In August 1987, Traderfield Securities became a FINRA member. It is based in Flushing, New York, with a single branch office employing six registered representatives. Mario Divita, initially registered as a General Securities Representative (GSR) in 1988, joined Traderfield in October 2016 as a GSR and Financial and Operations Principal.
Currently holding various registrations through Traderfield, including GSR, General Securities Principal, Compliance Officer, Operations Professional, and Private Securities Offerings Principal, Divita took an ownership interest in Traderfield in August 2017.
Background of Mario Divita
From January 2017 to December 2021, Divita served as the chief executive officer and chief compliance officer of the firm. In November 2021, Traderfield and Divita entered into an Acceptance, Waiver, and Consent (AWC) agreement, consenting to sanctions, including censure, restitution, principal suspension, and continuing education.
| Employment Period | Employer Name | Location | Position |
|---|---|---|---|
| 10/2016 – Present | TRADERFIELD SECURITIES, INC | NEW YORK, NY, USA | RR |
| 05/2011 – Present | MD PROVISIONS | NEW YORK, NY, USA | OWNER |
| 11/2014 – 12/2015 | QUASAR TRADING, LLC | WEST PALM BEACH, FL, USA | TRADER |
Sanction details
The sanctions were imposed due to their failure to –
- Establish, maintain, and enforce a supervisory system with written procedures to identify and prevent excessive trading in customer accounts;
- Adequately supervised a former registered representative who engaged in excessive trading in 16 customer accounts; and
- Report statistical and summary information related to five customer complaints about the registered representative to FINRA.
Overview of the Case (Traderfield Securities Inc. and Mario Divita)
Between January 2019 and at least September 2020, Traderfield and Divita neglected to establish, sustain, and enforce a supervisory system, which includes written supervisory procedures. This system should have been reasonably crafted to ensure compliance with the regulations overseeing the proposed outside business activities of registered individuals.
Throughout this period, Traderfield and Divita were aware that two registered representatives of the firm were participating in external activities related to investment funds and private placement offerings. However, neither the firm nor Divita assessed these activities by FINRA Rule 3270.01, which includes the failure to determine whether they qualified as outside securities activities. Consequently, Traderfield and Divita breached FINRA Rules 3110, 3270.01, and 2010.
Details and Facts
This case stems from a complaint filed with FINRA. Under FINRA rules, firms must establish and maintain a system to supervise their associated persons’ activities. Written procedures (WSPs) must be in place and designed to comply with securities laws, regulations, and FINRA rules.
Rule 3270 prohibits registered persons from engaging in outside business activities without prior notice to their employer. Rule 3270.01 requires the member firm to evaluate such activities and impose conditions if necessary.
Source – FINRA
Between January 2019 and September 2020, Traderfield assigned Divita supervisory responsibility for reviewing and approving outside business activities. During this period, two registered persons managed investment funds without proper evaluation by Traderfield. Despite presenting these activities as an outside business, Traderfield understood them as investment-related. However, no assessment was made regarding restrictions, treatment as outside securities activities, or potential interference with responsibilities.
Traderfield’s WSPs did not reference Rule 3270.01. As a result, Traderfield and Divita violated FINRA Rules 3110, 3270.01, and 2010.
Sanctions for Traderfield include a censure, a $75,000 fine (joint with Divita), and an undertaking for senior management to certify remediation within 120 days. Divita faces a six-month suspension, a $75,000 fine (joint with Traderfield), and must complete 50 hours of relevant continuing education within 120 days.
Both respondents agree to pay the fines promptly and waive any claim of inability to pay. Divita acknowledges potential statutory disqualification and the need for an application to continue association during suspension. The sanctions take effect on a date determined by FINRA.
Statement from the Report
On September 5, 2023, a Letter of Acceptance, Waiver, and Consent (AWC) was issued, censuring and imposing a $75,000 fine jointly and severally on a firm, alongside an individual named Divita. The AWC mandated the remediation of identified issues and the implementation of a supervisory system, specifically written supervisory procedures (WSPs), designed for compliance with FINRA Rule 3270.01.
Divita faced a six-month suspension from any FINRA member association in a principal capacity. Additionally, they were required to complete 50 hours of continuing education focused on supervisory responsibilities.
Without admitting or denying the findings, both the firm and Divita consented to the sanctions. The AWC highlighted their failure to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed for compliance with rules governing registered representatives’ proposed outside business activities (OBAs).
It was found that the firm and Divita were aware of the two representatives’ outside activities involving investment funds and private placements, yet they didn’t assess whether these constituted outside securities activities. The representatives managed investment funds that garnered $60 million from 200+ investors, presenting them as OBAs to the firm and Divita. Although understood as investment-related, no evaluation occurred to determine restrictions, recording on the firm’s records, potential interference with responsibilities, or alignment with the firm’s business.
Moreover, the firm’s WSPs lacked references or requirements for compliance with FINRA Rule 3270.01 or its listed factors.
Divita’s suspension, effective from October 2, 2023, to April 1, 2024, concludes the regulatory actions taken in response to these compliance shortcomings.
Conclusion
In conclusion, the case involving Traderfield and Mario Divita reveals significant regulatory violations related to the establishment and enforcement of a supervisory system for outside business activities (OBAs) as mandated by FINRA rules.
The firm and Divita failed to assess and appropriately manage the external activities of two registered representatives involved in investment funds and private placements, leading to a violation of Rule 3270.01. The absence of written supervisory procedures (WSPs) referencing this rule compounded the violations, resulting in censure, fines, and sanctions.
The Acceptance, Waiver, and Consent (AWC) agreement, issued on September 5, 2023, outlined the sanctions, including a $75,000 fine jointly imposed on Traderfield and Divita, along with a six-month suspension for Divita in a principal capacity. Both parties consented to the sanctions without admitting or denying the findings. The AWC emphasized the need for remediation, including the implementation of a supervisory system with WSPs designed for compliance with FINRA Rule 3270.01.
The case underscores the importance of diligent oversight and adherence to regulatory requirements in the financial industry. The identified compliance shortcomings led to tangible consequences, serving as a reminder to industry participants to establish and maintain robust supervisory systems to ensure compliance with applicable rules and regulations.
