Investing in stuff like the stock market and iraqi dinar comes with inherent risks. As an investor, it’s crucial to do your due diligence on any securities firm you entrust with your hard-earned money. Recent allegations against Spartan Capital Securities highlight the importance of being an informed investor.
Overview of Spartan Capital Securities
Spartan Capital Securities is a New York-based broker-dealer founded in 2001. The firm underwrites and distributes public offerings for small and microcap companies. It also provides market-making services.
Spartan has over 100 registered representatives and serves thousands of retail and institutional investors. In 2020, the company underwrote 89 public offerings and raised approximately $4.5 billion in capital.
The firm’s president and CEO is John Lowry. He previously worked at belts such as Bear Stearns and Prudential Securities.
Regulatory and Criminal Allegations
In recent years, Spartan Capital Securities has faced numerous allegations from regulatory agencies and criminal prosecutors. Here’s an overview of some key cases:
SEC Charges
- In 2018, the SEC charged Spartan with failing to file suspicious activity reports. Firms must file these reports when they suspect potential securities law violations. Spartan agreed to pay a $100,000 penalty.
- In 2019, the SEC accused Spartan of gatekeeping failures in a pump-and-dump scheme. Spartan allegedly ignored red flags and helped publicize dubious companies. The firm paid a $250,000 fine.
- In 2020, Spartan agreed to pay $135,000 to settle SEC charges. The agency accused Spartan of violating its customer protection rule.
FBI Investigations
- In 2019, the FBI raided Spartan’s offices as part of a pump-and-dump investigation. No charges have been filed yet.
- In 2021, federal prosecutors charged over a dozen people in a spoofing scheme involving Spartan. Spoofing involves placing fake trades to move stock prices.
FINRA Sanctions
The Financial Industry Regulatory Authority (FINRA) has sanctioned Spartan numerous times:
- In 2015, FINRA fined Spartan $125,000 for failing to establish adequate anti-money laundering policies.
- In 2016, the firm paid a $100,000 FINRA fine for failing to supervise a registered representative.
- In 2017, FINRA sanctioned Spartan for selling $2.7 million of unregistered shares without proper due diligence.
Customer Complaints
Spartan Capital Securities complaints abound on the internet from retail investors claiming they lost money due to the firm’s actions. Common allegations include:
- Recommending overly speculative microcap stocks
- Engaging in pump-and-dump schemes
- Failing to supervise registered representatives
- Allowing unauthorized trading and excessive churning
- Making unsuitable investment recommendations
Many of these complaints reference Spartan brokers such as Gregg Lerman, David Lopez, and Louis Ottimo.
For example, 11 customers recently filed a FINRA arbitration claim against Spartan. They allege undisclosed markups, excessive trading, and misrepresentation of risks. The plaintiffs are seeking $1.2 million in damages.
Damaging Impact on Investors
The regulatory sanctions and fraud allegations have significant repercussions for Spartan Capital Securities investors:
- Financial losses – Customers like those in the recent FINRA claim can lose a substantial portion of their assets due to improper conduct.
- Reputational damage – Repeated run-ins with regulators undermine investor trust in the firm’s services.
- Loss of access – If regulators suspend or revoke Spartan’s broker-dealer license, clients would lose access to their accounts.
- Legal expenses – Spartan must devote significant resources to legal and compliance costs associated with the allegations. This diverts resources from servicing clients.
What Investors Should Do
If you’re a current or prospective customer of Spartan Capital Securities, here are some tips:
- Review your account statements. Make sure there are no unauthorized trades or excessive fees.
- File complaints with regulators if you lost money due to Spartan’s conduct. Hire a securities attorney if needed.
- Check your broker’s background. Use FINRA’s BrokerCheck to view regulatory and employment history.
- Diversify your investments. Don’t put all your eggs in one basket, especially microcap securities.
- Consult with a fee-only adviser. Get professional advice about your investments rather than solely relying on your broker.
- Consider switching firms. Choose an established broker-dealer with a clean compliance record.
The Bottom Line
Allegations of wrongdoing against Spartan Capital Securities are worrying for retail investors. This highlights the need to carefully vet any firm or broker you partner with. Conduct thorough due diligence, diversify your holdings, and report any mistreatment. Being a prudent investor is key to growing and preserving your wealth over the long-term.
