Securities Industry Commentator by Bill Singer Esq

In the Matter of Department of Enforcement,Complainant, v. Bernard G. McGee, Respondent (FINRA NAC Decision, Complaint No. 2012034389202 / July 18, 2016)

https://www.finra.org/sites/default/files/NAC_2012034389202_McGee_071816_0.pdf

In barring McGee and affirming $12,325.34 in hearing costs and $1,743.04 in appeal costs, the NAC stated in the "Syllabus" to the NAC Decision:

In connection with a customer's surrender of four variable annuities and purchase of a charitable gift annuity, respondent willfully omitted a material fact, made an unsuitable recommendation, engaged in undisclosed outside business activities, failed to timely update his Form U4, and made misrepresentations on his firm's annual compliance questionnaires. Held, findings affirmed, sanctions affirmed in relevant part.

In the Matter of the Application of Bernard G McGee For Review of Disciplinary Action Taken by FINRA (SEC Opinion, '34 Act Rel. No. 80314; Admin. Proc. File No. 3-17402 / March 27, 2017).

https://www.sec.gov/litigation/opinions/2017/34-80314.pdf

In sustaining FINRA's violations and sanctions, the SEC stated in the "Syallabus" to its Opinion:

Former registered representative of FINRA member firm appeals from FINRA disciplinary action finding that he induced an investor's securities transaction through a material omission, made an unsuitable recommendation to an investor, engaged in undisclosed outside business activities, failed to disclose material information to his firm, and misrepresented information on compliance questionnaires. Held, association's findings of violations and imposition of sanctions are sustained.

Bernard G. McGee, Petitioner, v. Securities and Exchange Commission, Respondent

(Summary Order, United States Court of Appeals for the Second Circuit, 17-1240-ag)

http://brokeandbroker.com/PDF/McGee2CirOrder.pdf

Bernard McGee appealed the final order of the Securities and Exchange Commission, Bernard G. McGee, Exchange Act Rel. No. 80314 (Mar. 27, 2017), sustaining disciplinary action by the Financial Industry Regulatory Authority, Inc. ("FINRA") against him for inducing a transaction and conducting business activities in violation of Section 10(b) of the Securities Exchange Act ("Exchange Act") and FINRA rules. Pointedly, 2Cir admonished that [Ed: footnotes omitted]:

FINRA's Sanction Guidelines recommend consideration of a bar in particularly egregious situations where an associated person engaged in reckless or intentional misrepresentations. We agree with FINRA that aggravating factors demonstrate that McGee's fraudulent omission and unsuitable recommendation were egregious and justify a bar. McGee persuaded CF to liquidate nearly half of her investment holdings and invest those assets with 54Freedom, even though CF incurred nearly $40,000 in various expenses by doing so and McGee knew almost nothing about 54Freedom's financials or operations. As a result of this transaction, CF lost $200,000. McGee, on the other hand, earned $49,264 in compensation from 54Freedom. 

Moreover, even though CF was 71 years old at the time of the transaction, financially unsophisticated, and receiving income of only $1000 a month, McGee chose her to serve as a case study to determine whether 54Freedom's charitable gift annuity program worked. McGee violated his duty as a broker to disclose to CF that he would receive compensation from her investment in Freedom. McGee even attempted to conceal his misconduct during Cadaret's investigation.

[I]n connection with three municipal bond offerings between January 2013 and December 2014, Mario Hinojosa and his wholly-owned municipal advisor, Barcelona Strategies LLC, misrepresented their municipal advisory experience and failed to disclose conflicts of interests to their client, a local school district in South Texas.  While working as a paralegal, Hinojosa set up Barcelona, registered it as an SEC municipal advisor, drafted a marketing brochure about the firm, and circulated the brochure to the school district and other municipalities.  The brochure created the misleading impression that Hinojosa and Barcelona had served as a municipal advisor on numerous municipal bond issuances and failed to disclose that Hinojosa had a financial interest in the school district's offerings.  By virtue of their misrepresentations and omissions, Barcelona and Hinojosa improperly earned hundreds of thousands of dollars in municipal advisory fees. 

• Securities Industry Commentator
• Bill Singer