The Wall Street Legal & Regulatory Feed
Securities industry Commentator by Bill Singer Esq
January 4, 2019
Unstrained Mercy Gently Rains Down After FINRA Bar (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4368/finra-indiana-insurance/
On a rainy evening in 2011, stockbroker and insurance agent Jeffrey A. Schumaker was driving when two young girls ran out in front of his car, and he could not avoid hitting and injuring one of them. Schumaker was sued over the accident and he incurred legal defense costs. After the accident, Schumaker experienced a medical issue and needed to write a substantial check to pay his medical bills -- unfortunately, he had anticipated a substantial commission check would cover his payment. As you may have anticipated, the commission check didn't materialize. Faced with an overdrawn checking account, Schumaker took $8,300 in funds from the homeowner's association where he served as Treasurer. His intent was to repay the funds. In 2014, when the homeowners' association had bills coming due and needed funds, he made a deposit into the association's account of $9,000, which included the $8,300 unauthorized withdrawal and his own dues. Thereafter, Schumaker disclosed to the association his $8,300 misappropriation and how he had repaid it; and then he resigned as Treasurer. Such, then, is the stuff of the prologue for today's blog.
In a FINRA Arbitration Statement of Claim filed in March 2017 and as amended, public customer Claimants asserted violation of industry regulations prohibiting borrowing or
arranging lending from customers; selling away; engagement in outside business
activities; facilitating Ponzi scheme, and forgery. Ultimately, Claimants sought $111,500 in compensatory damages plus interest, fees, and costs, and a declaratory judgment that Respondents had committed fraud.
Respondent IFS Securities did not appear. Respondent Gendlek appeared pro se. Respondent Gendlek and TFS Securities Inc. generally denied the allegations and asserted various affirmative defenses. Respondent TFS file a Crossclaim against Respondent Gendlek asserting apportionment and indemnification.
In May 2017, Claimants withdrew their claims against Respondent IFS Securities based upon having named that party in error.
In January 2018, Claimants informed FINRA that they had settled their claim against Respondent TFS, which, in February 2018, informed FINRA that it had settled its Crossclaim against Gendlek.
The FINRA Arbitration Panel found Respondent Gendlek liable and ordreed him to pay to Claimants $53,200 in compensatory damages.
Bill Singer's Comment: Online FINRA BrokerCheck records as of January 4, 2019, disclose that Gendlek was first registered in 1982, and was registered with TFS from January 2006 to December 2014, and with IFS from January 2015 to July 2016. Under the BrokerCheck heading "Employment Separation After Allegations," IFS disclosed that Gendlek had been "permitted to resign" on July 20, 2016, based upon allegations of purportedly involving a "promissory note" and involving:
Lost or stolen funds/securities. Misrepresentation or misleading information.
Under the BrokerCheck heading "Customer Dispute - Pending," IFS disclosed allegations involving the instant FINRA Arbitration that:
REP SOLD PRIVATE PLACEMENT TO CLIENT UNAUTHORIZED BY FIRM. FIRM UNAWARE OF OUTSIDE ACTIVITY
In the Matter of Francis Joseph Gendlek, Respondent (AWC 2016049989801, February 1, 2018).
https://www.finra.org/sites/default/files/fda_documents/2016049989801%20Francis
%20Joseph%20Gendlek%20CRD%201054226%20AWC%20jm.pdf
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Gendlek submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In accordance with the terms of the AWC, FINRA imposed upon Gendlek a Bar in all capacities from any FINRA member. As set forth in the "Overview" portion of the AWC:%20Joseph%20Gendlek%20CRD%201054226%20AWC%20jm.pdf
Between August 2005 and September 2013 (the "Relevant Period"), Gendlek made material misrepresentations and omissions in connection with the sale of securities in willful violation of Securities Exchange Act Section 10(b), Exchange Act Rule 10b-5, and in violation of NASD Rules 2120 and 2110 and FINRA Rules 2020 and 2010. Gendlek also violated NASD Rule 3040 and FINRA Rule 2010 by participating in private securities transactions without obtaining approval from the Firm during the period January 2006 through September 2013. Finally, from January 2006 to September 2013 Gendlek failed to disclose an outside business activity to the Firm, in violation of NASD Rules 3030 and 2110 and FINRA Rules 3270 and 2010.