FINRA

SPEARMAN WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT HE WAS REQUIRED TO SELL A CUSTOMER'S HOLDINGS BECAUSE OF MARGIN REQUIREMENTS. THE COMPLAINT ALLEGES THAT SPEARMAN SOLD SHARES FOR SEVERAL HOURS THAT DAY OUT OF HIS PROPRIETARY ACCOUNT AND SPEARMAN KNEW THAT THE PRICE THE CUSTOMER WAS GIVEN DID NOT REFLECT THE MARKET PRICE. BY GIVING THE CUSTOMER LESS THAN THE MARKET PRICE AND LESS THAN THE AMOUNT FOR WHICH HE SOLD THE SHARES, SPEARMAN MADE A $239,772 PROFIT, EXCLUDING THE $18,327 COMMISSION, AT THE EXPENSE OF THE CUSTOMER. SPEARMAN DID NOT DISCLOSE TO THE CUSTOMER HOW HE HANDLED THE TRADES AND THE PROFIT HE MADE ON THE TRADES. ON A LATER DATE, SPEARMAN SOLD SHARES OUT OF A FIRM ACCOUNT TO REDUCE THE CUSTOMER'S DEBIT BALANCE. HE DID NOT SELL THE SHARES DIRECTLY OUT OF THE FIRM ACCOUNT. INSTEAD HE BOUGHT SHARES IN ONE OF HIS PROPRIETARY ACCOUNTS AND KNEW OR WAS RECKLESS IN NOT KNOWING THAT PRICE WAS WELL BELOW THE MARKET PRICE. BY GIVING THE CUSTOMER AN UNFAIR PRICE, WHICH WAS SIGNIFICANTLY LESS THAN THE MARKET PRICE, AND SIGNIFICANTLY LESS THAN THE AMOUNT FOR WHICH HE SOLD THE SHARES, SPEARMAN MADE A $45,771 PROFIT, AT THE EXPENSE OF THE CUSTOMER. SPEARMAN DID NOT DISCLOSE TO THE CUSTOMER HOW HE HANDLED THE TRADES AND THE PROFIT HE MADE ON THE TRADES AND HIS FAILURE TO DISCLOSE HOW HE HANDLED THE TRADES AND THE PROFITS HE MADE WAS INTENTIONAL, OR AT A MINIMUM, RECKLESS. THE FACTS THAT SPEARMAN FAILED TO DISCLOSE TO THE CUSTOMER WERE MATERIAL AND HE HAD A DUTY TO DISCLOSE THOSE FACTS. THE COMPLAINT ALSO ALLEGES THAT SPEARMAN EXECUTED CUSTOMER ORDERS FOR AN EXCHANGE TRADED SECURITY BY SELLING TO OR BUYING FROM THE STREET IN HIS ACCOUNT AND COMPLETING THE TRADE WITH THE CUSTOMER FROM THAT ACCOUNT AT A PRICE THAT GAVE HIM A PROFIT. IN EACH SITUATION, SPEARMAN DID NOT DISCLOSE ANY OF THE MARKUPS OR MARKDOWNS TO HIS CUSTOMER OR THE FIRM. SPEARMAN WAS NOT A MARKET MAKER IN THE SECURITIES BEING TRADED, AND THE TRADES WERE CONTEMPORANEOUS AND DESIGNED TO BE OFFSETTING. AS A RESULT OF HIS CONDUCT, SPEARMAN WILLFULLY VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULES 10B-5 AND 10B-10 THEREUNDER.

Decision & Order of Offer of Settlement

Bar (Permanent)

