FINRA has suspended Anthony Graziano, with Joseph Stone Capital L.L.C., from associating with any FINRA member in all principal capacities for three months. Graziano first became registered as a General Securities Representative and General Securities Principal with Joseph Stone Capital L.L.C. in June 2015 and subsequently became registered with the firm as a Compliance Officer in October 2018.
Graziano consented to the sanctions and to the entry of findings that he failed to reasonably supervise a registered representative of his firm, who excessively traded a customer’s account.
Graziano’s suspension is scheduled to begin on January 3, 2022, and end on April 2, 2022. He was also fined $5,000 and will undertake to attend and satisfactorily complete 20 hours of continuing education concerning supervisory responsibilities.
If you have been harmed by Anthony Graziano, 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.
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FINRA Letter of Acceptance, Waiver, and Consent No. 2020066887201
Anthony Graziano and FINRA entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) on December 8, 2021, after FINRA alleged that from August 2019 to June 2020, Graziano failed to reasonably supervise one registered representative of Joseph Stone, who excessively traded one customer’s account.
Specifically, from August 2019 to June 2020, Graziano was the designated principal responsible for supervising the registered representatives assigned to Joseph Stone’s branch office in Manhattan. Graziano’s supervisory responsibilities, as set forth in the firm’s written supervisory procedures (WSPs), included (1) reviewing the branch’s daily trade blotter and, where appropriate, “speaking with [the] broker and the client to determine whether any sales practice violations have occurred” and (2) enforcing any restrictions that another principal of Joseph Stone (Principal A) imposed on the commissions that could be charged in a customer account.
According to the AWC, Graziano did not reasonably discharge those responsibilities, as set forth below.
First, although Graziano reviewed the branch’s daily trade blotter, he failed to identify red flags that a representative under his supervision (Representative A) was excessively trading the account of a 78-year-old customer (Customer 1). For example, Graziano failed to identify red flags of excessive trading through his review of the branch’s daily trade blotter, including multiple in-and-out trades of the same security. Moreover, even after being specifically told by Principal A that the cost-to-equity ratio in Customer 1’s account exceeded benchmarks for excessive trading, Graziano failed to take steps to investigate “whether any sales practice violations [had] occurred.”
Second, Graziano did not enforce restrictions that Principal A set on the commissions that Representative A could charge in Customer 1’s account. In September 2019, Principal A notified Graziano that he was restricting the commissions Representative A could charge in Customer 1’s account to one percent per trade because the account’s cost-to-equity ratio already exceeded 20 percent. Graziano, however, failed to enforce this restriction, and, as a result, between September 2019 and January 2020, Representative A charged Customer 1 commissions greater than one percent on six separate occasions. Collectively, those trades caused Customer 1 to pay an additional $4,000 in commissions after Principal A had restricted the commissions that could be charged in the account.
In all, the trades that Representative A recommended in Customer 1’s account from August 2019 to June 2020 resulted in a cost-to-equity ratio of 22 percent and caused Customer 1 to pay almost $120,000 in commissions and other trading costs.
As a result of the foregoing, Graziano violated FINRA Rules 3110 and 2010.
FINRA Rules 3110, 2111 & 2010
FINRA Rule 3110(a) requires that each member firm “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.”
FINRA Rule 3110(b)(1) provides that “[e]ach member shall establish, maintain, and enforce written procedures to supervise the types of business in which it engages and the activities of its associated persons that are reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.” The duty to supervise under Rule 3110 also includes the responsibility to reasonably investigate red flags that suggest that misconduct may be occurring and act upon the results of such investigation. 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.
FINRA Rule 2111 requires, in pertinent part, that member firms or their associated persons “have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile.” Recommended securities transactions may be unsuitable if, when taken together, they are excessive, the level of trading is inconsistent with the customer’s investment profile, and the registered representative exercises actual or de facto control over the customer’s account.
No single test defines when trading is excessive, but factors such as the turnover rate and the cost-to-equity ratio are considered in determining whether a firm or associated person has violated FINRA’s suitability rule. Turnover rate represents the number of times that a portfolio of securities is exchanged for another portfolio of securities. The cost-to-equity ratio is the percentage of return on the customer’s average net equity needed to pay commissions and other expenses. A turnover rate of six or a cost-to-equity rate above 20 percent generally indicates that an account has been excessively traded.
Anthony Graziano (CRD#: 2862096)
Graziano first registered with FINRA in 1997. He has 21 years of experience in the securities industry.
Graziano became registered as a General Securities Representative and General Securities Principal through an association with Joseph Stone Capital L.L.C. in June 2015, and he subsequently became registered as a Compliance Officer in October 2018. Graziano remains registered through Joseph Stone in those capacities.
Graziano’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 Anthony Graziano, or Joseph Stone Capital L.L.C., contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at email@example.com, 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. 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.