Joseph Stone Capital: Complaints and Regulatory Actions

The White Law Group reviews the complaints and regulatory actions of Joseph Stone Capital.

The White Law Group is continues to investigate potential securities lawsuits involving Joseph Stone Capital (CRD#: 159744/SEC#: 8-69014). The firm, headquartered in Garden City, New York, has eight (8) disclosures on its CRD or FINRA Broker report. It is also reportedly subject to the FINRA 3170 Taping Rule.

Regulatory actions taken against a broker-dealer may include censures, fines, suspensions and restitution, among others. They can have serious consequences for a broker-dealer’s profile and reputation. The following is a review of FINRA and the SEC’s regulatory actions involving Joseph Stone Capital.

FINRA Taping Rule Violation

April 11th, 2025: Joseph Stone failed to comply with FINRA Rule 3170 (the Taping Rule), which requires certain firms to tape record all telephone conversations between their registered persons and existing and potential customers. Between September 2021 and July 2024, the firm’s special written procedures were not reasonably designed to comply with the Taping Rule. In certain instances, between September 2021 and May 2022, the firm reportedly failed to record all conversations as required by the Taping Rule. As a result, the firm violated FINRA Rules 3170 and 2010. For these alleged violations, Joseph Stone is censured and fined $35,000.

FINRA Complaint: Joseph Stone Capital to pay Restitution to Customers 

September 8, 2022: reportedly censured Joseph Stone Capital, LLC for supervisory failures in connection with suitability requirements involving excessive trading, according to a Letter of Acceptance Waiver and Consent. From January 2015 through June 2020, Joseph Stone allegedly failed to identify or reasonably respond to red flags of excessive trading in 25 customer accounts that purportedly caused the customers to pay more than $1,037,000 in commissions, fees, and margin interest.  

In addition to the censure, the firm was reportedly ordered to pay restitution of $825,607.59 and implement a “reasonable heightened supervision plan” for five registered representatives who were allegedly involved and will maintain the plan for a period of no less than two years. 

What is Excessive Trading or Churning? 

When a broker engages in excessive trading of securities in a customer’s account without considering the client’s investment goals and primarily to generate commissions that benefit the broker, the broker may be engaged in an illegal practice known as churning. 

Churning fraud is an illegal and unethical practice. The more a broker trades the more they get paid. In many cases this is enough incentive for unscrupulous brokers to over-trade in a client’s account. 

Often churning fraud occurs when a broker has discretionary authority (either actual or implied) to a client’s account, meaning they do not need the client’s consent to trade on their behalf. Churning may result in significant losses and expose the client to unnecessary tax liabilities. 

Joseph Stone Capital: Broker Misconduct and Customer Complaints

There have been numerous cases of registered representatives employed by Joseph Stone Capital who were allegedly involved in broker misconduct and fraudulent activities.

June 24th, 2024: A former Joseph Stone Capital broker allegedly willfully violated the Regulation Best Interest or Reg BI by recommending a series of transactions in a customer’s account that was excessive and not in the customer’s best interest. FINRA’s findings stated that the broker recommended that the customer execute 199 trades in the account over the next several months. On several occasions, he recommended that the customer sell a security shortly after purchasing it, causing the customer to suffer a realized loss but generating commissions for the advisor. The customer suffered realized losses and paid more than $52,000 in commissions and trade costs. Joseph Stone reportedly settled with the customer through mediation. The broker reportedly had three customer complaints filed against him. Allegations included unsuitable and unauthorized trading and churning, among others.

December 27th, 2022: A former stockbroker based in Mineola, New York was registered with Joseph Stone Capital LLC from 2016 until his suspension. In December 2022, the Financial Industry Regulatory Authority (FINRA) reportedly suspended him for five months for engaging in excessive and unsuitable trading in two customer accounts. He was also ordered to pay $10,648.61 in restitution to a senior customer. ?He has one customer complaint filed against him, according to his broker check profile.

The broker’s regulatory history includes:

• A 2014 order by the Arkansas Securities Department to pay $55,000 in restitution for excessive trading. ?

• A 2021 Wells Notice from FINRA alleging willful violations of securities laws, including churning customer accounts and making unauthorized trades. ?

What is Failure to Supervise? 

FINRA Rule 3110 (Failure to Supervise) requires a firm to establish and maintain a system to supervise the activities of its associated persons that is reasonably designed to achieve compliance with securities laws and regulations and FINRA rules. 

The rule gives requirements for a firm to have reasonably designed written supervisory procedures (WSPs) to supervise the activities of its associated persons and the types of businesses in which it engages. 

Among other things, a firm’s WSPs must address supervision of supervisory personnel and provide for the review of a firm’s investment banking and securities business, correspondence and internal communications, and customer complaints. WSPs should describe: 

• the specific individual(s) responsible for each review, 
• the supervisory activities such persons will perform, 
• the frequency of the review, and 
• the manner of documentation.  

Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees. 

The brokerage firms can be held responsible for any losses in a FINRA arbitration claim if it is determined that they failed to properly supervise their agent. 

Class Action Lawsuit vs. Individual FINRA Arbitration Lawsuit

You may wonder whether a large class action lawsuit is a better litigation option for you than an individual FINRA arbitration case.  The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option.  Class action lawsuits as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually.

Filing a Lawsuit for Investment Losses

If you are concerned about your investments with Joseph Stone Capital, the securities attorneys at The White Law Group may be able to help you. For a free consultation with an attorney, please call (888) 637-5510. 

The foregoing information, which is all publicly available, is being provided by The White Law Group. 

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.