Securities Arbitration Lawyer Blog
FINRA has suspended Adam Maggio, with Joseph Stone Capital L.L.C., from associating with any FINRA member in all principal capacities for five months. Maggio has been registered in multiple capacities with Joseph Stone Capital L.L.C. since February 2013, including as a General Securities Principal.
Maggio consented to the sanctions and to the entry of findings that he failed to reasonably supervise trading in certain customer accounts for potentially excessive activity. His suspension is scheduled to begin on January 3, 2022, and end on June 2, 2022. He was fined $5,000 and will also undertake to attend and satisfactorily complete 20 hours of continuing education concerning supervisory responsibilities.
If you have been harmed by Adam Maggio, or Joseph Stone Capital L.L.C., contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
Iorio Altamirano LLP represents investors nationwide that have disputes with their financial advisors or brokerage firms.
FINRA Letter of Acceptance, Waiver, and Consent No. 2019063821601
Adam Maggio and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on December 10, 2021, after FINRA alleged that from January 2015 to June 2020, Maggio failed to reasonably supervise trading in certain customer accounts at Joseph Stone for potentially excessive activity. Maggio failed to identify certain red flags of excessive trading, and when Maggio was provided notice of those red flags in certain customer accounts, he did not implement appropriate procedures to stop the misconduct. As a result, Maggio violated FINRA Rules 3110 and 2010.
According to the AWC, Joseph Stone’s written supervisory procedures (WSPs) designated Maggio as the supervisor responsible for reviewing actively traded accounts for compliance with FINRA’s suitability rule. The WSPs directed that designated supervisors, including Maggio, conduct such reviews by considering, among other things, “a calculation of Year to Date Cost Over Equity Ratio [in a customer’s account] . . . as well as the number of trades in a time period (quarterly & Year to Date) and the client’s [investment] objectives, risk tolerance, [and] experience as well as any other criteria deemed applicable by the reviewer.” When Maggio identified an account as an actively traded account, he had the authority to, among other things, limit the commissions charged to the customer on future trades. As discussed below, Maggio did not reasonably discharge his responsibility to supervise the trading of customer accounts for potentially excessive activity.
FINRA alleged that Maggio failed to identify red flags of excessive trading. Specifically, from January 2015 through November 2017, Joseph Stone’s clearing firm made exception reports available to Joseph Stone through an online portal, to which Maggio and other supervisors had access. Among these exception reports were “active account reports” that flagged accounts with high commission-to-equity ratios. Prior to November 2017, Maggio did not review these reports as a general practice, even though they were uploaded to the portal. Instead, Maggio tried to identify excessively traded accounts using his own manual calculations, which compared the commissions charged in an account to the account’s current value, rather than its average net equity, and which often understated the cost-to-equity ratio.
On certain occasions, Maggio’s manual review did not identify accounts that had red flags of excessive trading, including accounts with cost-to-equity ratios greater than 20 percent, with the result that certain accounts continued to be actively traded and were charged high commissions.
FINRA alleged that Maggio also failed to reasonably respond to red flags of excessive trading. After Maggio began reviewing relevant exception reports in November 2017, in certain instances, he failed to reasonably respond to red flags of excessive trading. On certain occasions, Maggio responded to red flags of excessive trading by restricting the commissions that representatives could charge on individual trades, but he did not limit the aggregate costs and commissions charged to the affected accounts. As a result, representatives could place more frequent trades in a customer’s account and thereby continue to charge customers similar aggregate commissions. Maggio also did not restrict commissions on certain trades where the customer made a realized gain, irrespective of the overall amount of commissions that had been charged.
You can read more about excessive trading here.
FINRA Rules 3110 & 2010
FINRA Rule 3110 requires that member firms “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.” To comply with this obligation, a firm’s designated supervisors must reasonably investigate red flags of potential misconduct and take appropriate action when misconduct has occurred.
A violation of FINRA Rule 3110 also is a violation of FINRA Rule 2010, which requires associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.
Adam Maggio (CRD#: 4177365)
Maggio first became registered with FINRA in 2002. Since February 2013, Maggio has been registered in multiple capacities, including as a General Securities Principal, through an association with Joseph Stone Capital L.L.C. Since September 2021, Maggio has also been registered in multiple capacities, including as a General Securities Principal, through an association with another FINRA member firm.
Maggio’s public FINRA CRD shows a total of three prior customer complaints.
How to Recover Losses or Obtain a Free Consultation
If you have been harmed by Adam Maggio, or Joseph Stone Capital L.L.C., contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com 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. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.