[W]hile serving time in the Autry State Prison (Autry) in Georgia in 2015, and continuing through July 2020, Reese participated in a scheme to defraud victims by telling them they had failed to appear for jury duty and a warrant had been issued for their arrest. To carry out this scheme, inmates used contraband cellular telephones from inside Autry to access internet websites to identify the names, addresses, and telephone numbers of potential fraud victims. Using the cellular telephones, inmates called the victims who name, and number had been obtained and made certain false misrepresentations to the victims. The inmates told the victims that they were law enforcement officials and that the victim had unlawfully failed to appear for jury duty. In addition, the victims were told that because they had failed to appear for jury duty, warrants had been issued for their arrest and the victim had a choice of being arrested on the warrant or pay a fine to have the arrest warrant dismissed.

To make the calls seem real, Reese, along with other inmates, created fictitious voicemail greetings on their contraband cellular telephones used by the inmates, identifying themselves as members of legitimate law enforcement agencies, including the U.S. Marshal Service. For those victims who wanted to pay a fine, the inmates instructed them to purchase pre-paid cash cards and provide the account number of the cash card or the victim could wire money directly into a pre-paid debit card account held by the inmates or one of the co-conspirators. Based on these false representations, the victims electronically transferred money to the inmates because they believe that the funds would be used to pay the fine.

After a victim provided an inmate with the account number of the pre-paid cash card, the inmates then used their contraband cellular telephones to contact co-conspirators, who were not incarcerated, to have those individuals transfer the money from the cash card purchased by the victims to a pre-paid debit card possessed by the co-conspirators. The co-conspirators would then withdraw the victim's money via an automated teller machine or at a retail store.

In August of 2016, two individuals, ages 75 and 78, living in the Western District of Louisiana, became victims of Reese's scheme. The victims believed the callers, who were inmates posing as legitimate law enforcement officers, and followed their instructions to pay them to have the alleged warrants for their arrest for failing to appear for jury duty dismissed. The two victims $9,797.95 to Reese and his co-conspirators.

Equitec Proprietary Markets, LLC ("Equitec" or "the Firm"), a registered broker-dealer, appeals disciplinary action taken against it by the Cboe Exchange, Inc., f/k/a Chicago Board Options Exchange, Inc. ("Cboe"). Cboe found that Equitec violated Rule 15c3-5 under the Securities Exchange Act of 1934 (the "Market Access Rule" or the "Rule") and Cboe Rule 4.2 (which requires adherence to applicable laws) by failing to implement and maintain risk-management controls reasonably designed to prevent the entry of orders that exceeded its capital threshold and by failing to implement written supervisory procedures reasonably designed to ensure compliance with all regulatory requirements. For these violations, Cboe imposed a censure and $50,000 fine. We sustain Cboe's findings of violations and imposition of sanctions. 

In considering potential aggravating or mitigating factors, we find no mitigating factors. We find that aggravating that Equitec's violations were serious and extensive. The Market Access Rule was specifically designed to protect against "systemic risk" that "could potentially expose a broker or dealer to enormous financial burdens and disrupt the markets." Equitec's numerous deficiencies in its WSPs and its complete exclusion of executed trades for purposes of its capital threshold exposed itself and potentially the market to just such systemic risks. 

Further aggravating is Equitec's disciplinary history with respect to WSPs. In 2005, Equitec settled with the Pacific Stock Exchange by paying a $2,000 fine after that exchange alleged that Equitec failing to have adequate WSPs. In 2007, Equitec settled with the American Stock Exchange by paying a $90,000 fine after the exchange alleged that Equitec failed to maintain adequate supervisory systems and WSPs. And in 2012, Cboe issued a letter of caution against Equitec based on deficiencies in the Firm's WSPs similar to those at issue here, such as failing to specify how Equitec determined credit and capital thresholds, failing to specify the manner by which Equitec would prevent the entry of orders for securities from traders who were restricted from trading those securities, and failing to specify that Equitec's financial and riskmanagement controls were under Equitec's direct and exclusive control. Under these circumstances, we find that the $50,000 fine is remedial and not excessive or oppressive. 

From Stephen A. Kohn, Candidate for 2022 FINRA Small Firm Governor:

THE BULLIES ARE OUT TO GET US . . . And they're doing a good job of it!

I've been in this business for a long, long time; just under four decades. With the exception of a few months at a wire-house, I've always been a small firm guy. And, in all that time, one would think things would change, get better, or at least, stay the same.  But the mantra has NEVER changed, "GET RID OF THE SMALL FIRMS."

And, between the large firms, FINRA and the SEC, the bullies are unrelenting and keep whittling away at our sisters and brothers.

So, where are we? The small firm community is on its death bed.  Biased regulators are trying to engineer us out of existence through overblown rulebooks and biased regulation.  Given that FINRA is a membership organization, one would have hoped for some energetic opposition to the inevitable decline of some of the 90% of FINRA's membership -- look it up, the so-called FINRA Small Firms account for 90%-plus, and dwindling of the total number of member firms.  Where is the voice of the FINRA Board of Governors?  Sadly, it is a whisper if anything at all.  The Board seems beholding to the anti-Small Firm agenda of large firms, FINRA and the SEC.  Almost no Governor appears to have the inclination or the guts to take a stand that offers some relief to the little guys.

I have served you before and now, I need to get back on the Board of Governors, to again be your voice and to finish my work.

I am asking for your petition.  Get me on the ballot in this upcoming BOG election.

I make no promises to change what's been done.

My goal is to stop things from getting worse!

Please click the PandaDoc link below and sign my petition, get me on the ballot and back on the BOG to work for our common survival. 

https://eform.pandadoc.com/?eform=df558958-493a-4ce0-85f4-5e0ed39c1778

Let me be your voice.

Stephen Kohn 

(303) 880-4304  Cell Phone

sakohn7@gmail.com

Stephen Kohn has been employed in the financial services industry since 1984. In 1996, he founded FINRA member firm Stephen A. Kohn & Associates, Ltd. ("SAKL")  On January 2, 2020, he passed ownership of SAKL to DMK Advisor Group, Inc. ("DMK"), still a small, Independent broker/dealer, catering to the needs of forty-one independent representatives and their clients, with office locations in five states, registered in forty-one and Puerto Rico.  

 

Stephen holds Series 7, 24, 53, 63, 72, 73, 79 and 99 registrations. He has the honor of having been elected to the FINRA Board of Governors in 2017, representing the Small Broker/Dealer Community.  He was also twice elected to the National Adjudicatory Council ("NAC") in 2009 and 2014. He serves as an Industry Arbitrator and has been elected to the District 3 Committee. 

 

Stephen graduated from C.W. Post College in 1964 with a BA degree. He has the distinction of having served in the United States Coast Guard.

 

Well known to those in the NASD and now FINRA small-firm community as a passionate and persistent advocate for small broker/dealers, who comprise more than 90% of FINRA membership, Stephen continues to speak out on behalf of his industry constituents and colleagues. He intends to remain active in the FINRA reform movement and urges all like-minded industry participants to reach out to him in full confidence concerning any and all matters.