In an ongoing effort to protect retail investors from predatory brokerage practices, FINRA utilizes Rule 4111 to publicly flag “Restricted Firms”—broker-dealers with a lengthy history of misconduct. New York City-based Spartan Capital Securities is currently in the crosshairs, having been designated as a Restricted Firm on its public BrokerCheck profile, a label the firm is actively appealing.

The Allegations The Restricted Firm designation comes on the heels of severe regulatory allegations. In December, FINRA formally accused Spartan Capital of orchestrating a massive excessive trading scheme. Regulators allege the firm’s practices resulted in customers paying an astonishing $10 million in unnecessary costs and commissions, while suffering $8 million in direct investment losses AdvisorHub.

Under Rule 4111, firms with risk profiles that significantly exceed their peers are required to set aside cash reserves specifically to cover future customer arbitration claims. Spartan Capital is pushing back against the restricted label, but the public designation serves as a major warning light for the investing public.

What This Means for Investors Excessive trading, or “churning,” occurs when a broker buys and sells securities in a customer’s account primarily to generate commissions, eating away at the client’s principal balance. If you are a client of Spartan Capital Securities and your account statements show high-frequency trading, steep commission fees, and diminishing returns, you may be the victim of excessive trading. Contact a FINRA arbitration lawyer to evaluate your account and file a claim before your funds are fully depleted.