Regulatory scrutiny has fallen on Spartan Capital Securities due to numerous investment fraud complaints, leading to actions from the Financial Industry Regulatory Authority (FINRA). Issues such as excessive trading and compliance failures have prompted concern among regulators and clients alike. Bakhtiari & Harrison stands ready to assist those impacted by investment fraud at Spartan Capital Securities, guiding clients through the legal maze to recover their losses. In this blog, we will explore Spartan Capital Securities, the complaints against them, the actions taken by regulators, and steps you can take if you feel affected.

What is Spartan Capital Securities?

Founded in New York, Spartan Capital Securities, LLC operates as a financial services firm that offers various investment options and advisory services. As a broker-dealer, Spartan is mandated to adhere to strict regulatory guidelines established by FINRA and the U.S. Securities and Exchange Commission (SEC).

However, numerous complaints have arisen, prompting regulators to express concerns about the firm’s adherence to these regulations and its overall commitment to client welfare.

Complaints Against Spartan Capital Securities

Spartan Capital Securities has been the subject of multiple complaints, alleging various forms of misconduct. Since 2017, accusations from FINRA, state regulatory bodies, and individual investors have included fraud, negligence, and breaches of fiduciary duty. Here are some of the key issues raised:

Churning and Excessive Trading

Churning refers to the practice of executing excessive trades in a client’s account, primarily to generate commissions for the broker rather than to further the client’s investment objectives. This unethical practice directly violates the fundamental principle of acting in the client’s best interest. Excessive trading can result in significant financial losses for clients due to unnecessary fees and poor market decisions, which can lead to tax implications from short-term capital gains.

Compliance Issues

Spartan Capital Securities has been criticized for failing to comply with necessary regulatory reporting obligations. For instance, the firm has repeatedly delayed updating Forms U4 and U5, essential documents that reflect customer complaints and outcomes. This lack of transparency can mislead clients and regulators about the firm’s history and customer grievances. Furthermore, regulators have accused Spartan Capital Securities of misclassifying the results of customer disputes, potentially obscuring the firm’s professional conduct and dispute resolution efforts.

How to Proceed if You’ve Been Affected

If you suspect that Spartan Capital Securities has harmed your investments, taking swift action is crucial. Here’s a step-by-step guide on how to safeguard your financial interests:

1. Review Your Account Statements: Begin by examining your transaction history for any unauthorized or unusual activity. Look out for high turnover rates, multiple trades, and excessive broker fees, which may indicate churning.
2. Utilize Regulatory Resources: Investigate any complaints or regulatory actions against Spartan Capital Securities. Tools like FINRA BrokerCheck, the SEC’s EDGAR Database, and state securities regulators can provide valuable insights into the firm’s past conduct.
3. Consult a Financial Advisor or Lawyer: Seek personalized guidance from a qualified financial advisor or attorney who can evaluate your situation and recommend the best course of action.
4. Report the Issue to FINRA: If you suspect misconduct, report your concerns to FINRA. This could initiate an investigation and lead to a resolution.

Regulatory Actions by FINRA

FINRA has taken significant steps against Spartan Capital Securities, underscoring the serious concerns about the firm’s regulatory compliance. Here are some of the main regulatory actions taken:

Reporting Failures

Spartan Capital Securities has faced charges for failing to report 223 required amendments for 72 brokers. This includes 162 instances related to customer-initiated arbitrations, as well as nine cases in which customers won disputes against the firm’s brokers. These omissions have significant implications for transparency and accountability within the firm.

FINRA Arbitration Case (Case No. 18-04117)

In this case, serious allegations were levied against Spartan Capital Securities, including breach of fiduciary duty, churning, unauthorized trading, and lack of supervision. The arbitration concluded with Spartan Capital Securities being ordered to pay the complainant $15,806.45.

Additionally, the firm was fined $600,000 for its regulatory failures and mandated to hire an outside consultant to enhance its supervisory practices. Key executives, John Lowry and Kim Monchik, were also fined and suspended from associating with any FINRA member firm for two years, emphasizing the gravity of the firm’s regulatory violations.

Can You Sue Spartan Capital Securities?

If you have incurred financial losses due to Spartan Capital Securities, legal action may be a viable option for seeking compensation. Many contracts with financial firms include arbitration clauses, requiring parties to resolve disputes through FINRA arbitration instead of traditional court proceedings. Here’s how to proceed:

Understand Your Rights

Investors have the right to expect ethical management of their investments. If Spartan Capital Securities or its employees have caused you financial harm, you may be eligible for compensation.

Consult an Investment Fraud Attorney

Engaging an attorney specializing in securities law and investment fraud is essential. They can assess your case, navigate you through the arbitration process, and assist you in presenting your claims effectively.

Prepare for FINRA Arbitration

Gathering evidence and formulating a strong case is critical for a successful arbitration outcome. Your attorney will help collect the necessary documentation and build a compelling argument.

Avoid Direct Negotiation Without Representation

It is advisable to have legal representation when engaging with Spartan Capital Securities. An experienced attorney can ensure your interests are adequately represented, preventing potential pitfalls during negotiations.

Consult with Bakhtiari & Harrison

If you believe that Spartan Capital Securities mishandled your investments, Bakhtiari & Harrison is here to assist you. With a focus on securities and investment fraud, our attorneys bring extensive experience in arbitration and litigation. If you have experienced excessive trading, breaches of regulations, or other fraudulent activities, we can guide you through the FINRA arbitration process. This can be crucial in helping you recover compensation for your losses.

Conclusion

The investigation into Spartan Capital Securities and the actions taken by regulators reveal serious concerns regarding the firm’s compliance with investment regulations. With allegations ranging from churning and excessive trading to significant reporting failures, it’s essential for clients to be vigilant in protecting their financial interests. If you suspect that you have been affected by Spartan Capital Securities’ practices, consider the steps outlined in this article and consult with professionals who can provide the necessary guidance and support. Remember, you have rights as an investor, and there are avenues available to seek redress for any financial harm you may have suffered.

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