← Broker database 2022-01-10
John LoPinto Suspended for Excessive Trading in Customer Accounts
According to FINRA, John Michael LoPinto was assessed a deferred fine of $7,500, suspended for nine months, and ordered to pay $135,333 plus interest in deferred restitution on January 10, 2022, for excessively trading customer accounts and exercising unauthorized discretion.
LoPinto excessively traded five customers' accounts by recommending high-frequency trading. The customers routinely followed his recommendations, giving LoPinto de facto control over their accounts. His trading strategy was excessive and unsuitable given the customers' investment profiles.
The results were devastating for these customers: they suffered collective realized losses of $240,331 while paying total trading costs of $205,523, including $161,706 in commissions. The high trading frequency generated substantial commissions for LoPinto while causing significant losses for his customers.
Additionally, LoPinto exercised discretion to effect trades in one customer's account without obtaining the customer's prior written authorization and without his member firm accepting the account as discretionary. The customer paid $21,632 in commissions on these unauthorized discretionary trades.
Excessive trading, also known as churning, occurs when a broker engages in excessive buying and selling in a customer's account primarily to generate commissions rather than to benefit the customer. This violates fundamental suitability obligations and breaches the broker's duty to act in the customer's best interests.
The restitution ordered ($135,333) represents commissions paid by three of the five customers plus the customer whose account was traded with unauthorized discretion. The remaining customers had previously received restitution in connection with another matter.
For investors, this case illustrates several critical warning signs of excessive trading: high trading frequency, substantial commission charges relative to account value, and persistent losses despite high trading activity. Investors should review their account statements carefully and question advisors who recommend frequent trading that generates high commissions while producing poor investment results.
Monthly account statements show commission charges - if commissions represent a significant percentage of your account value over time, this may indicate excessive trading. Consider seeking a second opinion if your account shows high turnover without corresponding positive performance.