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.

2009

FINANCIAL INDUSTRY REGULATORY AUTHORITY
FINRA
NASD Rules CASES OF NOTE 

VISIT WALL STREET'S LEADING ONLINE COMMUNITY
BrokeAndBroker.com

DEVELOPING ENFORCEMENT TRENDS AS NOTED BY BILL SINGER

OUTSIDE ACCOUNTS
SEE: RULE #3050

BORROWING / LENDING

SEE: RULE #2370

E-COMMUNICATIONS

SEE: Electronic Communication Rules

 PRIVATE PLACEMENTS

Cagan; Stebbins; Gossett; Collier; Russo; Chavez; Kim

Chiappetta; Mispel; Tipton; Wacik; Fisher; Kimbrough; Nord; Roberts; Russell; Kelly;Berkoff; Lacour; Meadows; Byers; Londo; Allen; Boardman; Boeckel; Bonner; Sellers; Alexander; Breeze; Dillon; Hunt; Stadelmann; Ahlert; Brusseau; Crawford; Gold; Kim; LeBlanc; Lee; Spencer Jr.

Weems improperly accepted about $250,000 in gifts from a client of a registered representative for whom she was working, in violation of her member firm’s prohibition of employees accepting gifts that would create the appearance of compromising business judgment and a conflict of interest. Weems did not obtain her member firm’s prior written approval for an exception from the firm’s policy. 

Katherine Eileen Weems:  In light of Weems’ financial status, no monetary sanctions were imposed; Suspended 3 months in all capacities; Agreed to fully and freely cooperate with FINRA’s ongoing investigation, including providing truthful testimony if requested; 

Terry used his member firm’s electronic accounting systems to record deposits, totaling $144,300, into his personal brokerage account, without actually physically depositing any funds into the account and utilized the fictitious balance to trade in securities for his own account. Terry would not have had sufficient funds with which to fund the securities transactions without the deposits. 

Don Edward Terry: Barred

Spencer engaged in a Ponzi scheme over a 10-year period, borrowing $1,897,718 from customers and non-customers by inducing them to sign promissory notes, representing that he would pay 10 percent to 12 percent interest and return the investor’s principal in periods ranging from six months to one year. Spencer misused the funds because he knew he did not have the liquid assets or ongoing income necessary to pay interest and return the principal, and used new investor funds to pay existing investors. In other instances, Spencer automatically renewed the obligation when the promissory notes became due. Spencer’s member firm prohibited loans from customers regardless of the registered representative’s relationship with the customer, unless the registered representative obtained prior written approval. Spencer never requested or received approval from his firm to accept the loans. 

William Walter Spencer Sr.: Barred

Shakoor posted messages to an electronic bulletin board using the email his member firm assigned to him, which identified him to other users as an employee of his member firm. Since the messages discussed securities, identified Shakoor as a firm employee and were disseminated to the public, he was required to obtain a firm principal’s approval but failed to do so. Shakoor failed to disclose material information in posted messages and/or the messages were misleading because they failed to include a sound basis for the securities, and failed to disclose that he held positions in some of the securities for which he made recommendations. Shakoor posted messages that contained claims that were false, exaggerated, unwarranted and/or misleading; and posted messages containing recommendations without providing a reasonable basis, and predictions or projections of future stock.

Anthony Basir Shakoor: Fined $10,000; Suspended 6 months in all capacities

• "Ooops," variety; i.e., "I didn't even realize that my comments involved the securities business but now I see that they were;" or 
• "Can They Do That To Me" variety; i.e., "Are you telling me that FINRA can trample on my First Amendment Rights?"

Richmond created fictitious trade confirmations and used them to support proof of claims filed in class action lawsuits to recoup settlement claims in excess of $85,000 to which he was not entitled by falsely presenting himself as a legitimate class member. 

Jason Read Richmond: Barred

On the other hand, this has what to do with FINRA?  How does this serve as a launching pad for a Bar?  Perhaps there is more to this than what has been publicized -- after all, this was an AWC settlement.  Nonetheless, in this post-Madoff world, one would think that FINRA would have far more on its plate than this.

However, puhleeease, don't tell me I'm defending Richmond or apologizing for him. I'm not. I'm just reminding all of us that FINRA didn't exactly do such a great job regulating some basic frauds and needs to be careful not to divert its attention to these jurisdictionally greyer areas.

Pliner falsified IPO eligibility letters after his clients expressed an interest in participating in IPOs, but could not because their IPO eligibility letters had expired. After speaking with his clients, Pliner re-dated or recompleted eligibility letters from prior years and re-filed the falsified letters, pending the receipt of newly-executed eligibility letters. The findings also stated that, after receiving the new letters from clients, Pliner did not send them to his firm because he had already filed the falsified letters. 

Yishai Zvi Pliner: Fined $5,000; Suspended 30 days

Paul's member firm warned him not to exercise discretion in customers’ variable annuity sub-accounts and required him to sign a warning letter to evidence his understanding of the firm’s policies regarding the use of discretion within customer accounts. Nevertheless, Paul exercised discretion in customers’ accounts without discussing the transactions with the customers. Paul had verbal authority from the customers to exercise discretion but no written permission. The transactions did not result in any fees or charges to the customers nor did the transactions yield any compensation for Paul. 

Michael Keith Paul: Fined $5,000; Suspended 10 business days

Separately, compliments to FINRA for providing a more even-handed statement of facts.  Moreover, given the additional context, we now better understand why Paul received such a relatively light fine and suspension.

Nori denied to NYSE Regulation examiners that the branch office he supervised employed non-registered cold-callers and that they used telemarketing scripts when, in fact, there were interns at the branch office engaged in those activities. In an attempt to obfuscate the facts and mislead the examiners, Nori instructed his staff at the branch office that, if asked, the employees were to tell the examiners that there were no approved interns employed at the branch office. While either possessing personal knowledge to the contrary or after learning information to the contrary, Nori failed to fully and accurately disclose to the examiners that his member firm employed non-registered cold-callers at a branch office.

