Spartan Broker Joseph Kelly Suspended for Excessive Trading

The Financial Industry Regulatory Authority (FINRA) sanctioned Joseph Kelly (CRD No. 4560737) for engaging in excessive and quantitatively unsuitable trading in the accounts of four retail customers between May 2017 and February 2023. FINRA determined that Kelly’s trading activity violated Rule 15l-1(a)(1) of the Securities Exchange Act of 1934 (Regulation Best Interest) as well as FINRA Rules 2111 and 2010. Kelly consented to a nine-month suspension, a $10,000 fine, and $69,830 in restitution plus interest to affected customers.

Kelly entered the securities industry in 2003 and was associated with Spartan Capital Securities, LLC (CRD No. 146251) from January 2017 through December 2024. He is currently registered with another FINRA-member firm.

Under Regulation Best Interest (Reg BI), brokers must act in the best interest of retail clients and avoid placing their own financial interests ahead of the customer’s. When recommending a series of transactions, brokers must ensure that the level of trading is not excessive given the client’s investment profile. FINRA often measures excessive trading using two key metrics: a turnover rate (how many times the account’s assets are traded in a year) and a cost-to-equity ratio (the annual return the account must earn just to break even after commissions). As a general rule, turnover rates above six and cost-to-equity ratios exceeding 20% indicate potential excessive trading. FINRA Rule 2111 imposes a similar suitability obligation, while Rule 2010 requires high standards of commercial honor and fair dealing.

According to FINRA, Kelly’s trading for four customers resulted in turnover rates of 10 to 35 and cost-to-equity ratios ranging from 42% to 171%, far exceeding acceptable limits. His activity generated approximately $365,344 in commissions while causing $262,683 in realized losses. For example, one customer, a 59-year-old convenience-store owner, experienced an annualized turnover rate of 35 and a 171% cost-to-equity ratio, leading to nearly $68,000 in losses. Another customer, a 56-year-old engineer, suffered losses exceeding $56,000 with a cost-to-equity ratio of 68%. FINRA found that Kelly’s trading patterns were excessive, unsuitable for three customers, and not in the best interest of a fourth, violating Reg BI and FINRA’s ethical standards.

Lufrano Law, LLC is a national investment litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. Please contact us at (800) 627-2179 for more information if you have been the victim of investment negligence or fraud.

The content on this site reflects personal opinions and does not constitute statements of fact. No findings have been made against the firms or individuals mentioned. This blog is intended solely for educational purposes, drawing on publicly available information to provide general insights and a basic understanding of the law. It is not a substitute for legal advice.