← Broker database 2024-03-08
Joseph C. Desapio Suspended by FINRA for Unsuitable Trading and Borrowing from Customer
According to FINRA, Joseph C. Desapio (CRD #5837553), a registered representative based in New York, New York, was suspended for 15 months after consenting to findings that he violated FINRA's Suitability Rule and Regulation Best Interest (Reg BI) by recommending quantitatively unsuitable trades in customer accounts, including the account of a senior investor. No monetary sanction was imposed due to Desapio's demonstrated financial inability to pay. FINRA's investigation found that Desapio exercised de facto control over customer accounts, meaning he effectively directed trading activity even without formal discretionary authority. The trading in these accounts exhibited excessively high turnover rates and cost-to-equity ratios, both of which are key metrics regulators use to identify potentially abusive trading patterns. Quantitative unsuitability, sometimes called excessive trading or churning, occurs when a broker engages in a level of trading activity that is so excessive that it is virtually impossible for the customer to profit after accounting for commissions and other transaction costs. In Desapio's case, the trading activity generated $136,023 in total trading costs, including $111,798 in commissions for Desapio, while causing customers to suffer $92,546 in realized losses. This pattern demonstrates that the primary beneficiary of the trading was Desapio himself, not his customers. In addition to the unsuitable trading, Desapio borrowed $20,000 from a customer without obtaining his firm's approval, a separate serious violation of FINRA rules governing financial dealings between brokers and their customers. The 15-month suspension, running from March 18, 2024, through June 17, 2025, reflects the gravity of the combined violations. Investors should be vigilant about monitoring the frequency of trading in their accounts and the commissions being generated. Excessive trading that enriches the broker at the customer's expense is a serious regulatory violation, and investors who experience such activity may have recourse through FINRA's arbitration process. This matter was resolved through FINRA Case #2022074025801.