John Christopher Nori: Fined $5,000; Suspended 3 months in all capacities; Concurrently Suspended 6 months in any Supervisory capacity only; Required to Requalify as a Series 9 and 10 prior to beginning any supervisory position following his suspensions.

Lee borrowed $1,500 from a customer contrary to his member firm’s compliance manual, which prohibited representatives from borrowing money from customers. Lee failed to respond to FINRA requests for information. 

Stephen Scott Lee: Barred

LeBlanc borrowed $20,000 from a customer, signed a promissory note without prior written notice to his member firm and without obtaining pre-approval from the firm’s chief executive officer. LeBlanc never provided any notice, orally or in writing, to the firm concerning his borrowing arrangement with the customer and never complied with his payment obligations under the promissory note. LeBlanc falsely answered “no” on an annual firm certification form regarding borrowing money from a customer. 

JerryWayne LeBlanc Jr: Fined $5,000; Suspended 13 months in all capacities

King willfully failed to amend her Uniform Application for Securities Industry Registration or Transfer (Form U4) with material information, and failed to fully and timely respond to FINRA requests for information and documents. 

Valerie Elaine King: Fined $5,000; Suspended two concurrent 2-year terms in all capacities

Kim borrowed money from a customer without his member firm’s knowledge or permission even though he had signed a firm compliance agreement in which he specifically agreed not to borrow money or securities from a client. Kim failed to disclose that he had an outside brokerage account to his member firm, made false representations to the other firm and failed to disclose his employment with a member firm. Kim failed to respond to FINRA requests for information.

Jung Han Kim aka Jay Kim: Barred (sanction based upon Kim's failure to respond to FINRA requests for information). 

Impellizeri omitted material information regarding OTCBB securities. Impellizeri omitted from his disclosures to the customers the potentially lucrative benefits that could accrue to his member firm from his sale of the securities because of the firm’s potential consulting arrangements with the issuers and positions in their stock. 

NAC imposed sanctions:
Neal Anthony Impellizeri: Fined $25,000; Ordered to pay $7,929 in restitution to customers; Suspended 6 months in all capacities

What's missing from the FINRA discussion is a very clear and concise statement NOT merely that the NAC imposed the sanctions as published BUT that the NAC significantly modified both the OHO's findings and sanctions as against Impellizeri.  However, since I am a well known critic of FINRA and some may acccuse me of overstating the issue, let me not add my own words but simply let the NAC Decision speak to the issue.

 In the Matter of the Department of Member Regulation v. Steven Richard Jaloza et al. (July 28, 2009) (http://www.finra.org/web/groups/industry/@ip/@enf/@adj/documents/nacdecisions/p119659.pdf

At Page 1 of the NAC Decision:

Hearing Panel found that two respondents engaged in fraudulent sales practices involving OTC Bulletin Board securities and all respondents violated the Recommendation Rule by recommending purchases of OTC Bulletin Board securities without reviewing or ensuring that their firm reviewed materials necessary to provide a reasonable basis for making the recommendations. Held, findings of violations of the Recommendation Rule reversed and dismissed; findings of fraud affirmed in part and reversed in part; sanctions vacated in part and modified in part.

At Page 23 of the NAC Decision:

The Hearing Panel barred each respondent and assessed $8,770 in costs, jointly and severally. In light of our dismissal of findings of violation as to Jaloza and Gimeli, we eliminate all sanctions imposed on them. In light of our dismissal of some of the findings as to Impellizeri, we reduce the bar imposed by the Hearing Panel to a six-month suspension, $25,000 fine, and order to pay restitution of $7,929 to customers J & CH. We also affirm the imposition of one third of the Hearing Panel's costs ($2,923) on Impellizeri and impose no appeal costs.25

At Page 24 of the NAC Decision:

We next turn to the customers' and Impellizeri's testimony regarding their pre-hearing conversations. TA did not testifY, and his affidavit does not address his pre-hearing conversations with Impellizeri. JW testified that Impellizeri contacted him and suggested that, rather than pay extensive legal fees, he would "just as soon" reimburse JW for his losses. JW believed that Impellizeri's statement implied that, if JW did not testifY at the hearing, Impellizeri may be willing to reimburse JW's losses. CH testified that Impellizeri left a telephone message encouraging her to talk to him. She could not recall if Impellizeri encouraged them not to attend the hearing. CH and Impellizeri never spoke before the hearing because she did not return his call. Impellizeri admitted that he attempted to contact JW, CH, TA and other clients to whom Market Regulation had talked. He denied that he tried to persuade any of them not to attend the Hearing Panel hearing. He stated that several customers had told him that Market Regulation staff had harassed them, and he wanted his clients to understand that FINRA was not a government agency and could not force them to testify against him.

Holtrey failed to adequately supervise a registered representative who misappropriated $90,000 from customers. Holtrey failed to detect and follow up on red flags regarding the registered representative’s business with his customers, including a failure to take appropriate action as required by his member firm’s supervisory procedures to review weekly sales blotters. After receiving telephone calls from a customer and her financial advisor at another firm raising concerns about the registered representative’s activities, Holtrey failed to conduct any follow-up, bring the complaint to his member firm’s attention or initiate any process related to the complaint. 

Ronald Eugene Holtrey: Fined $10,000; Suspended 6 months in Supervisory Capacity only; Required to requalify as a principal by examination before again acting in a principal or supervisory capacity

Associates Person Goldrich took a typed list of securities-related definitions and formulas that she had created into the testing area for her Series 7 examination in violation of FINRA’s Test Center Rules of Conduct. 

Sarah Rachel Goldrich: Fined $5,000; Suspended 2 years in all capacities

Gold borrowed $44,043 from a member firm’s customer when the firm’s compliance manual generally prohibited representatives from borrowing money from customers unless the customer was an immediate family member, a registered member of the same broker dealer or a financial institution. The customer was not a “permitted” borrower. 

Alan Howard Gold: Fined $5,000; Suspended 4 months in all capacities

Gerrior fabricated a letter purportedly from his employer insurance company that falsely represented the date he commenced working as an insurance agent, and submitted the fabricated letter to the Massachusetts Division of Insurance to support his argument that he had been licensed by his member firm before a date that would have required him to complete the prescribed continuing education. 

