Securities Industry Commentator by Bill Singer Esq

Iglesias and Arguello required corrupt doctors to prescribe a certain minimum quota of medical goods and services, on average, for each patient. To conceal the quota, Iglesias and Arguello required the doctors to enter into sham "marketing agreements." If the doctor failed to live up to the quota, Iglesias and Arguello would cut off the flow of new patients to the doctor. Attorneys made money from their patients' settlements, and they, too, paid kickbacks to patient brokers for new clients. Medical providers billed insurance and workers' compensation at exorbitant rates-one provider billed nearly $6,000 for a single hot/cold pack for pain.

From January 2012 through March 2017, Summit failed to establish and maintain a supervisory system, and failed to enforce written supervisory procedures ("WSPs"), that were reasonably designed to achieve compliance with FINRA's suitability rule as it pertains to excessive trading.

In addition, from June 2015 through March 2018, Summit failed to establish and maintain a supervisory system, and failed to enforce WSPs, that were reasonably designed to achieve compliance with FINRA's rules concerning registered representatives' creation and dissemination of consolidated reports.

As a result of the foregoing, Summit violated NASD Rule 3010 (for conduct before December 1, 2014), FINRA Rule 3110 (for conduct on or after December 1, 2014), and FINRA 2010.

[D]uring the relevant period, the Firm employed between three and six compliance principals who, according to the Firm's WSPs, were supposed to utilize trade alerts provided by Summit's clearing firms to review registered representatives' trading activity. I lowever, as set forth below, the Firm failed to enforce those procedures. Specifically, during the relevant period, Summit received a number of trade alerts that were relevant to identifying excessive trading, including alerts related to turnover and cost-to-equity ratios in commission-based accounts. However, the Firm did not feed alerts provided by one clearing firm into the trade review blotter used by the compliance principals to review registered representatives' securities recommendations. As a result, during the relevant period, the Firm's compliance principals did not review alerts provided by one of Summit's two clearing firms that related to turnover and cost-to-equity ratios, relying instead on a strictly manual review of the blotter to identify potential excessive trading.

The Firm's manual review of the blotter did not identify that one registered representative in particular, CJ, excessively traded 14 customers' accounts.For example, CJ recommended 267 trades over a three-year period in an account belonging customer JO, a retired woman with a net worth of less than $500,000. CJ's trading caused JO to pay more than $61,000 in commissions over the three-year period and resulted in annualized cost-to-equity ratios in excess of 27%. Likewise, CJ placed 533 trades over a three-year period in an account belonging to customer MP, a retired woman with a net worth of less than $1 million. CJ's trading caused MP to pay more than $171,000 in commissions over the three-year period and resulted in annualized cost-to-equity ratios in excess of 32%. 

For the 14 customers whose accounts were excessively traded, CJ's trading generated more than 150 alerts for potentially excessive turnover rates and cost-to-equity ratios. The Firm received those alerts, but, as discussed above, no one at the Firm reviewed them. Collectively, CJ's excessive trading caused the 14 customers whose accounts he excessively traded to pay $651,405.23 in commissions during the relevant period. The customers suffered realized losses during that period of more than $300,000. . . .

In July 2014, Antypas' customer ("Customer") transferred a REIT, which was then valued at approximately S52,000, to a Transfer on Death Account ("TOD Account") that she held at LPL. 

Throughout the Relevant Period, including during July 2014, Antypas knew that LPL's written compliance manual stated that LPL prohibited registered representatives from being named as beneficiaries on a customer's account. 

In an effort to circumvent LPL's policy, Antypas recommended that the Customer, who was 88 years old, name his wife as the sole beneficiary of the TOD Account. The Customer followed Antypas' recommendation and made Antypas' wife the sole beneficiary of the TOD Account. 

In February 2015, while the same Firm policies remained in effect, Antypas also recommended that the Customer name his wife as the sole beneficiary on an additional variable annuity account that the Customer held at the Finn. The Customer subsequently named Antypas' wife as her beneficiary for this account. The account was valued at approximately $36,000. 

In September 2016, the Firm amended its written compliance manual to identify additional examples of prohibited beneficiary relationships, including "listing as beneficiary another person associated with you (spouse, assistant, etc.) in your place, unless the client is also an immediate family member." 

In a continued effort to circumvent Firm policies, Antypas subsequently recommended that the Customer name his sister, rather than his wife, as the beneficiary for the Customer's TOD Account and variable annuity account. In October 2016, the Customer named Antypas' sister as her beneficiary for both accounts. At the time, the Customer's TOD Account had an approximate value of $61,000 and her variable annuity account had an approximate value of $38,000. 

Antypas did not disclose to the Firm that the Customer named his wife and sister as beneficiaries. 

However, in November 2017, the Firm inquired about the Customer's accounts during a branch audit. The Firm subsequently determined that Antypas had recommended that the Customer name his wife and his sister as beneficiaries. After the Firm communicated with the Customer, the Customer removed Antypas' wife and sister from her beneficiary designations. Therefore, neither they nor Antypas obtained any funds from the Customer's accounts in connection with those designations. 

By virtue of the foregoing, Respondent violated FINRA Rule 2010.

During the Relevant Period, multiple customers of Booth gave him funds totaling at least approximately $1,000,000 to invest on their behalf. Booth, however, deposited the funds into an account he controlled and, instead of using the funds for investment purposes, used them for his own personal use. 

FINRA Rule 2150(a) provides that "[n]o member or person associated with a member shall make improper use of a customer's securities or funds." FINRA Rule 2010 provides that "[a] member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade. " Converting customer funds violates FINRA Rules 2150(a) and 2010. . . .

• Securities Industry Commentator
• Bill Singer