Former Spartan principal gets suspended for failure to control traders
David Daniel Lopez, a former designated principal of Spartan Securities Group responsible for supervising all firm traders, has accepted a 12-month suspension as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Lopez entered the securities industry in 1995 when he became associated with a FINRA member. In 2001, he became registered with FINRA as a General Securities Principal through his association with Spartan. On June 28, 2019, Spartan filed a Uniform Termination Notice for Securities Industry Registration (Form U5) for Lopez, terminating his registration with FINRA.
From January 1, 2018 through March 6, 2019, Lopez was Spartan’s designated principal responsible for supervising all firm traders, as well as trading and market making at the firm. These responsibilities included establishing, documenting, and maintaining a system of risk management controls and written supervisory procedures (WSPs) reasonably designed to achieve compliance with the Market Access Rule.
During the same time period, the firm provided market access to the trader through the firm’s execution management system, which the trader regularly utilized to route quotes and orders to the market.
Spartan’s WSPs contained trading limits that applied to all traders at the firm. Lopez had the ability to modify or restrict the trader’s market access in accordance with the WSPs. Although Lopez was aware that the trader previously exceeded the allowable trading limits through trading in the firm’s proprietary account Lopez never modified or restricted the trader’s market access.
On March 6, 2019, the trader executed a series of transactions in Spartan’s proprietary account that resulted in short positions in a biotechnology stock that exceeded the trading limits set forth in the firm’s WSPs. Lopez became aware of the short positions in the biotechnology stock in the morning on March 6, 2019, but failed to modify or restrict the trader’s market access until close to the end of the trading day.
On March 7, 2019, by the time Spartan was able to cover the short positions into which the former trader had entered, the firm suffered a loss of approximately $16.6 million.
Lopez has accepted a12-month suspension from associating with any FINRA member in all principal capacities.