FINRA barred a representative previously affiliated with the Red Bank, N.J.-based First Standard Financial Company a week after the New Jersey Bureau of Securities revoked the firm’s registration, arguing the firm made $28.7 million “through pervasive, unauthorized, unsuitable and excessive trades.”
Phillip J. Sparacino signed the letter of acceptance, wavier and consent after he refused to present information and testimony to the regulatory agency in its investigation of Sparacino’s allegedly suspect trading practices while at First Standard. According to the FINRA letter, Sparacino worked at First Standard as a corporate securities representative between July 2014 and October 2019, when he resigned after the state’s Securities Bureau revoked his registration.
According to the Bureau of Securities, First Standard Financial Company recruited agents who had known histories of regulatory infractions, including charges of excessive trading. At First Standard, the state charges, these agents would make frequent trades with the alleged aim of boosting commissions, including short-term trading in bonds. According to the bureau, the sales commissions reached such a level that it would have been difficult for clients’ accounts to break even.
“First Standard held itself out as a legitimate financial services firm but in reality the firm served as a haven for greedy, dishonest agents who traded clients’ accounts like sharks in a feeding frenzy,” Bureau of Securities Chief Christopher W. Gerold said after the firm’s registration was revoked on Nov. 4.
First Standard had 44 agents with a branch office in New York as of the end of 2018, according to the Bureau, but numerous agents left in this past year, leaving many client accounts behind, and some remaining agents, including Sparacino, allegedly filled the gap. According to a complaint against First Standard filed on Oct. 31, Sparacino generated $24,258 in commissions in April and May 2019. In the four-month period between June and October, he allegedly made $1,452,514 in commissions and fees. The Bureau also recommended he pay $250,000 in penalties (in May, the Bureau revoked the registration of former agent Gabriel Block, assessing he pay $750,000 in civil penalties.) According to Paul R. Rodriguez, the acting director of the Division of Consumer Affairs, the investigation is ongoing.
“Our investigation into excessive, unsuitable and unauthorized trading at First Standard isn’t over,” he said. “We fully intend to hold accountable everyone who contributed to their egregious abuse of the trust investors placed in them.”