Raymond Paul Gerrior Jr.: Fined $10,000; Suspended 18 months in all capacities

Respondent 

• raised over $1.5 million from investors through offers and sales of limited partnership interests in a hedge fund, and made numerous misrepresentations in connection with the offers and sales that were inconsistent with the private placement memorandum (PPM); 
• used over $1.3 million of the funds raised to invest in promissory notes issued by private companies in which he had a controlling interest, and made misrepresentations regarding 
  • the fund’s investment strategy, 
  • the concentration of investment funds in particular investments; 
  • the use of funds, and 
  • the amount of management fees and other expenses charged to the fund 
• omitted to timely disclose material facts including that he exercised sole discretion over the fund’s operations;
• misused customer funds received in connection with the fund offering by obtaining debit cards linked to accounts and utilized the cards to pay for personal and non-business related expenses;
• caused funds from the various accounts to be transferred to his personal brokerage account and caused monthly payments for non-business related expenses to be drafted from one of the accounts; and
• failed to properly supervise the activities of a registered representative for whom he had supervisory responsibility, and failed to review the representative’s email correspondence. 

Through his member firm, Respondent conducted an unregistered offering of the securities of an entity for which there was no available exemption due primarily to the offering being conducted pursuant to a general solicitation, and failed to timely disclose to investors that the firm was under common control with the issuer, in that he owned both entities. 

Respondent: Barred

Eller made unsuitable recommendations to his customers to buy closed end funds (CEFs) purchased in an initial public offering (IPO) and sell them in the short term without fully understand the pricing of CEFs and the risks and rewards of the investments. The findings stated that Eller’s recommendations contributed to his customers losing approximately $97,000. T

Gregory Alan Eller: Fined $10,000; Suspended 15 business days in all capacities

Derby and Mullins verbally communicated a guarantee against loss to an institutional investor in connection with the sale of Collateralized Debt Obligation (CDO) securities. 

Dan Alexander Derby: Fined $10,000 (must be paid either immediately upon his reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier); Suspended 30 days in all capacities.

Jeffry Alan Mullins:Fined $10,000; Suspended 30 days in all capacities.

Del Toro recommended and effected securities purchases to a customer that were unsuitable in light of the customer’s age and financial condition, and received $76,650 in commissions from the investment. Del Toro engaged in private securities transactions and failed to provide written notice to his member firms describing in detail the proposed transactions, his role therein and stating whether he had received, or would receive, selling compensation in connection with the transactions. Del Toro guaranteed the customer in writing against loss. 

Sergio M. Del Toro: Barred

Currier acted in a principal capacity, including supervising brokers and reviewing trades, without having requalified to act in that capacity as required by the terms of a Letter of Acceptance,Waiver and Consent. 

James Sylvester Currier: Fined $5,000; Suspended 6 months in all capacities; Suspended 2 years in Principal Capacity only

Leonard & Company (CRD #36527, Troy, Michigan) and James Sylvester Currier (CRD #2070654, Registered Principal, Bloomfield Hills, Michigan) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $40,000. Currier was fined $5,000, suspended for 10 business days in a principal capacity, and required to re-qualify as a principal by taking and passing the Series 24 examination before undertaking activities in that capacity. . .

Given those facts, I'd say that Currier is a pretty lucky fellow to only have been hit with a 6/m all capacities suspension and anything less than a Bar as a Principal.  Must have had one damn good lawyer.

Courter-Jann backdated her firm’s Annual Compliance and Supervision Certification, causing a record and document that her member firm was required to make and preserve to be inaccurate. Courter- Jann provided the certification to FINRA without disclosing that she had backdated it and/or that the date shown on it was not the date when she had signed it. 

Suzanne Kay Courter-Jann: Fined $7,500; Suspended 30 days in Principal capacity only

Chavez failed to disclose to his member firm that he opened and maintained a brokerage account at another firm, and failed to disclose to the other firm that he was a registered representative with a member firm. Chavez made material misrepresentations to his member firm about his outside business activity and made material misrepresentations to both firms regarding his outside securities account. Chavez participated in firm audits and compliance questionnaires and falsely reported that he did not participate in any outside business activities. Chavez engaged in outside business activities without providing notice to his member firm and failed to appear for FINRA on-the-record interviews. 

Miguel Alberto Chavez: Barred

Carpenter was aware of and understood his member firm’s policies and procedures relating to personal use of the corporate credit card, but, nevertheless, used his corporate credit card to pay for personal expenses and for his personal use, charging a total of $9,338.48 in personal expenses to the card. 

Kenneth Mark Carpenter: Barred

However, these cases involving RRs misusing corporate expense allocations or credit cards bother me because they always seem so one-sided against the little guys.

Let me throw this out for purposes of making the point.  My recollection is that former Merrill Lynch & Co. Chief Executive Officer John Thain, left that firm in the wake of massive losses. However, I also recall that Thain apologized for incurring corporate expenses of $1,200,000 to renovate his office. 

Help me wrestle with the differences in these cases. Carpenter helped himself to some $9,000 from his firm for personal use and Thain spent $1.2 million to renovate his office.  The reason one gets charged but not the other is what?  As best I understand the tortured explanations, Carpenter engaged in what many call a "theft" but Thain's apparent misuse of corporate funds is what many call a "perk."  Ah...sure, that's it. Hmmm...you ever wonder if such crafty wordsmithing may have gotten us into this Great Recession to begin with?

Browne knowingly or recklessly employed devices, schemes or artifices to defraud; made untrue statements of a material fact or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, concerning a Collateralized Mortgage Obligation (CMO) Program and CMO investments; or engaged in acts, practices or courses of business which operated, or would operate, as a fraud or deceit upon his customers. Browne effected transactions in, or induced the purchase or sale of, securities by means of any manipulative, deceptive or other fraudulent device or contrivance. Browne intentionally or recklessly made misrepresentations of material facts and omitted to disclose material facts to customers in connection with their CMO investments. Browne recommended risky and illiquid CMO positions to customers without investigating and understanding the products; Browne lacked reasonable grounds to believe that CMOs were suitable for his customers based on their disclosed investment experience, investment objectives, financial situation and needs. Browne exercised discretionary authority in customer accounts without his customers’ prior written authorization and his firm’s prior written acceptance of the accounts as discretionary.