All Capacities

Indefinite

1/13/2015

Disgorgement

$66,771.00

WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, SPEARMAN CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT HE LIQUIDATED A POSITION HELD BY A FIRM CUSTOMER TO MEET MARGIN REQUIREMENTS, BUT INSTEAD OF SELLING THE SHARES TO THE MARKET AND MAXIMIZING THE RETURN TO HIS CUSTOMER, SPEARMAN BOUGHT THE SHARES INTO HIS PROPRIETARY ACCOUNT AND SOLD TO THE STREET ON THE SAME DAY. THE FINDINGS STATED THAT SPEARMAN GAVE THE CUSTOMER A PRICE NEAR THE MARKET LOW AND FAILED TO INFORM THE CUSTOMER HOW THE TRADES WERE DONE AND THE BASIS FOR THE PRICING. BY THESE ACTIONS, SPEARMAN MADE A PROFIT OF APPROXIMATELY $21,000, EXCLUDING THE $18,327 COMMISSION, AT THE EXPENSE OF THE CUSTOMER. THE PROFIT WAS NOT DISCLOSED TO THE CUSTOMER. SPEARMAN KNEW OR WAS RECKLESS IN NOT KNOWING THAT PRICE WAS WELL BELOW THE MARKET PRICE. THE CUSTOMER'S PRINCIPALS LATER DEPOSITED STOCK WITH THE FIRM, SOME OF WHICH WAS SOLD TO COVER THE MARGIN DEBIT. SPEARMAN HAD COMPLETE DISCRETION OVER WHEN AND HOW MUCH OF THE STOCK TO SELL. ON THE LAST SALE OF THE SHARES, SPEARMAN AGAIN TRADED IN A WAY TO BENEFIT HIMSELF AT THE EXPENSE OF THE CUSTOMER. RATHER THAN SELL THE SHARES INTO THE MARKET, HE BOUGHT A BLOCK OF THE SHARES INTO ONE OF HIS PROPRIETARY ACCOUNTS AT A PRICE THAT WAS WELL BELOW THE MARKET PRICE FOR THE DAY AND THEN SOLD THE SHARES FOR A PROFIT OF $45,771, AT THE EXPENSE OF THE CUSTOMER. SPEARMAN AGAIN FAILED TO INFORM THE CUSTOMER HOW THE TRADES WERE DONE AND THE BASIS FOR THE PRICING, AND DID NOT DISCLOSE THE PROFIT TO THE CUSTOMER. THE FACTS THAT SPEARMAN FAILED TO DISCLOSE TO THE CUSTOMER WERE MATERIAL AND HE HAD A DUTY TO DISCLOSE THOSE FACTS. THE FINDINGS ALSO STATED THAT SPEARMAN PERIODICALLY EXECUTED CUSTOMER SALE ORDERS BY BUYING THE POSITION IN HIS PROPRIETARY ACCOUNT AT THE MARKET PRICE, HOLDING IT AND SELLING IT TO THE MARKET LATER THE SAME DAY OR THE NEXT DAY. FOR CUSTOMER PURCHASES, SPEARMAN PERIODICALLY PURCHASED FROM THE STREET AT MARKET PRICE AND THEN SOLD TO CUSTOMERS FROM HIS PROPRIETARY ACCOUNTS. CUSTOMERS WERE CHARGED THE ALLEGED MARKET PRICE AT THE TIME WHEN THE ORDER WAS PLACED AND ALSO WERE CHARGED A COMMISSION. SPEARMAN DID NOT DISCLOSE TO CUSTOMERS ANY PROFITS MADE IN THOSE SITUATIONS THAT INVOLVED EXCHANGE TRADED SECURITIES AND DID NOT DISCLOSE ANY OF THE MARKUPS OR MARKDOWNS TO HIS CUSTOMER OR FIRM. SPEARMAN WAS NOT A MARKET MAKER IN THE SECURITIES BEING TRADED, AND THE TRADES WERE CONTEMPORANEOUS AND DESIGNED TO BE OFFSETTING. AS A RESULT OF HIS CONDUCT, SPEARMAN WILLFULLY VIOLATED SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULES 10B-5 AND 10B-10.

MR. SEAN SPEARMAN DENIES THE ALLEGATIONS IN THE COMPLAINT AND INTENDS TO VIGOROUSLY DEFEND HIMSELF AND EXPECTS TO BE FULLY VINDICATED ONCE ALL OF THE FACTS ARE KNOWN AND ALL OF THE EVIDENCE IS REVIEWED. MR. SPEARMAN WAS BUYING AND SELLING THE INVOLVED SECURITY DURING THE PERIOD PRIOR TO THE LIQUIDATION. HE STOPPED TRADING 2 HOURS BEFORE THE LIQUIDATIONS TOOK PLACE. THE CUSTOMER TRANSACTIONS WERE BOOKED BY A CLERK AND NOT BY MR. SPEARMAN. THE FIRM AND MR. SPEARMAN MADE IT A PRACTICE TO TRADE STOCKS. THIS WAS THE MODEL FOR THE FIRM AND FOR MR. SPEARMAN. MANY TIMES, MR. SPEARMAN AND/OR THE FIRM WOULD BUY/SELL THE SAME SECURITY THAT CLIENTS BOUGHT/SOLD, WHERE MR. SPEARMAN AND THE FIRM WOULD HOLD THEMSELVES OUT TO PROVIDE LIQUIDITY AND/OR SUPPLY, IN ACCORDANCE WITH THE FIRM'S BUSINESS MODEL.

