Our firm is investigating Joseph Stone Capital broker and CEO Damian Maggio (CRD# 2864247) of Garden City, New York for potential investment-related misconduct, including alleged failure to supervise customer accounts.
Financial Advisor’s Career History
According to his FINRA BrokerCheck report, Damian Maggio has been registered in the securities industry since 1997 and is currently associated with Joseph Stone Capital L.L.C. (CRD# 159744) in Garden City, New York, where he serves as CEO and a registered representative.
Over the course of his career, Maggio has been registered with the following broker-dealers:
- Joseph Stone Capital L.L.C. (Garden City, NY) – Registered since February 26, 2013; currently CEO and registered principal/representative.
- First Midwest Securities, Inc. (Garden City, NY) – October 2008 to February 2013.
- J.P. Turner & Company, L.L.C. (Westbury, NY) – October 2005 to October 2008.
- Brundyn Securities Inc. (Arlington, TX) – September 2004 to October 2005.
- North American Clearing, Inc. (Longwood, FL) – April 2004 to August 2004.
- LH Ross & Company, Inc. (Boca Raton, FL) – January 2003 to March 2004.
- Lloyd, Scott & Valenti, Ltd. (Austin, TX) – August 2002 to January 2003.
- KSH Investment Group, Inc. (Great Neck, NY) – October 2001 to August 2002.
- Harrison Securities, Inc. (Port Washington, NY) – December 2000 to November 2001.
- Whitehall Wellington Investments, Inc. (Port Washington, NY) – November 2000 to December 2000 and again from October 1998 to December 1999.
- M.S. Farrell & Company, Inc. (Syosset, NY) – December 1999 to November 2000.
- LCP Capital Corp. (Staten Island, NY) – January 1998 to October 1998.
- Royal Hutton Securities Corp. (New York, NY) – September 1997 to December 1997.
- Gaines, Berland Inc. (Bethpage, NY) – July 1997 to October 1997.
Maggio has passed the General Securities Representative (Series 7), General Securities Principal (Series 24), Investment Banking Representative (Series 79), and Uniform Securities Agent State Law (Series 63) examinations, among others, and is currently licensed in multiple U.S. states and territories.
Damian Maggio Fraud Allegations and Investor Complaints Explained
FINRA BrokerCheck currently reports two customer disputes involving Damian Maggio: one pending customer arbitration and one settled customer dispute.
Pending FINRA Arbitration – Failure to Supervise
- Type: Customer Dispute – Pending FINRA Arbitration
- Employing Firm at Time of Alleged Conduct: Joseph Stone Capital L.L.C.
- Allegations: Failure to supervise
- Product Type: OTC equity securities
- Alleged Damages: Approximately $2,807,663.24
- Forum: FINRA Dispute Resolution, Docket/Case No. 21-03107
- Date Notice/Process Served: January 12, 2022
- Status: Arbitration pending
According to the BrokerCheck description, Maggio was named in a multi-claimant group arbitration involving Joseph Stone Capital customer accounts that traded in OTC equity securities. The pending statement of claim alleges that the firm, and by extension its supervisory personnel, failed to properly supervise the representatives and accounts at issue. Maggio’s BrokerCheck statement contends that he did not have supervisory responsibility over the registered representatives or the customers’ accounts and that he was named primarily because his name appears on the firm’s Form BD Schedule A as an executive.
These allegations remain unproven and are still being contested in the FINRA arbitration process. No final award or settlement is reported as of the most recent BrokerCheck update.
Settled Customer Dispute – Reg D Private Offering
- Type: Customer Dispute – Civil Litigation (customer-initiated)
- Employing Firm at Time of Alleged Conduct: LH Ross & Company, Inc.
- Allegations: Violations of the Securities Act of 1933 in connection with a Regulation D private offering
- Product Type: “Other” – Reg D private placement
- Alleged Damages: $100,000
- Court: U.S. District Court, Missoula (Case No. CV-04-135-M-DWM)
- Date Complaint Received: August 1, 2004
- Date Process Served: August 24, 2004
- Disposition: Settled on August 18, 2004
- Total Settlement: BrokerCheck notes that the total settlement with all parties exceeded $10,000, and that Maggio personally contributed $9,000.00.
In his BrokerCheck statement, Maggio reports that he was named in the litigation for referring a client to another registered representative who then allegedly solicited the Reg D offering. He states that his name was later removed from the case and that his contribution to the settlement was a business decision to avoid substantial defense costs, asserting that the case was resolved without a finding that he violated securities laws. Investors should be aware, however, that any settlement of a customer dispute is a reportable disclosure event and may indicate litigation or arbitration risk related to the broker’s activities, referrals, or supervision.