Kevin Michael Browne: In light of Browne's financial status no fine was imposed; Suspended 1 year in all capacities

Bartley's and Donaldson's member firm entered into a “Selling Agreement” with a company to serve as a selling agent for the company’s offering and sold the unregistered offering pursuant to an exemption from SEC registration pursuant to Regulation D. Acting on the firm’s behalf, Bartley and Donaldson sold interests in the company’s offering to investors with whom neither they nor the firm had any pre-existing relationship prior to the time that they contacted them relating to a potential investment in the offering company, thus engaging in a general solicitation with respect to the offering. Bartley sent a document to prospective investors relating to the offering, which was not fair and balance, omitted material risks relating to the offering, and she failed to obtain approval from a firm principal prior to sending the document to prospective investors. 

Linda Jo Bartley: Fined $15,000; Suspended 2 months in all capacities

William Arthur Donaldson: Fined $5,000; Suspended 1 month in all capacities

See Gallamore for similar General Solicitation issue this month

Barris forged a customer’s signature and initials on variable annuity applications and related documents. Barris directed customers, who received an unauthorized electronic deposit of $11,280 into their bank account from the transfer agent of Barris’ member firm, to write a personal check payable to him for $11,280, and he would return the funds to the transfer agent; instead, Barris misappropriated the funds for his own use. 

Kerry Dexter Barris: Barred

Anderson forged a customer’s signature and initials to his member firm’s documents to facilitate a variable annuity application. Anderson failed to respond to FINRA requests for information. 

Dana Reece Anderson: Censured; Barred

The firm failed to 

• establish and implement policies and procedures reasonably designed to detect and cause the reporting of suspicious customer activity; 
• detect, investigate and conduct due diligence when red flags associated with suspicious activity were present; 
• file Suspicious Activity Reports (SARS) when red flags associated with suspicious activity were present; 
• follow its written supervisory procedures, in that it failed to conduct appropriate risk-based due diligence for correspondent accounts of foreign financial institutions customers owned, and failed to implement adequate supervisory procedures to monitor the suspicious activity in those accounts;
• perform AML customer identification reviews for customers, as required by its procedures, which would have revealed that several accounts appeared to be shell vehicles for possible securities fraud; 
• file SARS on individuals possibly engaged in insider trading; and
• adequately test its AML compliance program and, during a two-year period, failed to conduct or document AML training. 

The Firm paid transaction-related compensation to non-registered foreign finders who did not meet the requirements for compensation; failed to provide documents to its customers that disclosed the compensation being paid to foreign finders, and the customers’ confirmation statements failed to indicate that a referral or finder’s fee was being paid. The foreign finder signed account documents and no one from the firm signed the documents accepting the accounts which contained discrepancies and were incomplete. Moreover, the Firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with rules relating to its foreign finders and foreign associates business.

The Firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with FINRA’s advertising rules resulting in firm violations with its Web site and advertisements. 

Synergy Investment Group LLC: Censured; Fined $75,000

Note that in addition to the by now somewhat standard SAR allegations in Synergy (that comment is not intended to diminish or downplay the importance of monitoring such activity but to merely note that these lapses are becoming far too common), we see the second foreign finders' fee payment citation this month.  See Bear Stearns/Fourcade for another example.

Let me take this opportunity to expand a bit on this issue.

Under FINRA/NASD Member and Registration Rule 1060: Persons Exempt from Registration, note the following

(b) Member firms, and persons associated with a member, may pay to nonregistered foreign persons transaction-related compensation based upon the business of customers they direct to member firms if the following conditions are met:

(1) the member firm has assured itself that the nonregistered foreign person who will receive the compensation (the "finder") is not required to register in the U.S. as a broker/dealer nor is subject to a disqualification as defined in Article III, Section 4 of the Association's By-Laws, and has further assured itself that the compensation arrangement does not violate applicable foreign law;

(2) the finders are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad;

(3) the customers are foreign nationals (not U.S. citizens) or foreign entities domiciled abroad transacting business in either foreign or U.S. securities;

(4) customers receive a descriptive document, similar to that required by Rule 206(4)-3(b) of the Investment Advisers Act of 1940, that discloses what compensation is being paid to finders;

(5) customers provide written acknowledgment to the member firm of the existence of the compensation arrangement and that such acknowledgment is retained and made available for inspection by the Association;

(6) records reflecting payments to finders are maintained on the member firm's books and actual agreements between the member firm and persons compensated are available for inspection by the Association; and

(7) the confirmation of each transaction indicates that a referral or finders fee is being paid pursuant to an agreement.

The Firm maintained the registrations for individuals employed by or affiliated with hedge funds that were firm customers and that executed trades through the firm but who were not active in the firm’s investment banking or securities business, and did not function otherwise as registered representatives. The firm failed to establish, maintain and enforce an adequate supervisory system and adequate written supervisory procedures reasonably designed to achieve compliance with FINRA rules to prevent the firm from maintaining the registration of any registered representative who was not actively involved in the firm’s investment banking or securities business and not functioning as a firm representative. 

Pali Capital, Inc.: Censured; Fined $25,000

The Firm failed to conduct searches of firm records with respect to information requests from the Financial Crimes Enforcement Network. 

The Firm failed to 

• establish and implement policies, procedures and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and implementing regulations thereunder, and
• make and keep adequate written reports of an annual inspection and review of its Office of Supervisory Jurisdiction. 

The Firm's AML compliance officer was responsible for implementing and monitoring the day-to-day operations and internal controls of the firm’s AML compliance program and, for about two years, failed to include internal controls reasonably designed to achieve compliance with implementing regulations of the Bank Secrecy Act. 

