- December 20, 2020
- WestPark Capital
Stephen Sloane (CRD # 1257601) was a Financial Advisor at Westpark Capital Securities, Inc. in New York, NY from 2016-2020. Stephen Sloane has been in the securities industry since 1984 and previously worked at Morgan Stanley, Citigroup Global Markets, Inc., Dean Witter Reynolds Inc., and Donald Sheldon & Co., Inc.
According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on July 20, 2020, FINRA initiated an investigation involving Stephen Sloane. According to the pending investigation: “Sloane was named a respondent in a FINRA complaint alleging that he recommended an unsuitable investment strategy to retail customers. The complaint alleges that Sloane recommended that the customers engage in active, short-term trading of U.S. Treasuries with 10 and 30-year maturities, without conducting reasonable diligence to understand the effect of the strategy’s costs on the customers’ potential returns. Sloane, therefore, did not have a reasonable basis to recommend the strategy. Sloane did not do any research or seek any guidance about whether the trading strategy could be profitable at the costs the customers paid. Sloane also made no attempt to calculate either the returns he expected to generate from active trading or whether those returns would breakeven with the cumulative costs of his trading strategy. Sloane received approximately $220,000 in compensation from implementing his strategy for the customers, representing his share of the $510,025 in markups and markdowns he charged to execute the trades for the customers. By contrast, after paying markups, markdowns, and other transactional service fees, the customers realized total trading losses, exclusive of interest, of $329,811, as a result of Sloane’s investment strategy. Sloane’s member firm instructed him to reduce his trading costs. When that firm fired him for disregarding its directive, Sloane moved to another member firm where he continued executing the same unsuitable strategy. The complaint also alleges that Sloane charged excessive and unfair markups. Sloane recommended that some customers use the proceeds from sales of treasury securities to purchase treasury securities the following day. The markups resulted in those customers’ trades on those days occurring at prices not reasonably related to prevailing market prices. Default decision rendered December 8, 2020, wherein Sloane is barred from association with any FINRA member in all capacities and ordered to pay $175,823.03, plus interest, in restitution to customers. The sanctions are based on findings that Sloane recommended to 14 customers, 12 of which were over 65 years of age, an unsuitable investment strategy involving short-term trading of 10-year and 30-year treasuries without having a reasonable basis to do so.”
For a copy of Stephen Sloane’s FINRA disciplinary action details click here
February 29, 2016, Stephen Sloane was discharged from Morgan Stanley Wealth Management following allegations “concerning cost-related issues associated with registered representative’s trading of U.S. treasuries.”
In addition to the foregoing, Stephen Sloane has been the subject of three customer complaint disclosures since 2000, alleging sales practice misconduct. Among the complaints include the following:
• August 2009—”CLAIMANT ALLEGES, INTER ALIA, THAT DURING THE PERIOD OF 2006 TO NOVEMBER 2008 THE FA RECOMMENDED INVESTMENTS THAT WERE UNSUITABLE.” The matter settled for $78,500.
• July 2002—”UNSUITABLE INVESTMENT RECOMMENDATIONS, BREACH OF CONTRACT, NEGLIGENCE, FRAUD, MISREPRESENTATION AND VIOLATION OF 1933 SECURITIES ACT FROM FEBRUARY 15, 2000 THROUGH APRIL 4, 2002.” The matter settled for $55,000.
• April 2002—”CLIENT’S ATTORNEY ALLEGED THAT THE STOCK INVESTENTS PURCHASED IN THE CLIENT’S ACCOUNT WERE UNSUITABLE. SEPTEMBER 1999 THROUGH SEPTEMBER 2001.” The matter settled for $25,000.
• February 2000—” CUSTOMER ALLEGES THAT INVESTMENT WAS UNSUITABLE.” The matter settled for $2,000.
For a copy of Stephen Sloane’s CRD, click here
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 firstname.lastname@example.org.