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FINRA Suspends Philip Marchese for Alleged Excessive Trading

Jun 24, 2022 Excessive Trading

Philip Marchese (CRD #: 5905008) has been suspended by FINRA, according to his BrokerCheck record, accessed on June 16, 2022. Keep reading to learn more about Philip Marchese’s conduct as a broker.

Suspension by FINRA

On April 22, 2022, Philip Marchese consented to the entry of findings that he allegedly engaged in excessive trading in his clients’ accounts, violating FINRA Rules 2111 and 2010.

According to a letter of Acceptance, Waiver & Consent (AWC), Philip Marchese excessively traded in four customer accounts over which he had de facto control while a broker with Spartan Capital from August 2017 through November 2019.

Philip Marchese allegedly conducted the following transactions in the four clients’ accounts. For comparison, FINRA considers a cost-to-equity ratio over 20% and an annualized turnover rate of 6 or higher to be signs of excessive trading.

  • Customer A: 148 transactions from August 2017 to November 2019, with an annualized turnover rate of 18.9 and an annualized cost-to-equity ratio of 62%.
  • Customer B: 17 transactions from October 2018 to October 2019, with an annualized turnover rate of 6.76 and an annualized cost-to-equity ratio of 42%.
  • Customer C: 87 transactions from September 2017 to March 2019, with an annualized turnover rate of 31.87 and an annualized cost-to-equity ratio of 161%.
  • Customer D: 44 transactions from April 2018 to September 2019, with an annualized turnover rate of 37.23 and an annualized cost-to-equity ratio of 196%. 

This trading allegedly generated a total of $244,645 in trading costs and $246,327 in realized losses. 

FINRA Rule 2111

FINRA Rule 2111 requires brokers to recommend investments that adequately suit investors’ profiles. An investor’s profile describes characteristics such as their age, risk tolerance, and investment goals.

In the case of brokers with de facto control over or discretionary power in a client’s account, brokers must also obey the requirement for quantitative suitability—i.e., that the number of trades must not be excessive.

Investors who rely on brokers for recommendations may be able to recoup their losses by seeking out FINRA arbitration.

FINRA Rule 2010

FINRA Rule 2010 requires brokers to uphold high standards of professional honor and ethical conduct.

Sanctions

Philip Marchese faced the following sanctions:

  • Partial restitution of $50,000, plus interest
  • 12-month suspension from associating with FINRA members in all capacities

Philip Marchese’s restitution payment is due upon reassociation with a FINRA member firm, or before application/request for relief from statutory disqualification (e.g., suspension) as part of this AWC or any other regulatory action.

His suspension began on May 2, 2022, and will end on May 1, 2023.

You can read the full AWC here.

Investor Dispute

On July 1, 2015, an investor alleged that Philip Marchese made “widely unsuitable” transactions; engaged in negligence, including the negligent management of accounts and registered representatives; committed common law fraud; made misrepresentations, and breached his contract.

The investor further alleged that Philip Marchese violated FINRA Rules 2010 and 2020, and the Minnesota Securities Act.

The investor sought $825,000 in damages and received a $50,000 settlement.

FINRA Rule 2020

Misrepresentation of information concerning investments violates FINRA Rule 2020, which forbids the use of manipulative, deceptive, and otherwise fraudulent means to influence the purchase or sale of securities.

What are blue sky laws?

Blue sky laws like the Minnesota Securities Act build on federal regulations by further defining and restricting fraudulent activities. They may also define what qualifies as a security in a particular state.

What is broker negligence?

Many actions can qualify as broker negligence, ranging from unsuitable investment recommendations, to failures to supervise, to unauthorized transactions. Investors who believe their losses were caused by negligence can seek out FINRA arbitration to recover their funds.

Background Information

Philip Marchese has passed the following exams:

  • Series 63 – Uniform Securities Agent State Law Examination
  • SIE – Securities Industry Essentials Examination
  • Series 7 – General Securities Representative Examination

Previously, Philip Marchese worked for the following firms:

  • Joseph Stone Capital (CRD#:159744)
  • Spartan Capital Securities (CRD#:146251)
  • Worden Capital Management (CRD#:148366)
  • Legend Securities (CRD#:44952)
  • Joseph Gunnar & Company (CRD#:24795)
  • Brookstone Securities (CRD#:13366)

Kurta Law Can Help

If you worked with Philip Marchese and you have concerns about your investments, please contact us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.

For over 20 years, Kurta Law has advocated on behalf of investors who want to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm and exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.