HP Securities, Inc.: Censured; Fined 10,000 ($5,000 jt/several with unnamed party); must certify to FINRA, in writing, every three months, for one year, that it has complied with its obligations under 31 CFR Part 103.100(b)(2)(i)

The Firm 

• acted as the placement agent for a contingency offering of securities:
  • failed to satisfy the minimum contingency of the offering by the closing date, 
  • failed to terminate the offering and return investor funds,
  • extended the offering period; and raised additional funds, but failed to send written reconfirmation offers to investors regarding the extension and material updates prior to the closing date, and
  • failed to establish a proper escrow account in connection with the offering and directed a premature release of investor funds from the escrow account prior to satisfying the offering contingency requirement; 
• made improper payments to nonregistered foreign entities for referrals of customers: 
  • one customer was not a foreign entity domiciled abroad, 
  • the firm did not obtain written acknowledgment of the existence of the compensation arrangement, and 
  • the firm failed to provide a descriptive document disclosing what compensation was being paid to the nonregistered foreign entities;
• failed to implement its anti-money laundering (AML) compliance program, in that it failed to monitor transactions for red flags. 
• failed to preserve email correspondence relating to its securities business for at least three years. 
• failed to timely forward an investor’s check payment for an offering to the escrow account and, as a result, the firm held customer funds while conducting a securities business and became subject to a net capital requirement that it did not satisfy. 

CP Capital Securities, Inc.: Censured; Fined $21,500

A gold star to FINRA for this one.

The Firm failed to

• establish and maintain adequate supervisory systems within its retail brokerage operation to supervise registered representatives’ sales of a hedge fund of funds to retail customers. 
• adequately supervise, approve and record private securities transactions a registered investment advisor engaged in on the firm’s behalf on its books and records.

The Firm's registered representatives used marketing materials that 

• contained hypothetical returns, 
• failed to make adequate disclosure of the risks involved,
• failed to provide a sound basis for investing in a hedge fund of funds, and 
• made exaggerated or unwarranted claims in its marketing materials. 

Bear Stearns & Co., Inc., nka J.P. Morgan Securities, Inc.: Censured; Fined $500,000

The Firm shared portfolio trading commissions with Fourcade in violation of Rule 2830(k)’s prohibition against sharing investment company portfolio trading commissions with sales personnel involved in the retail sale or distribution of investment company shares. Notwithstanding its awareness of the payments, the Firm failed to supervise the arrangement and the payments thereunder, and failed to ensure compliance with FINRA directed brokerage rules. 

Bear Stearns & Co., Inc., nka J.P. Morgan Securities, Inc.: Censured; Fined $225,000

Renee Michelle Fourcade: Censured; Fined $15,000

Also, note my equally snotty comments in Bear Stearns above

See similar foreign finder's fee case at Synergy

Woods paid a customer $353 to compensate the customer for trading expenses, without his member firm’s authorization or permission. 

Stephen John Woods: Fined $5,000; Suspended 10 business days

Williams provided a prospective client with a piece of sales literature for a variable annuity that he had falsified by altering it. 

• The original time periods for charges associated with fund withdrawal had been deleted and replaced with handwritten shorter time periods, falsely reflecting lower charges associated with withdrawal of funds from the variable annuity; 
• the information regarding the annual contract fee and investment portfolio expenses were crossed out, falsely suggesting that they would not be imposed; and 
• additional charges associated with optional features were deleted, falsely suggesting that there were no additional fees for the optional features. 

Williams also made verbal misrepresentations to the client about the variable annuity that were consistent with the false information in the falsified sales literature. 

Michael Timothy Williams: Fined $5,000; Suspended 1 year.

Washington assisted customers in opening fraudulent bank accounts and withdrawing money from the newly opened fraudulent accounts, and received approximately $4,700 in compensation for assisting in the scheme. Customers of Washington’s member firm opened the bank accounts with falsified identifying information and made initial deposits of money with counterfeit checks drawn on the accounts of the firm’s other customers. At the customers’ direction, Washington made branch and automatic teller machine (ATM) withdrawals for the customers, despite knowing that the customers deposited counterfeit checks and that fraud alerts were placed on the accounts. The bank lost a total of $43,093.81 from the scheme. 

Kareem Isadore Washington: Barred

Toth asked a bank teller to process an $8,500 check payable to a mortgage company drawn on a bank customer’s account without the customer’s knowledge or consent, and forwarded the check to the company to pay Toth’s mortgage. Toth admitted to the conversion when the bank questioned her, and also admitted to asking the teller to process another check for $6,500, although she claimed she had the check voided. Toth failed to respond to FINRA requests for information and to appear for an on-the-record interview. (FINRA Case #)

Victoria Ann Toth: Barred

NEWSLETTERS

• XXX distributed newsletters that a principal of his member firm had not approved for distribution, thereby preventing his firm from complying with NASD Rule 2210(C)(1) by providing the newsletters to FINRA’s Advertising Regulation Department for approval; 
• the newsletters failed to prominently disclose the firm’s name as the broker-dealer through which he conducted his securities business; and 
• one of the newsletters referenced an unregistered entity through which XXX engaged in business but did not disclose the relationship between his firm and the unregistered entity. 

SEMINARS

• XXX distributed invitations to seminars about financial matters, including investments, and a firm principal had not approved the content of the invitations;
• the invitations and XXX’ Web site misrepresented that he was the author of books; 
• the invitations contained misleading and exaggerated information and failed to identify his firm as the broker-dealer. 
• XXX conducted seminars at which he made publications available for review, and offered to distribute the publications that were purchased from a vendor of investment publications, which a principal of his firm had not approved, and thereby prevented his firm from complying with NASD Rule 2210(C)(1) by providing the newsletters to FINRA’s Advertising Regulation Department for approval;
• XXX offered to distribute the publications on his public Web site. The publications contained violations of the content standards in FINRA Rules 2210(d)(1) and (2) and included statements that were misleading, inaccurate or unwarranted; and
• XXX used a script in presenting material at the seminars that was outdated and misleading. 

