Finra has barred a former supervisor over allegations he failed to supervise excessive and unsuitable trading by a registered representative, the industry’s self-regulator says.
From Sep. 18, 2019 through Oct. 8, 2019, Michael Leahy, then registered with First Standard Financial Company as its sole principal as well as its compliance officer, allegedly failed to supervise a former registered representative Finra only identifies as “PS,” according to a letter of acceptance, waiver and consent published by the regulator.
During that time, PS allegedly engaged in unauthorized trading, used margin without authorization, recommended unsuitable transactions and charged excessive commissions to dozens of clients, Finra says.
First Standard experienced an “exodus of registered representatives and principals” on or about September 18, 2019, leaving PS as the only registered representative trading client accounts, inheriting the accounts of departing brokers, according to the letter of acceptance. And Leahy was allegedly the only person responsible for supervising PS during the period in question, Finra says.
Leahy allegedly missed numerous red flags about PS’ behavior, such as trade blotters showing frequent in-and-out trading, commissions often exceeding 5% of transactions, several customer complaints and a notification from a clearing firm about PS’s potentially unauthorized trading, according to the letter of acceptance. Leahy’s alleged failures allowed PS to engage in misconduct until the New Jersey Bureau of Securities revoked PS’ registration on Oct. 8, 2019, Finra says.
Leahy consented to the bar and a $5,000 fine without admitting or denying the findings, Finra says.
Meanwhile, First Standard permitted a registered representative by the name of Philip Joseph Sparacino to resign in October 2019 following a State of New Jersey revocation order, according to his BrokerCheck profile.
Finra barred Sparacino in November over his refusal to provide requested documents, according to BrokerCheck. The former broker has two customer disputes on his record that were closed with no action, both alleging unauthorized trading and excessive commissions, and a pending customer dispute alleging churning and unsuitable trades, all from between December 2018 and October 2019.
Leahy had been in the financial services industry since 1998 and was registered with nine firms before joining First Standard in 2017, according to his BrokerCheck profile.
In addition to the bar on his record, Leahy has a customer dispute that was closed with no action, a judgment/lien, and two criminal complaints, one alleging a “terroristic threat” from 2008 that was amended and reduced, and one alleging felony assault charges that were eventually dismissed.
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