NOTE: Offers of Settlement (OS) and Letters of Acceptance, Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings.

FINANCIAL INDUSTRY REGULATORY AUTHORITY
FINRA
2008
Continuing Education
see the NASD Continuing Education Rule

VISIT WALL STREET'S LEADING ONLINE COMMUNITY
BrokeAndBroker.com

The Firm did not have an adequate email retention system to preserve emails sent or received by registered representatives as required by SEC Rule 17a-4. The Firm failed to fully comply with the Firm Element of FINRA’s Continuing Education requirements in that, acting through an individual, it failed to develop a written training plan and to maintain records documenting the completion of its continuing education program by covered registered persons. 

Tripp and Company, Inc.: Censured; Fined $24,000 (of which $5,000 jt/sev with unnamed individual).

Acting through Ackerman, the Firm 

• allowed a registered representative to act as an unregistered principal of a branch;
• failed to establish, maintain and enforce a supervisory system and written procedures to supervise the activities of registered members to achieve compliance with applicable rules and regulations regarding 
  • markups/markdowns, 
  • commission charges, 
  • municipal securities and private securities transactions, 
  • outside business activities, 
  • Securities and Exchange Commission (SEC) Regulation SP, 
  • sale of private placements, 
  • free-riding and withholding, 
  • advertising and sales literature, and 
  • the Regulatory Element of the Continuing Education Requirement;
• failed to enforce its supervisory system and written procedures regarding the securities activities of a branch office so that the firm failed to provide for supervision of that branch’s registered representatives, particularly with respect to suitability of unregistered securities;
• in connection with its branch office inspections, failed to prepare a written inspection report that included the testing and verification of its policies and procedures regarding the safeguarding of customer funds and securities, validation of customer address changes, transmittal of funds and other areas;
• failed to establish or enforce procedures for a registered principal to review business-related electronic correspondence in one of its branch offices;
• failed to designate and specifically identify to FINRA one or more principals to establish, maintain and enforce a system of supervisory control policies and procedures and, therefore, failed to establish procedures providing for the review and supervision of customer account activity conducted by branch office managers, sales managers or other supervisory persons;
• failed to establish procedures reasonably designed to provide heightened supervision over the activities of each producing manager responsible for generating 20 percent or more of the revenue of the business units supervised by the producing manager’s supervisor;
• in connection with a transaction in which the firm received approximately $350,000 in customer funds to purchase shares of an unregistered stock, the firm failed to 
  • establish and maintain a Special Reserve Bank Account for the Exclusive Benefit of Customers, 
  • prepare computations to determine the amount of funds and/or qualified securities needed to be deposited in the reserve account, and 
  • make the required deposit of funds and/or qualified securities to the account. 
  • accurately post the receipt and payment of customer funds in its general ledger. 
• in connection with a contingent private offering in which it was seeking to raise $60 million as a placement agent, caused the release of public customer funds from escrow before the satisfaction of the contingency, contrary to the terms of the offering. 
• failed to maintain a Checks Received and Forwarded Blotter in a branch office, and that order tickets for equity, corporate bond and municipal securities transactions contained deficiencies;
• failed to file summary and statistical information with FINRA for customer complaints. 

Sloan Securities Corp.: Censured; Fined $65,000

James Curtis Ackerman: Fined $35,000, Suspended 3 months in Principal capacity; Suspended 10 business days in all capacities (suspensions to run concurrently); Ordered to requalify by examination as a general securities principal by passing the Series 24 examination within 60 days of the end of the three-month suspension. If Ackerman fails to pass the examination, he may not perform any functions requiring principal registration until such time as he passes the required examination.

However (and, yes, there is always that qualifier), I still have a nagging feeling or fear that all is not what it seems.  Assuming that FINRA hasn't hyped the facts here (and we know that would never, ever happen), I did quite a double take when I saw that the firm was fined a mere $65,000.  I rubbed my eyes because I thought the fine was $650,000, which made sense to me given the enormity of the violations; but when I saw that there were only three zeroes after the "65" I was astonished.  Then I figured that Mr. Ackerman was going to be barred as a Principal or certainly sat down for a few years.  Gee, imagine my puzzled look when I saw he got three months with a requal for the Series 24 and a mere 10 business days in all capacities.

My research revealed that Sloan has been an NASD/FINRA member since 1987.  I truly do not understand how all of the above just materialized in 2008, out of the blue, to the apparent shock and mystification of regulatory staff.  Moreover, since Mr. Ackerman was apparently suspended in 2005 to 2006 by NASD for one-year as a Compliance Director, you would think that his activities and that of his firm would have been subjected to all the more scrutiny during examinations since then. 

Ultimately, Sloan is the single most illustrative case of all that I see wrong with how Wall Street is regulated. I find it hard to believe that the good old FINRA examiners just happened to stroll into Sloan one fine day and, voila, the firm was in total disarray.  A compliance meltdown of this magnitude does not occur all at once. So many things had to be wrong from day one, so many things had to take months to go wrong, that you have to wonder why FINRA just didn't catch any of this earlier.  And if the best that FINRA can do for our industry and the investing public is to read the toe tag on this corpse of a member firm, then we're not really talking so much about pre-emptive regulation as post-mortems. 

Acting through Butler, the Firm permitted him to perform duties requiring registration while his registration status with FINRA was inactive due to his failure to complete the Regulatory Element of FINRA’s continuing education requirement. Butler continued to perform these duties when he knew his registration status was inactive. 