XXX: Fined $15,000; Suspended 6 months

Russo failed to provide written notice to his member firm that he was engaged in outside business activities for compensation. While associated with a member firm, Russo opened an account with another member firm and failed to notify either his member firm or the executing member firm, in writing, of his association with the other firm. 

Ronald Peter Russo Jr.: Fined $7,500; Suspended 60 days

Runyan affixed the signature of a public customer’s spouse to a spousal consent provision on an individual retirement account (IRA) application without the spouse’s permission and authorization. Runyan signed his name on the application as witnessing the spouse’s signature, which he had not. The application that Runyan signed on the spouse’s behalf did not contain any notation evidencing that someone other than the spouse had signed it. Runyan’s member firm maintained a compliance manual prohibiting registered representatives from committing forgery. 

Preston Douglas Runyan: Fined $5,000; Suspended 4 months

Patel engaged in private securities transactions without prior written notice to, or prior written approval from, his member firm. Patel sent and received business-related emails from firm customers at his personal (non-firm) email address and then deleted the emails to avoid detection, without providing copies to the firm. 

Piyush Manubhai Patel: Barred

While working as a loan officer with a bank affiliate of his member firm, Nuno-Amarteifio falsified documents in an effort to conceal the fact that the purpose of the loan he was processing was to finance a real estate transaction in which he had an interest. The bank’s policies prohibited loan officers from processing loans in which they had an interest. 

Johnny Amartey Nuno-Amarteifio: Fined $5,000; Suspended 90 days

Ligon paid Mongelli a $50,000 referral compensation fee when Mongelli referred brokerage customers to Ligon because he was not registered to do business in the states of residence for those referred customers, and Ligon subsequently served as the registered representative for the accounts. 

Jamik Jamar Ligon (Principal): Fined $7,500; Suspended 2 months

Rocco Anthony Mongelli: Fined $10,000; Suspended 3 months

Khawaja recklessly provided his customer with false and misleading bank comfort letters and failed to have a registered principal review his correspondence, in violation of the firm’s written policies and procedures. 

Jereis Elias Khawaja: Fined $10,000; Suspended 2 years

Kent 

• participated in private securities transactions, received compensation for his participation, failed to provide his member firm with prior written notice, and failed to receive the firm’s prior written approval;
• engaged in outside business activities and failed to provide his firmwith prompt written notice. 
• negligently failed to advise investors and firm customers of material facts concerning a real estate venture and his involvement; specifically, that proceeds from the venture were to be applied towards defaulted bank loans for which he was personally liable. 

Derek Roy Kent: Barred

Karamian changed the address of record for a customer’s brokerage account to the branch address of the firm office where he worked without the customer’s knowledge, authorization and consent. Karamian sent, via facsimile, a letter of authorization to his member firm’s cashiering department requesting a wire transfer of $281,768 from the customer’s brokerage account to a third party escrow account at a bank without the customer’s knowledge, authorization and consent. Karamian had the customer sign the letter of authorization for the withdrawal of these funds, knowing that the customer had not read the letter and did not knowingly authorize or consent to the request to transfer funds out of his account. Through a series of financial transactions, Karamian caused $261,000 of the funds transferred to be deposited into a bank account he controlled and the customer had not authorized the transfer. 

Jacob Karamian: Barred

At the end of the trading day, Heynen entered fictitious sell transactions for the total amount of her long positions. The next morning her back office realized that the transactions did not match those reported with the Street and, in response, Heynen cancelled the transactions.

Heynen entered the fictitious sell transactions into her member firm’s Phase 3 order entry system, which is a back-office service provider and allows users to book transactions into the firm’s books and records without actually executing the claimed transactions. Heynen entered the fictitious sell transactions and maintained long positions to circumvent the firm’s trading account limits per security and total trading limit for her proprietary trading account. 

As a result of entering the fictitious sell transactions, Heynen concealed a $76,810 unrealized trading loss from her firm. Heynen caused her firm’s books and records to reflect false and misleading information regarding securities transactions in her account and, by entering the fictitious sell transactions at prices that concealed her unrealized trading losses, she engaged in unethical business conduct. 

Carol Anne Heynen: Fined $10,000 (FINRA advises that this number was arrived in following consideration of Heynen's financial status); Suspended 9 months

Graham wrongfully and without authorization converted $8,666.12 in funds for his own use and benefit from individuals by securing debit or credit cards linked to their accounts, and used the cards for his personal benefit or a third party’s benefit without the individuals’ knowledge or consent.

Dermot A. Graham: Barred

Dowling exercised discretion in a customer’s account, and effected transactions and electronic fund transfers primarily involving the purchase of small equity positions and the writing of covered calls against these positions. Although Dowling had a power of attorney from the customer, her member firm had 

• not accepted the customer’s account as discretionary; and 
• denied her trading authority over the customer’s account. 

Dowling failed to appear for an on-the-record sworn statement that FINRA requested. 

Sheila Dawnell Dowling: Barred

Crawford borrowed $25,000 from customers and obtained this loan notwithstanding the fact that his member firm had written procedures that prohibited borrowing from, or lending money to, customers. Crawford failed to update his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose material information. Crawford failed to respond to FINRA requests to appear for on-the-record testimony. 

Stephen Timothy Crawford: Fined $5,000; Suspended 2 years

While registered with member firms, Collier failed to disclose to another member firm with which he maintained a securities account for which he had financial interest and discretionary authority, that he was associated with the member firms. Collier failed to disclose to his member firms that he maintained a securities account at another member firm. 

Paul Scott Collier: Fined $2,500; Suspended 5 business days in all capacities

Brusseau borrowed $16,800 from customers when his member firm’s written procedures prohibited borrowing money from customers under any circumstances. Brusseau neither received written permission nor disclosed the borrowing arrangement before receiving the loan. Brusseau failed and refused to provide requested information to FINRA. 

William David Brusseau: Barred

Bassari drafted a form letter about his previous employer and mailed it to former (potential) customers, which constituted sales literature without prior approval of an appropriate registered principal of his member firm. The form letter failed to provide a sound basis for statements contained in the letter, and contained other statements that were unwarranted. 