SOPHISTICATED INVESTOR CLAIMS 16 OF 30 TRADES CONDUCTED BETWEEN APRIL AND SEPTEMBER 2012 IN ONE ACCOUNT WERE UNAUTHORIZED DESPITE RECEIVING CONFIRMATIONS FOR ALL TRADES AND MONTHLY STATEMENTS SHOWING ALL ACCOUNT ACTIVITY. CUSTOMER ORIGINALLY DEMANDED REIMBURSEMENT FOR LOSSES RESULTING FROM THESE TRADES. ALTHOUGH DOZENS OF EMAILS AND PHONE CALLS WERE EXCHANGED WITH CUSTOMER DURING THIS PERIOD THERE WAS NO MENTION OF UNAUTHORIZED TRADING OR ANY IMPROPRIETY UNTIL RECEIVING WRITTEN COMPLAINT IN NOVEMBER 2012 FOLLOWED BY AN ARBITRATION FILING IN DECEMBER 2012.

$437,603.25

$625,000.00

SPEARMAN (AND THE FIRM) FILED ANSWER TO THE ARBITRATION STATEMENT OF CLAIM AND DENY ALL ALLEGATIONS OF UNAUTHORIZED TRADES. CUSTOMER WAS IN CONSTANT CONTACT WITH SPEARMAN AND OTHERS AT THE FIRM WITHOUT MENTIONING ANY IMPROPRIETY UNTIL UP TO 6 MONTHS AFTER ALLEGED UNAUTHORIZED TRADES OCCURRED. CUSTOMER HAD PREVIOUSLY DEMANDED REIMBURSEMENT OF LOSSES ON THE TRANSACTIONS ALLEGED TO BE UNAUTHORIZED. ALL OTHER TRANSACTIONS IN THE ACCOUNT (WITH ONE EXCEPTION) WHICH THE CUSTOMER ACCEPTED AS 'AUTHORIZED' WERE PROFITABLE. OTHER FINAL RESOLUTION: 1. PAY TO CLAIMANT INTEREST ON THE AFOREMENTIONED AWARD OF $437,603.25 AT THE RATE OF 10% PER ANNUM ACCRUING FROM DECEMBER 7, 2012 TO JANUARY 10, 2014. 2. PAY TO CLAIMANT $10,000 IN PUNITIVE DAMAGES AND SANCTIONS. 3. PAY TO CLAIMANT $2,399.08 IN COSTS. 4. PAY TO CLAIMANT $300.00 AS REIMBURSEMENT FOR THE NON-REFUNDABLE PORTION OF THE CLAIMANT'S INITIAL CLAIM FILING FEE. THE FIRM INTENDS TO FILE AN APPEAL AND WILL THUS UPDATE THIS FILING AS SOON AS THE APPEALS PROCESS IS FORMALLY UNDERWAY. AS OF JUNE 19,2014, THE SUPERIOR COURT OF CALIFORNIA IN THE COUNTY OF ORANGE ISSUED JUDGMENT AND DECLARED: "HAVING REVIEWED THE PARTIES' STIPULATION, THE ARBITRATION AWARD IN FINRA CASE NO.12-04191 ENTITLED NEGOTIART OF AMERICA, INC. VS. ASCENDIANT CAPITAL MARKETS, LLC AND SEAN ANTHONY SPEARMAN IS VACATED. JUDGMENT IS HEREBY ENTERED IN FAVOR OF ASCENDIANT CAPITAL MARKETS, LLC AND SEAN ANTHONY SPEARMAN. MR. SPEARMAN DERIVED NO FINANCIAL GAIN FROM THIS ACCOUNT, SINCE HE WAS A SALARIED EMPLOYEE OF THE FIRM AND THIS WAS A "HOUSE" ACCOUNT.