Cascadia Capital, LLC: Censured; Fined $10,000 jt/sev with Butler

Michael Joseph Butler (Principal): Censured; Fined $10,000 jt/sev with Firm; Fined additional $15,000

Kozub completed a Firm Element Continuing Education test on another registered representative’s behalf in violation of NASD rules. 

Katherine Patricia Kozub: Fined $5,000; Suspended 30 days

The Firm allowed registered representatives to conduct a securities business while their registrations were deemed inactive due to their failure to timely complete the Regulatory Element of the Continuing Education requirement. 

Kershner Trading Group, LLC: Censured; Fined $10,000

The Firm failed to retain instant messages in violation of Securities and Exchange Commission (SEC) Rule 17a-4, and failed to maintain records documenting the content of its continuing education programs (firm element) and covered registered persons’ completion of the programs. 

Seslia Securities: Censured; Fined $17,500

FINRA fined and suspended 16 current and former registered representatives of State Farm VP Management Corp. of Bloomington, IL (which is engaged in the business of selling mutual funds and variable products) for misconduct involving FINRA's Continuing Education requirements for registered representatives.

The representatives engaged in this misconduct without any authorization from State Farm. State Farm reported the misconduct to FINRA after uncovering test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provided FINRA with its findings.The Continuing Education requirements consist of a Regulatory Element and a Firm Element. The Regulatory Element requires all registered persons to take computer-based training, devoted to industry rules and regulations, on the second anniversary of their initial securities registration and every three years thereafter. The Firm Element requires firms to administer appropriate training to their registered persons who have direct contact with customers, and to the registered persons' immediate supervisors, on an ongoing basis. The training must cover topics specifically related to their business, such as new products, sales practices, risk disclosure, and new regulatory requirements and concerns.

The 2005 Firm Element designed by State Farm was an internal, computer-based system. Covered representatives were required to complete a two-hour training session and then pass a proficiency test with a minimum score of 80%. In order to access the Firm Element training session and proficiency test, the participant was required to sign on to the system using a user ID and password. The subordinate representatives who took the test for their superiors signed on as the superiors for whom they were taking the test, using the superiors' user IDs and passwords.

One sanctioned representative, a former registered principal of the firm, Rebecca Sappington directed a subordinate to obtain the user IDs and passwords of at least four State Farm registered representatives working in her area, and complete the Firm Element program for these representatives by taking their proficiency tests. When Sappington learned that her directive had not been carried out, she instructed her subordinate to delegate the task to another person, who was an unregistered and newly hired employee of State Farm. This unregistered person then obtained the user IDs and passwords for at least four representatives, logged onto the system and completed the Firm Element program for the representatives by taking their proficiency tests.

In concluding these settlements, the registered representatives neither admitted nor denied the charges, but consented to the entry of FINRA's findings. The individuals agreed to the following sanctions:

Series 26 Principals who directed a subordinate to take their proficiency tests:

• Todd Rindfuss received a $10,000 fine, a six-month suspension as a principal and a 90-day suspension in all capacities. 
• Michael Stansbury received a $10,000 fine, a six-month suspension as a principal and a 90-day suspension in all capacities. 

Series 26 Principal who directed subordinates to take the test for others: 

• Rebecca Sappington received a $10,000 fine, a bar as a principal and a six-month suspension in all capacities 

Series 6 Representatives who directed or allowed a subordinate to take their proficiency tests: 

• Jeffery Coleman received a $5,000 fine and a 60-day suspension. 
• Walter Culbreth received a $5,000 fine and a 60-day suspension. 
• Beverly Lochard received a $5,000 fine and a 60-day suspension. 
• William Nickum received a $5,000 fine and a 60-day suspension. 
• Robert Olive received a $5,000 fine and a 60-day suspension. 
• Valerie Tichy-Drummer received a $5,000 fine and a 60-day suspension. 
• Karen Curtis received a $5,000 fine and a 60 day suspension. 

Series 6 Representatives who completed the proficiency tests for their superiors: 

• Kenneth Capell received a $5,000 fine and a 30-day suspension. 
• Mayka Hardy received a $5,000 fine and a 30-day suspension. 
• Teresa King received a $5,000 fine and a 30-day suspension. 
• Lori Love received a $5,000 fine and a 30-day suspension. 
• Heather Montagne received a $5,000 fine and a 30-day suspension. 
• John Reich received a $5,000 fine and a 30-day suspension.

Watson took notes into a Regulatory Element of Continuing Education exam and looked at them before they were confiscated by an examiner, even though she had acknowledged that it was prohibited prior to the exam. Watson failed to respond to FINRA requests for information.

Fredricka Dale Watson: Barred

Sappington directed individuals under her supervision to complete the computer-based Firm Element Continuing Education program on registered representatives' behalf without any notice to, or authorization from, her member firm . 

Rebecca Rhoden Sappington (Principal): Fined $10,000; Suspended 6 months; Barred in Principal capacity

Doolittle caused his member firm to respond untimely to FINRA requests for information and willfully omitted material information from his Form U4 by failing to timely amend it. Doolittle permitted a registered representative of his member firm to engage in conduct for which registration was required while inactive due to failure to complete regulatory element continuing education. 

Kenneth Mark Doolittle (Principal): Suspended 3 months

Curtis delegated a subordinate in her office to complete the computer-based Firm Element Continuing Education program on registered representatives' behalf. 

Karen Denise Curtis: Fined $5,000; Suspended 60 days.