Robert Bassari: Fined $5,000; Suspended 10 business days

Ahlert made a $3,700 loan to a customer when his member firm had a policy that prohibited its representatives from borrowing and lending money between registered persons and firm customers and when the lending arrangement did not meet the conditions stated in NASD Rule 2370. 

Kevin Michael Ahlert: Fined $5,000; Suspended 30 days

Abbott presented seminars to promote the sale of reverse mortgages and solicit various types of investments from senior citizens contrary to his member firm’s prohibition of engaging in any reverse mortgage business, including the promotion and sale of reverse mortgages. 

In connection with the seminars, Abbott 

• sent invitations that used exaggerated and unwarranted claims, and used a slide and handouts that projected unfounded claims of future performance;
• issued public communications containing unbalanced discussions of reverse mortgages and making claims regarding his expertise and status in the financial industry that were misleading, false, unwarranted or lacked a sound basis;
• distributed communications that provided incomplete and unbalanced discussions of investment products and omitted  material information;
• used communications in the seminars without a registered firm principal’s prior written and dated approval and failed to file slides used in his presentation with FINRA’s Advertising Regulation Department; 
• failed to disclose the broker-dealer’s name in the seminar invitations . 

Daniel Allen Abbott: Fined $20,000; Suspended 60 days in all capacities

RBC Capital Markets Corp allowed associated persons to function as research analysts without having Series 86 or 87 research analyst registrations. The unregistered analysts published more than 3,500 research reports, and published more than 400 research reports after FINRA informed the firm that it had made a preliminary determination to recommend disciplinary action be initiated (one of the cited reports was published 7 months after the issuance of the Wells Notice) against the firm for its failure to appropriately register its research analysts (the Wells Notice). 

RBC Capital Markets Corporation: Censured; Fined $150,000

Carr failed to ensure that its electronic communications were archived to a non-rewriteable format in an adequate time frame, and, accordingly, further failed to timely maintain and preserve copies of internal and external electronic mail communications. The Firm failed to establish and maintain a formal system to review, retain, index or store emails that employees sent from their personal email accounts to conduct business. 

Carr Securities Corporation: Censured; Fined $25,000

Wilson fraudulently misrepresented to customers and another investor that he had an options trading account or other unspecified investment and would double their funds in four to six weeks. Wilson received $73,500 from investors, failed to apply the funds as directed and failed to return the funds with the promised returns, thereby misusing customer and investor funds. Also, Wilson misused the funds of an investor who was not a firm customer by holding the funds for 10 months before returning them in spite of his representation that the investment would be for 30 days. Subsequently, Wilson failed to respond to FINRA requests for information. 

Hugh Anthony Wilson: Barred

Weitz 

• provided a draft of a research report that contained a research summary, rating and price target to the company whose stock was featured as a stock pick, and did not provide a complete draft of the research report to his firm’s legal or compliance personnel prior to sending the report to the company;
• failed to disclose his ownership of securities that he profiled in research reports;
• purchased securities within 30 days prior to the security being featured as a stock pick and before his firm’s legal or compliance officers pre-approved the Stock Pick section of the research report. 
• failed to disclose valuation methods used to determine the price target and the risks to achieving price targets;
• failed to certify that the views in sections of research reports that he authored or contributed to were his own. 

David Travis Weitz: Fined $10,000; Suspended 30 days

Stephens permitted a trainee to complete portions of the required continuing education online courses for his Certified Financial Planner (CFP) designation on his behalf. 

Jason Erik Stephens: Fined $5,000; Suspended 10 days

Stadelmann received $1.5million from members of the public to purchase privately held companies’ stock but used the funds for other purposes. Stadelmann engaged in private securities transactions, for compensation, without his member firm’s prior permission. Also, Stadelmann borrowed $719,000 from firm customers in violation of FINRA rules. Stadelmann failed to respond to FINRA requests for documents and to appear for an on-the-record interview. 

Jeffrey Douglas Stadelmann: Barred

In an scheme to hold onto his title of “financial planner,”Scheidler had firm representatives assist him in submitting a plan ostensibly for each of them, for which they each agreed to pay $300, to be repaid by Scheidler. Scheidler completed the plan paperwork for each representative, submitted the completed plans and received a total of $400 from his firm for submitting the plans. 

John Kenneth Scheidler: Fined $10,000; Suspended 3 months

Pirnie conducted securities business with his member firm’s customers through an unregistered individual. 

Jason Thomas Pirnie: Barred

Pilipczak evaded his member firm’s supervisory system by concealing the sale of a customer’s variable annuity by forwarding the documentation directly to the insurance carrier and not notifying his firm of the sale,which caused his member firm’s records to be inaccurate and incomplete with respect to the transaction. Pilipczak provided a written statement to his firm in connection with the purchase of a new variable annuity transaction by the customer, falsely claiming that it was not funded by the sale proceeds from the earlier variable annuity. 

Kevin Mark Pilipczak: Fined $12,500; Suspended 1 year

Mohlman offered to pay another member firm’s employee to obtain account fee and performance information with respect to his former customer accounts (the employee did not provide the requested information.) Mohlman intended to use the information to convince former customers to switch accounts to his new member firm.  

Louis Gerald Mohlman Jr.: Fined $10,000; Suspended 3 months

Lake solicited customers to invest a total of $729,500 in different investment schemes through his weekly radio talk-show and daily radio advertising spots. Lake converted $671,321 he solicited for his personal use and returned $58,179 to customers. 

Jamie Patrick Lake: Barred

Kimura misappropriated $1.29 million from relatives’ accounts that he managed. Kimura intercepted checkbooks linked to the accounts, forged checks to himself and his creditors, and concealed his activity by fabricating account statements and diverting the actual statements to a mailbox he maintained. Kimura failed to respond to FINRA requests for information. 

Ryan Muneo Kimura: Barred

Keller stole computer monitors and a telephone worth $4,400 from his member firm and pawned them for cash. Keller failed to respond to FINRA requests for information. 

