Securities Arbitration Lawyer Blog
The Financial Industry Regulatory Authority (“FINRA”) has suspended stockbroker Michael May from the securities industry. Mr. May consented to the suspension after FINRA alleged that between June 2017 and May 2018, while associated with Joseph Stone Capital L.L.C. (“Joseph Stone Capital”), Mr. May excessively and unsuitable traded a customer’s account, in violation of FINRA Rules 2111 and 2010. As part of the agreement, Mr. May also agreed to pay $10,349 in restitution and a fine of $5,000.
Mr. May was registered as a broker with Joseph Stone Capital L.L.C. from July 2015 to June 2020 and again from March 2021 to October 2021. He is currently registered with VCS Venture Securities in New York, NY.
Iorio Altamirano LLP is investigating potential legal claims on behalf of customers of Michael May and Joseph Stone Capital related to investment recommendations and account activity made by Mr. May.
Customers who have suffered investment losses or suspect other misconduct by Mr. May or Joseph Stone Capital in their investment, brokerage, or retirement accounts, should contact securities arbitration law firm Iorio Altamirano LLP for a free and confidential consultation and to review their legal rights.
Iorio Altamirano LLP represents investors that have disputes with their financial advisors or brokerage firms, such as Joseph Stone Capital.
Joseph Stone Capital L.L.C.
According to a 2017 investigation by Reuters, out of all of the brokerage firms in the country, Joseph Stone Capital hired the second most brokers with a history of significant disclosures. In 2021, Iorio Altamirano LLP set out to update that analysis.
The investigation revealed that seventy-six percent (76%) of Joseph Stone Capital’s 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 Joseph Stone Capital L.L.C. Reveals Troubling Pasts for Owners, Executives, and Brokers
Mr. May was one of the brokers who had serious incidents reported on his BrokerCheck report.
FINRA Letter of Acceptance, Waiver, and Consent No. 2019063821603
FINRA and Mr. May entered into a Letter of Acceptance, Waiver, and Consent No. 2019063821603 on November 3, 2021, after FINRA alleged that between June 2017 and May 2018, while associated with Joseph Stone Capital, Mr. May excessively and unsuitable traded a customer’s account, in violation of FINRA Rules 2111 and 2010. Specifically, FINRA alleged:
- Between June 2017 and May 2018, while registered through Joseph Stone Capital, Mr. May engaged in excessive and unsuitable trading, including the use of margin in a customer’s account.
- During the relevant period, Mr. May recommended that his customer place 21 trades in his account, and the customer accepted Mr. May’s recommendations.
- Although the customer’s account had an average month-end equity of approximately $25,331, Mr. May recommended trades with a total principal value of more than $265,044, which resulted in an annualized turnover rate of more than 10.
- Collectively, the trades that Mr. May recommended caused his customer to pay $10,349 in commissions, trading costs, and margin interest, which resulted in an annualized cost-to-equity ratio in excess of 40 percent – meaning that the customer’s account would have to grow by more than 40 percent annually just to break even.
- May’s recommended securities transactions in the account of his customer were excessive and unsuitable.
- Accordingly, Mr. May violated FINRA Rules 21111 and 2010.
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.
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. According to FINRA, the account at issue had an annual turnover rate of more than ten.
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. According to FINRA, the account at issue had a cost-to-equity ratio of more than 40%.
Excessive trading is an unethical and illegal practice. It is also a violation of securities rules and regulations and can cause enormous harm to customers.
Financial Advisor Michael James May (CRD No. 4712287)
Michael May has 17 years of experience in the securities industry and has been associated with seven different firms, including two firms that have been expelled from the industry by FINRA.
According to his public disclosure report, in 2016, Mr. May was the subject of a customer complaint. A customer filed a securities arbitration claim alleging $180,000 in damages as a result of unsuitable and unauthorized transactions. Mr. May settled the dispute with his customer.
FINRA’s BrokerCheck tool can be used to obtain Mr. May’s complete and updated disclosure report.
Joseph Stone Capital – A Duty to Supervise
Financial institutions like Joseph Stone Capital must properly supervise financial advisors and customer accounts. Brokerage firms must 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 its financial advisors or the investment account activity sufficiently, it may be liable for investment losses sustained by customers.
How to Recover Losses or Obtain a Free Consultation
When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer in an effort to be compensated.
Iorio Altamirano LLP is a securities arbitration law firm located in New York, NY. We represent investors nationwide and vigorously pursue FINRA arbitration claims on behalf of investors to recover investment losses.
If you have lost money with Mr. May or Joseph Stone Capital, contact FINRA arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a bilingual law firm, fluent in both English and Spanish.