Securities Arbitration Lawyer Blog
FINRA has suspended financial advisor Christian Frank Lucchetto (CRD No. 4648994) from the securities industry for three months and fined him $5,000.
FINRA alleged that between January 2018 through May 2019, while employed by First Standard Financial Company in Red Bank, NJ, Frank Lucchetto excessively and unsuitably traded a customer’s account, in violation of FINRA Rules 2111 and 2010.
Mr. Lucchetto, who has ten years of experience in the securities industry, has been employed as a financial advisor at the following brokerage firms since 2011:
- Arive Capital Markets in Staten Island, NY, from September 2019 to the present.
- First Standard Financial Company in Red Bank, NJ, from July 2016 to September 2019.
- Cape Securities, Inc. in New York, NY, from October 2011 to July 2016.
According to a 2017 investigation by Reuters, Arive Capital Markets, Mr. Lucchetto’s currentl employer, hired more brokers with a history of significant disclosures than all but two other firms in the country. In 2021, Iorio Altamirano LLP set out to update that analysis.
The investigation revealed that eighty percent (80%) of Arive Capital Markets’ brokers and supervisors have significant red flag public disclosures. Significant red flag disclosures include:
- regulatory sanctions,
- terminations of employment after allegations of misconduct,
- customer disputes that result in an award or settlement, and
- prior association with a firm that FINRA has expelled.
You can read the full investigative report here: Investigative Report: Iorio Altamirano LLP Investigation into Arive Capital Markets Reveals Troubling Pasts for Owners, Executives, and Brokers.
If you have suffered financial losses investing with Christian Frank Lucchetto or suspect that Mr. Lucchetto did not have your best interest in mind when recommending investments or account transactions, contact New York securities arbitration law firm Iorio Altamirano LLP for a free and confidential review of your account.
Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Arive Capital Markets and First Standard Financial Company.
FINRA Letter of Acceptance, Waiver, and Consent No. 2020065035201
Between January 2018 and May 2019, Mr. Lucchetto, while employed by First Standard Financial Company in New York, NY, Frank Lucchetto excessively and unsuitably traded a customer’s account.
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. Excessive trading is unethical and illegal.
Specifically, FINRA alleged:
- Lucchetto excessively traded the account of a customer, a 61-year-old landscaping company owner.
- Lucchetto recommended the trading in the customer’s account, and the customer followed Mr. Lucchetto’s recommendations. As a result, Mr. Lucchetto exercised de facto control over the customer’s account.
- Lucchetto recommended frequent trading in the customer’s account, which resulted in an annualized turnover rate of 19.42 and an annualized cost-to-equity ratio of more than 71 percent. Thus, the customer’s investments had to grow by more than 71 percent just to break even.
- Lucchetto’s recommendations resulted in the customer paying $30,455 in commissions during the relevant period.
- Moreover, the recommended trades resulted in the customer suffering a realized loss of $64,402.
There are two primary indicators used to evaluate whether a financial advisor excessively traded an account. The first is turnover rate, which represents the number of times a portfolio of investments is replaced for another portfolio of investments. Generally, a turnover rate of six suggests excessive trading, but a turnover rate below four can be excessive in some cases. FINRA’s Department of Enforcement alleged that trading in the subject account had turnover ratios of 19.42.
The second indicator used to assess whether trading is excessive in an investment account is its cost-to-equity ratio. The cost-to-equity ratio measures the amount an account must appreciate to cover commissions and other expenses. That is, how much the account needs to grow just to break-even. A cost-to-equity ratio of 20% generally indicates excessive trading has occurred. The account at issue had a cost-to-equity ratio of 71%.
FINRA concluded that Mr. Lucchetto’s recommended securities transactions were excessive and unsuitable given the customer’s investment profile. Therefore, Mr. Lucchetto violated FINRA Rules 2111 and 2010.
Arive Capital Markets & First Standard Financial Company – Supervisory Duties
Brokerage firms like Arive Capital Markets and First Standard Financial Company 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 supervise their financial advisors or the investment account activity sufficiently, they may be liable for investment losses sustained by customers.
How to Recover Financial Losses or Obtain a Free Consultation
Investors should be aware that filing a securities arbitration complaint is not the same as filing a complaint directly with a brokerage firm or a complaint through FINRA’s Investor Complaint Center. If an investor is seeking monetary compensation, the investor must initiate a securities arbitration through FINRA Dispute Resolution Services.
Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who understands the FINRA forum and can navigate the arbitration process to effectively advocate on their behalf.
If you or a loved one were a customer of Christian Lucchetto and either sustained financial losses or suspect inappropriate activity, 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 arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.