FINRA files complaint against Frederick Joseph Cammarano III alleging supervision failures in churning scheme

If you entrusted a broker with your account and later discovered your portfolio was being traded excessively at his discretion, the allegations against Frederick Joseph Cammarano III may be worth your attention. BrokerCheck records show that Cammarano III (CRD# 2277307), formerly associated with Spartan Capital Securities, LLC, has been named a respondent in a complaint (Case No. 2018056490335) filed by FINRA alleging supervision failures related to churning and excessive trading.

Important notice: FINRA issued the following complaint. Issuance of a disciplinary complaint represents FINRA’s initiation of a formal proceeding, not a decision as to any of the allegations contained in the complaint.

The complaint covers allegations spanning more than four years and involves the firm’s failure to adequately oversee trading activity that the complaint alleges generated millions in revenue while causing substantial harm to customer accounts.

Supervision Failures and Alleged Churning at Spartan Capital

The complaint alleges that Cammarano III, together with co-respondent Kim Marie Monchik, failed to reasonably investigate and address red flags of excessive trading and churning, and failed to reasonably supervise the willful violations of Section 10(b) of the Exchange Act by registered representatives James Robert Pecoraro and John Joseph Stapleton. According to the FINRA complaint, Cammarano III and Monchik had an obligation to reasonably investigate and follow up on red flags indicating that the firm’s representatives were engaged in potentially excessive trading and churning, but allegedly failed to do so.

According to the allegations, he recommended series of securities transactions were excessive, not in customers’ best interest, and placed the financial interests of the firm and its representatives ahead of customers’ interests.

It is important to note that, as of the time of this report, the complaint is still pending. No findings of wrongdoing have been made. Cammarano III has the right to contest the allegations in a formal hearing before a FINRA hearing panel.

Churning and Excessive Trading

Churning occurs when a broker executes trades in a customer’s account that are excessive in frequency, volume, or cost relative to the customer’s stated objectives and financial situation. Unlike a legitimate investment strategy that unfolds over time, churning is characterized by rapid, repetitive trading driven by the broker’s financial incentive to generate commissions rather than by any genuine need to adjust the customer’s portfolio.

The hallmarks of churning are familiar to securities regulators: high turnover ratios (the value of securities bought and sold in a year relative to average account value), transaction costs that consume a significant portion of account value, frequent in-and-out trades in similar securities, and trading patterns that do not align with the customer’s documented investment profile or risk tolerance. When a customer’s account shows these characteristics, the question regulators and arbitrators ask is whether the broker exercised control and made the trading decisions, or whether the customer directed the trades independently.

Supervisors at a firm have a non-delegable duty under FINRA Rule 3110 to implement and enforce policies and procedures reasonably designed to detect and prevent excessive trading and other abusive practices. Red flags of churning include complaints from customers, patterns of high turnover in accounts, high customer acquisition costs relative to account size, and compensation structures that incentivize volume over client benefit. When supervisors become aware of these warning signs, they must investigate promptly and, if the facts support it, restrict or terminate the offending representative’s ability to manage customer accounts.

Regulatory Framework

Brokers and supervisors are bound by multiple layers of regulatory obligation when managing customer accounts:

FINRA Rule 3110 (Supervision): Member firms must establish and maintain a system to supervise the activities of each associated person reasonably designed to achieve compliance with securities laws and regulations, and with FINRA rules. This obligation is non-delegable and applies to all supervisory personnel, including branch managers and compliance officers.

SEC Regulation Best Interest (Reg BI): As of June 30, 2020, brokers recommending securities to retail customers must act in the customer’s best interest at the time the recommendation is made, considering the customer’s financial situation, needs, and objectives. Reg BI mandates that the financial interests of the firm or broker must not be placed ahead of the customer’s interests.

Section 10(b) of the Securities Exchange Act and Rule 10b-5: These provisions prohibit any manipulative or deceptive device or contrivance in connection with the purchase or sale of any security. Churning, the practice of executing trades primarily to generate commissions rather than to serve the customer’s best interests, constitutes fraud under Section 10(b) and Rule 10b-5.

FINRA Rule 2010 (Standards of Commercial Honor): All members and associated persons must observe high standards of commercial honor and just and equitable principles of trade. Excessive trading and churning violate this foundational rule.

Investor Rights and Recovery

Customers who suffered losses attributable to excessive trading and churning may have the right to seek recovery through FINRA arbitration. Customers harmed by churning typically seek damages based on two theories: the out-of-pocket loss (the difference between what they invested and what remains), and the lost opportunity cost (the return they would have earned had the account been managed passively or in accordance with their stated objectives).

Additionally, customers may seek damages for breach of fiduciary duty, fraud, and violation of industry regulations. Many churning cases result in arbitration awards that include compensatory damages, disgorgement of commissions, and prejudgment interest. While no arbitration award can fully restore a customer to the position they would have occupied absent the misconduct, recovery is possible for those with documented losses.

Customers who invested with Spartan Capital Securities, LLC during the period alleged in the complaint and who experienced unusual trading activity in their accounts should review their statements carefully and consider consulting with a securities attorney to evaluate whether they may have a claim.

Steps to take right now

1. Gather your account statements, trade confirmations, and any correspondence with your broker or firm, including emails, texts, and written materials about the investments.
2. Look up your broker on FINRA BrokerCheck at brokercheck.finra.org to review their full disclosure record.
3. Contact a securities arbitration attorney for a consultation to evaluate your options.

Rosenberger + Kawabata represents retail investors in FINRA arbitration proceedings involving churning, excessive trading, and supervision failures. If you invested with Spartan Capital Securities or Frederick Joseph Cammarano III and experienced excessive trading activity in your account, contact Rosenberger + Kawabata online for a free and confidential consultation, or call (310) 894-6921.

The information in this post comes from FINRA’s public disciplinary records. You can review Frederick Joseph Cammarano III’s BrokerCheck record (CRD# 2277307) for additional details about his employment history, prior customer disputes, and regulatory status.

You can view the full February 2026 FINRA disciplinary actions report here.