Summary of Reported Customer Disputes
- Customer Dispute – Pending FINRA Arbitration (Failure to supervise, Equity-OTC)
- Forum: FINRA Dispute Resolution, Case No. 21-03107
- Alleged damages approximately $2.8 million
- Allegations: Failure to supervise trading in OTC equities at Joseph Stone Capital; multi-claimant group case; Maggio disputes supervisory responsibility.
- Customer Dispute – Settled Civil Litigation (Reg D private placement)
- Court: U.S. District Court, Missoula, Case No. CV-04-135-M-DWM
- Alleged violations of the Securities Act of 1933 tied to a Reg D offering
- Alleged damages $100,000; case settled for more than $10,000 in total, with Maggio contributing $9,000.
Investors considering claims related to stockbroker fraud, failure to supervise, private placements, or speculative OTC equity strategies should understand that these disclosures suggest significant supervision and suitability questions surrounding the accounts and products at issue, even though each matter turns on its own facts and outcomes.
To obtain a copy of Damian Maggio’s FINRA BrokerCheck report, visit this link: visit this link.
Robert Wayne Pearce Is Committed to Recovering Your Investment Losses
FINRA Rule 3110 (Supervision)
FINRA Rule 3110 (Supervision) requires each member firm to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations, and with applicable FINRA rules.”
In the pending arbitration naming Damian Maggio, claimants allege that Joseph Stone Capital and its principals failed to supervise OTC equity trading in a group of customer accounts. As CEO and a principal of the firm, Maggio is alleged to have had supervisory responsibility for the activities of the registered representatives and accounts at issue, even though he denies that he directly oversaw those brokers or customers.
In a typical failure to supervise case under Rule 3110, arbitrators may examine whether:
- The firm had written supervisory procedures tailored to OTC equity trading and high-risk strategies.
- Those procedures were actually implemented, including surveillance for red flags such as excessive trading, concentration in speculative securities, and large realized or unrealized losses.
- Supervisory reviews were documented and escalated appropriately when issues surfaced.
If arbitrators find that the firm’s supervisory system was not reasonably designed or properly enforced, they may conclude that the firm — and in some instances its principals — violated FINRA Rule 3110, which can support liability for customer losses in a FINRA arbitration.
Section 6. Ruling Part 2 – FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade)
FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade) provides that a member firm, “in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.”
Rule 2010 is often pled alongside more specific rules such as Rule 3110. In cases like the pending Maggio arbitration, a failure to maintain and enforce an adequate supervisory system may be alleged to violate not only Rule 3110, but also the broad ethical standards of Rule 2010. For example:
- Allowing brokers to recommend or trade speculative OTC equities without adequate oversight can be characterized as inconsistent with just and equitable principles of trade.
- Ignoring or downplaying red flags in customer accounts may suggest that the firm and its principals did not put the customers’ interests ahead of their own, thereby falling short of the “high standards of commercial honor” required by Rule 2010.
Thus, even where a firm argues that it technically complied with written procedures, arbitrators may still find a violation of Rule 2010 if the overall course of conduct is deemed unfair or abusive toward customers.
FINRA Rule 2111 (Suitability)
FINRA Rule 2111 (Suitability) requires that a broker or firm have “a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer” based on the customer’s investment profile, including risk tolerance, financial situation, investment objectives, and other factors.
Although the pending Maggio arbitration is described primarily as a failure to supervise case, many multi-claimant actions involving OTC equities also assert that the underlying recommendations or trading strategies were unsuitable for the customers involved. In that context, Rule 2111 may come into play in the following ways:
- If the customers were conservative or income-oriented investors, concentrating their accounts in speculative OTC stocks may be alleged to violate the suitability standard.
- Supervisory personnel, including executives listed on Form BD, can be criticized for failing to detect patterns of unsuitable recommendations and halt them before substantial losses occur.
When arbitrators find that recommended strategies in OTC equities were unsuitable under FINRA Rule 2111, they may also conclude that the firm’s supervisory system violated Rule 3110 and that the overall conduct ran afoul of Rule 2010’s requirement to observe high standards of commercial honor.
The Law Offices of Robert Wayne Pearce, P.A. is a nationally recognized securities law firm representing investors in FINRA arbitration and securities fraud cases on a contingency fee basis. Robert Wayne Pearce, the founding attorney, has more than 45 years of experience recovering millions for victims of broker misconduct and investment fraud. He previously defended major brokerage firms and now uses that insight to protect investors nationwide. To discuss your case directly with Mr. Pearce, call (800) 732-2889 or email pearce@rwpearce.com for a free consultation.
