FINRA has filed an enforcement complaint against Stephen Sloane, alleging that from January 2014 to January 2018, he recommended an unsuitable investment strategy to at least 14 customers. The complaint alleges that Sloane did not have a reasonable basis for recommending that his customers engage in active, short-term trading of U.S. Treasuries with 10- and 30-year maturities. FINRA alleged that Sloane did not conduct reasonable diligence to understand the effect of the strategy’s costs on the customers’ potential returns. FINRA has also alleged that Sloane charged five customers excessive markups in violation of FINRA Rule 2121 and 2010.
Stephen Sloane was a financial advisor and registered representative at the following firms:
- Westpark Capital, Inc., New York, NY (March 2016 – August 2020); and
- Morgan Stanley Smith Barney, New York, NY (June 2009 – March 2016).
FINRA’s complaint includes the following specific allegations while he was employed by Morgan Stanley and Westpark Capital, Inc.:
- Sloane recommended that 14 of his customers engage in an investment strategy of actively buying and selling long-term U.S. Treasury Notes and U.S. Treasury Bonds (“U.S. Treasuries”).
- Sloane executed 546 buy and sell transactions of U.S. Treasuries.
- More than 40 percent of the customers’ sales of 10- and 30-year U.S. Treasuries occurred within three months of the purchase; more than 75 percent of the sales occurred within nine months.
- Sloane’s investment strategy was profitable for him, Morgan Stanley, and Westpark Capital, Inc., but not for his customers.
- Sloane received approximately $220,000 in compensation from implementing his strategy, while Morgan Stanley and Westpark Capital, Inc. were compensated $290,029.
- In contrast, the customers suffered a combined trading loss of $329,811.
- Sloane executed his active trading strategy for his benefit and without regard to his customers’ best interests.
- Sloane charged excessive markups to at least five customers on transactions involving U.S. Treasuries.
Financial advisors must make suitable investment recommendations. This obligation includes that the financial advisor has a reasonable basis for the recommended investment strategy.
Excessive trading occurs when a financial advisor makes many trades in a customer’s account, not to benefit the customer but to generate commissions for the broker.
Unsuitable recommendations and excessive trading are unethical and illegal.
Brokerage firms like Morgan Stanley and Westpark Capital, Inc. must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity, such as excessive trading, to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise their financial advisors or the investment account activity, they may be liable for investment losses sustained by customers.
Iorio Altamirano LLP is investigating potential securities arbitration claims involving financial advisor Stephen Sloane. Iorio Altamirano is also investigating the liability that Morgan Stanley and Westpark Capital, Inc. may have for their failure to supervise Mr. Sloane properly.
If you have lost money with financial advisor Stephen Sloane, Morgan Stanley, or Westpark Capital, Inc., contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@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. Iorio Altamirano LLP pursues FINRA claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.