Former Aegis Capital And Joseph Stone Capital Broker, Steven Luftschein, Has 17 Disclosed Customer Complaints And A Pending FINRA Enforcement Action
Steven Luftschein (CRD # 2690117) was a Financial Advisor at Aegis Capital in Melville, NY between 2013-2016 and Joseph Stone Capital in Huntington, NY between 2017-2018. Steven Luftschein has been in the securities industry since 1995 and previously worked at myriad brokerage firms in the New York area.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on May 13, 2020, FINRA filed an enforcement action against Steven Luftschein, alleging various securities laws violations. Specifically, the complaint alleges:
“Luftschein was named a respondent in a FINRA complaint alleging that he willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and violated FINRA Rule 2020 by churning in customers’ accounts at his member firm. The complaint alleges that Luftschein controlled the volume and frequency of trading in the customers’ accounts, deciding what securities to buy and sell, the quantities, the price, and when each transaction would occur. Luftschein also frequently made unauthorized trades in these accounts. Luftschein deliberately incurred unreasonably high trading costs in the customers’ accounts, which made it virtually impossible for the accounts to be profitable. Indeed, Luftschein’s trading in the customers’ accounts caused more than $261,000 in losses, while Luftschein received substantial income from trading the accounts. Luftschein also masked the true costs of his trading from customers by placing a high percentage of the trades as riskless principal trades. The complaint also alleges that Luftschein’s trading in the customers’ accounts was excessive and quantitatively unsuitable for the customers, as evidenced by high annualized turnover rates and cost-to-equity ratios, the size and frequency of the transactions, the transaction costs incurred and the customers’ investment objectives and needs. Luftschein did not have a reasonable basis to believe that his trading was suitable. The complaint further alleges that Luftschein effected trades in the customer accounts without first discussing with, and obtaining authorization from, the customers. None of the customer accounts were listed as discretionary accounts. The customers never gave Luftschein discretionary trading authority.”
The enforcement action remains pending. For a copy of the complaint, click https://www.finra.org/sites/default/files/fda_documents/2016051704303%20Steven%20Robert%20Luftschein%20CRD%202690117%20Complaint%20va.pdf
In addition to the FINRA sanction, Steven Luftschein has been the subject of six17 customer complaints during his career, alleging sales practice misconduct. Among the complaints include the following:
• January 2020—” TIME FRAME: UNSPECIFIED. CLAIMANT ALLEGES EXCESSIVE AND UNSUITABLE TRADING, FALSE AND MISLEADING STATEMENTS.” Alleged damages are $200,000 and the matter remains pending.
• May 2018—”TIME FRAME: 2013. CLAIMANT ALLEGES NEGLIGENCE, UNAUTHORIZED TRADING, CHURNING, UNSUITABILITY, BREACH OF CONTRACT, BREACH OF FIDUCIARY DUTY.” The matter was settled for $132,500.
• February 2018—”TIME FRAME: UNSPECIFIED. CLAIMANT ALLEGES UNAUTHORIZED TRADING AND UNSUITABLE INVESTMENT RECOMMENDATIONS.” The matter was settled for $569,962.
• August 2017—”Customers allege unsuitable investment recommendations, unauthorized trading, negligence, negligent supervision, federal securities law violations, Georgia blue sky law violations, control person liability and respondeat superior, breach of fiduciary duty and excessive trading from January 2010 through August 2011.” The matter was settled for $800,000.
• April 2017—”TIME FRAME: 04/24/2014 TO 05/31/2016. CLAIMANT ALLEGES UNSUITABLE INVESTMENT RECOMMENDATIONS, UNAUTHORIZED TRADING, EXCESSIVE TRADING, MISREPRESENTATIONS AND OMMISSIONS, BREACH OF CONTRACT AND BREACH OF FIDUCIARY DUTY.” The matter was settled for $100,000.
• June 2015—”TIME FRAME: June 2013 to January 2016. Clients allege unsuitable recommendations and mishandling of their accounts.” The matter was settled for $782,000.
• October 2010—”FAILURE TO SUPERVISE.” The matter was settled for $275,000.
• April 2010—”CUSTOMER ALLEGES REPRESENTATIVE FAILED TO FOLLOW INVESTEMENT OBJECTIVES, RESULTING IN SUBSTANTIAL LOSSES TO PORTFOLIO VALUE.” The matter was settled for $275,000.
A For a full copy of Steven Luftschein’s FINRA disclosure report, click https://brokercheck.finra.org/individual/summary/2690117#disclosuresSection
Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.
Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.
Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.
Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s:
• Other investments
• Financial situation and needs
• Tax status
• Investment objectives
• Time horizon
• Liquidity needs
• Risk tolerance
• Any other information disclosed by the customer
The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at email@example.com.