The Financial Industry Regulatory Authority has suspended a rep for six months for excessive trading in two clients' accounts, one of which was a senior, violating Regulation Best Interest.
According to FINRA's order, between January 2020 and September 2023, Justin Deiter was registered with FINRA as a general securities rep through an association with Spartan Capital Securities.
Although Deiter is no longer registered or associated with a FINRA member firm, he remains subject to FINRA's jurisdiction.
Between February 2020 and March 2022, Deiter excessively traded the accounts of two retail customers, one of whom was a senior. As a result, Deiter willfully violated the Best Interest Obligation of Reg BI as well as FINRA Rules 2111 and 2010.
A violation of Reg BI or FINRA Rule 2111 also is a violation of FINRA Rule 2010, which requires associated persons to "observe high standards of commercial honor and just and equitable principles of trade" in the conduct of their business," FINRA states.
Deiter's trading resulted in high turnover rates and cost-to-equity ratios that exceeded the traditional guideposts of 6 and 20%, respectively, as well as significant losses, the order states.
In February 2020, a then 49-year-old merchandiser opened an account at Spartan with Deiter.
"She was a conservative investor who relied on Deiter's advice and always followed his recommendations," the order states. "As a result, Deiter exercised de facto control over the account."
Between February 2020 and December 2021, Deiter recommended 32 transactions in the client's account resulting in an annualized turnover rate of 7 and an annualized cost-to-equity ratio of 34%. Deiter's trading in the customer's account generated $19,792 in commissions and caused $25,291 in realized losses.
In February 2020, an 89-year-old retiree opened an account at Spartan with Deiter.
"His investment objective was speculation," the order states.
Between June 30, 2020, and March 2022, Deiter recommended 28 transactions in the customer's account resulting in an annualized turnover rate of 14 and an annualized cost-to-equity ratio of 35%. Deiter's trading in the account generated $28,264 in commissions and caused $33,363 in realized losses.
"The level of trading that Deiter recommended in the two customers' accounts was excessive and not in the best interest of the customers," FINRA said.
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