fbpx

FINRA Initiates Regulatory Investigation Against SW Financial Broker John Orlando

John Orlando (CRD#: 2002197) is a registered Broker at SW Financial in Melbourne Beach, FL.

Broker’s Background

He entered the securities industry in 1989 and previously worked for Joseph Gunnar & Co., LLC; Westpark Capital, Inc.; Newport Coast Securities, Inc.; Sterne Agee Financial Services, Inc.; Emmett A. Larkin Company, Inc.; Salomon Grey Financial Corporation; Barron Chase Securities, Inc.; Rockefeller, Rothschild & Steele; M. J. Whitman, L.P.; Daiwa Securities America, Inc; Nationsbanc-CRT Services, Inc.; and Thomas James Associates, Inc.

Current And Past Allegations Of Conduct Leading To Investment Loss

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in March 2022, a regulatory action was initiated by FINRA and is pending. The FINRA sanction states, “Orlando 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. The complaint alleges that Orlando churned and excessively traded in a customer’s account. Orlando exercised de facto control over the customer’s account, controlling the volume and frequency of trading, deciding what securities to buy and sell, the quantities, the price, and when each transaction would occur. The customer relied on Orlando to make securities recommendations and consistently followed his recommendations. Orlando’s trading in the customer’s account was excessive and quantitatively unsuitable, as evidenced by the annualized turnover rate of 9.65 and cost-to-equity ratio of nearly 74 percent, the size and frequency of the transactions, the transaction costs incurred, and in-and-out trading. Orlando’s trading in the customer’s account generated more than $650,000 in commissions and concessions for himself and his member firm and more than $770,000 in additional costs that was paid to the underwriters of the offerings. The customer experienced approximately $1,245,000 in losses. The complaint also alleges that Orlando did not have reasonable basis to believe that the transactions and strategy he recommended to the customer were suitable for any customer. Orlando failed to understand or evaluate the fees and costs that his recommendations generated and their effect on the overall profitability of the customer’s account. In addition, about half the offerings Orlando recommended included warrants. In those instances, Orlando’s strategy included promptly selling the newly-purchased shares and holding the warrants. But, prior to recommending the strategy, Orlando failed to conduct due diligence on the companies he was recommending or analyze the likelihood that the warrants would become profitable. The warrants were typically issued by companies that had little revenue and no income and were subject to going concern opinions from their accountants and auditors. Orlando did not consider or understand the potential risks, benefits, and likely performance of the securities and strategies he recommended. The complaint further alleges that Orlando falsely characterized 87 transactions in the customer’s account as unsolicited, when, in fact, Orlando solicited the customer to participate in each transaction. As a result, Orlando caused inaccuracies in his firm’s books and records. In addition, the complaint alleges that Orlando made false statements to his firm on an annual compliance questionnaire about how he communicated with the customer. Orlando denied communicating via text message with clients when, in fact, he had exchanged at least 225 text messages with the customer that were nearly all related to the customer’s account.”

For a copy of the FINRA sanction, click here.

In addition, John Orlando has been the subject of six customer complaints, including one that remains pending, including the following:

  • October 2021 — “Unauthorized Trading, Over concentration, Unsuitable Investments, Fraud & Deceit, Breach of Contract.” The customer dispute is pending. Damages of $1.2M are requested.
  • July 2020 — “In August 2016 & March 2017, client invested in Horizon Fund to get access to pre-IPO shares of Uber & Palintir. Client alleges breach of fiduciary duty and negligence.” The customer dispute was settled for $30,000.
  • June 2020 — “Client alleges excessive trading, unsuitable investments, excessive concentration and unsuitable use of margin.” The customer dispute was settled for $1M.
  • March 2020 — “Unsuitable and concentrated investment.” The customer dispute was settled for $9,500.
  • March 2017 — “Client claimed Mr. Orlando pressured him into selling a large position which later went up in value.” The customer dispute was denied.
  • August 2016 — “CLAIMANTS ALLEGE THAT REP CONCENTRATED THEIR ASSETS INTO ONE AREA AND MADE UNSUITABLE RECOMMENDATIONS BETWEEN JUNE OF 2012 AND MARCH OF 2015.” The customer dispute was resolved with damages of $85,001 awarded.

For a copy of John Orlando’s FINRA BrokerCheck, click here.

We Help Investors Recover Investment Losses

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 age, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.

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 mwolper@wolperlawfirm.com.

Attorney Matthew Wolper

Attorney Matthew WolperMatt Wolper is a trial lawyer who focuses exclusively on securities litigation and arbitration. Mr. Wolper has handled hundreds of securities matters nationwide before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (“AAA”), JAMS, and in state and federal court. Mr. Wolper has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks. [Attorney Bio]