 20, 2020, at 2:50 PM.
  • Giovannelli never made these telephone calls.
  • On two dates (February 4 and 27, 2020), the altered records purport to show telephone calls between Mr. Giovannelli and the customer after the trades were executed on those dates.
  • In fact, Mr. Giovannelli placed and received other telephone calls on those dates and times, as is clear from the unaltered telephone records that he provided to Spartan during its investigation.
  • On December 21, 2020, Mr. Giovannelli appeared for and provided on-the-record testimony, where he falsely testified that he did not alter any of the telephone records that he provided to FINRA.

The complaint includes the following allegations related to Mr. Giovannelli’s discretionary trading without written authorization at Richard James & Associates Inc.:

  • Between September 2018 and March 2019, Richard James’ written supervisory procedures provided that “registered representatives will not exercise any discretionary power in a customer’s account unless the customer has given prior written authorization to a stated individual and the account has been accepted by the Firm,” as a discretionary account.
  • Giovannelli did not have any discretionary accounts at Richard James.
  • No customer gave Mr. Giovannelli written authorization to exercise discretionary power in their account, and Richard James did not accept any Mr. Giovannelli customer account in writing as a discretionary account.
  • Giovannelli exercised discretion in the accounts of four Richard James’ customers between September 2018 and March 2019.
  • Specifically, Mr. Giovannelli made 100 trades in the accounts of Richard James’ customers without receiving the customers’ prior authorization.

Financial Advisor Michael John Giovannelli (CRD No. 4989449)

Mr. Giovannelli has 14 years of experience in the securities industry and has been associated with 12 different firms, including four firms that have been expelled from the industry by FINRA.

Since January 2014, Mr. Giovannelli has been associated with the following brokerage firms:

  • Spartan Capital Securities, LLC in Garden City, NY, from July 2019 until August 2020.
  • Richard James & Associates, Inc. in Syosset, NY, from May 2017 until April 2019.
  • Salomon Whitney Financial in Melville, NY, from August 2015 to May 2017.
  • Legend Securities, Inc. (expelled by FINRA) in Melville, NY, from April 2015 to August 2015.
  • Brookville Capital Partners (expelled by FINRA) in Melville, NY, from January 2014 to March 2015.

Spartan Capital terminated Mr. Giovannelli in July 2020 for engaging in unauthorized trading.

Mr. Giovannelli public disclosure report also discloses that he has been the subject of at least three customer disputes, including:

  • Customer Dispute (April 2020): A customer filed a securities arbitration complaint alleging $97,292 in damages.  The complaint alleged the following causes of action: unsuitability, over-concentration, churning, excessive trading, commission abuse, failure to supervise, breach of fiduciary duty, negligence, fraudulent misrepresentation, breach of contract, respondeat superior, lost opportunity damages, and California Elder Abuse and Dependent Adult Civil Protection Act. The causes of action related to investments in Square, Inc. and Barclays IPATH S&P 500 VIX Short Term ETN. The alleged conduct occurred while Mr. Giovannelli was employed by SW Financial.  An arbitration panel held Mr. Giovannelli jointly and severally liable and awarded the customer $97,292.
  • Customer Dispute (November 2017): A customer filed a complaint with Salomon Whitney Financial, the firm that employed Mr. Giovannelli at the time of the allegations.  The customer alleged $15,000 in damages as a result of unauthorized trades.  The firm settled the matter for $5,000. Mr. Giovannelli continues to deny wrongdoing.

Unauthorized trading often occurs in non-discretionary accounts, where a customer retains discretion.  In non-discretionary accounts, brokers must obtain a customer’s permission every time before placing a trade.

Spartan Capital Securities, LLC and Richard James & Associates, Inc. – Supervisory Duties

Brokerage firms like Spartan Capital Securities, LLC and Richard James & Associates, Inc. must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations.   When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

How to Recover Financial Losses or Obtain a Free Consultation

If you or a loved one were a customer of broker Michael Giovannelli, Spartan Capital Securities, LLC, or Richard James & Associates, Inc., and either sustained financial losses or suspect that Mr. Giovannelli did not have your best interest in mind when recommending investments or making account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP.  August Iorio can be reached at august@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account or annuity.

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.

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