Shawn Steven Keller: Barred

Jordan caused customer telephone records at her member firm to be altered without authorization. Shortly before resigning from her firm to begin working at another member firm, Jordan deleted certain customer telephone numbers and made inaccurate updates to other customer telephone numbers to slow down other registered representatives at the firm who Jordan believed would be assigned to call her customers after she resigned. By changing customer telephone numbers, Jordan caused the firm’s books and records to be inaccurate. 

Donna Rae Jordan: Fined $5,000; Suspended 30 business days

Hunt borrowed approximately $5,500 from a firm customer contrary to his member firm’s procedures generally forbidding registered representatives from borrowing money from, or lending money to, customers. Loans to or from customers other than immediate family members or financial institutions required prior review and approval by the firm’s compliance department, but Hunt failed to obtain prior approval of the loan. Hunt failed to fully and timely respond to FINRA requests for information and documents. 

Herbert Tyrone Hunt: Fined $5,000; Suspended 18 months

Haggerty 

• did not have the required Series 86 or 87 (Research Analyst Qualification Exam) licenses required for research analysts when she was the principal author of or contributor to the Stock Pick sections of her member firm’s newsletter;
• failed to disclose her ownership of securities that she profiled as Stock Picks because she did not treat the section as a research report;
• purchased a security for her own account within 30 days prior to the security being featured as a Stock Pick, and before her firm’s legal or compliance officers pre-approved the Stock Pick section of the newsletter;
• failed to disclose valuation methods used to determine the price target in any Stock Pick section and the risks to achieving the price targets in her stock picks; and
• failed to certify that the views in the sections of the firm’s newsletter that she authored or contributed to were her own. 

Stephanie Murch Haggerty: Fined $10,000; Suspended 30 days

This would be like my law firm asking a non-lawyer employee to draft a legal article under his/her name to be included on the firm's website and sent out in its newsletter. Then, when it turns out that the article has some errors and failed to disclose ethical conflicts, my law firm would argue that it didn't know the non-lawyer wasn't a lawyer, that the non-lawyer should not authored the article, and that the non-lawyer failed to disclose conflicts.  Yeah, like that's going to work.

Something here is just not making sense -- of course, that something could be FINRA, which wouldn't be that much of a shock to me.

Also, see this apparent companion case: Weitz

Frick engaged in outside business activities and private securities transactions without prior written notice to her member firm. Frick was provided a money order by a customer in order to open an account at her member firm on behalf of the customer’s children, misplaced the money order and, in an attempt to settle the customer’s potential complaint in this matter, deposited $1,100 of her own personal funds into an account at her firm for the benefit of the customer’s children without notifying the customer or the firm. Frick used the funds she had previously deposited into the account to purchase mutual funds for the account without the customer’s knowledge, authorization or consent.

Gail Sylvenia Frick: Fined $25,000; Suspended 15 months

If I have one quibble, it's that I don't think FINRA is on particularly sound ground if it cites an RR for the undisclosed settlement of a complaint if there isn't an actual complaint but merely a "potential" complaint (there we go again with those troublesome adjectives and adverbs). All customers have potential complaints about virtually everything.  Likely, Frick "anticipated" that the customer would complain about the misplaced money order, but that's not the same thing as charging her with the undisclosed settlement of an actual complaint.  What happened here is that a money order (apparently for $1,100) was lost and rather than ask the customer to provide a replacement, Frick simply went out of her own pocket to cover the funds. No...that doesn't make her actions right but it does put them in a far different light than describing the underlying conduct as settling a customer complaint. We need to be particularly precise when drafting regulatory opinions because they are often used to support sanctions to be imposed in other similar cases.  

Fairbend converted, for her own use and benefit, $100 in prepaid cell phone rebate cards that belonged to another registered representative. 

Karen Lee Fairbend: Barred

As his member firm’s national sales director, Dorsey was responsible for reviewing daily trade blotters and information received from the firm’s compliance department. Despite being made aware of “red flags” indicating that unsuitable and excessive trading was occurring in customers’ accounts, Dorsey failed to take reasonable supervisory steps to respond to these “red flags” to prevent the unsuitable and excessive trading. Dorsey continued to maintain his FINRA securities registrations through his member firm for more than two years, although he did not actively engage in the firm’s securities business. 

Steven Laurence Dorsey: Fined $25,000; Suspended 1 year in Principal Capacity only; Required to requalify by exam before acting in any principal capacity.

While associated with a member firmin Texas, Dinwoodie sold Financial Advisory Service Agreements to customers located in Arkansas prior to his registration status in Arkansas being updated in his member firm’s system, and altered the Agreements to falsely reflect that the customers signed the agreements while located in Texas. Dinwoodie falsified other customers’ signatures on a Financial Advisory Service Agreement. Dinwoodie failed to respond to FINRA requests for an on-the-record sworn statement. 

James Christopher Dinwoodie: Barred

Dillon accepted a $19,000 loan from a customer without his member firm’s knowledge or consent, and in contravention of the firm’s written supervisory procedures prohibiting associated persons borrowing from, or loaning money to, any of the firm’s customers. 

Jason Lee Dillon: Suspended 60 days

Delmas made unsuitable recommendations to customers to buy inverse floater Collateralized Mortgage Obligation (CMO) securities, and those customers lost more than $163,000 as a result. Delmas did not have reasonable grounds to believe that the CMOs were suitable for the customers in light of their investment experience, objectives and risk tolerances. 

Andres Luis Delmas: Fined $15,000; Suspended 60 days

Now, would someone please show me a list of all the member firms that FINRA suspended for promoting the sale of such products (you can toss into that mix the Auction Rate Securities, the Credit Default Swaps, and all the other esoteric and hybrid products). What say you?  You can't find a list of firms that were suspended for such practices? Hmmm... me neither.  Isn't there a line in a Billy Joel song about how only the good die young and only the individual RR gets suspended ---or am I just imagining that verse? 

Davis reimbursed a customer for sales commissions without notifying his member firm, and subsequently provided inaccurate information to firm compliance employees who questioned him about the reimbursement.

Joseph Donald Davis III: Fined $5,000; Suspended 10 business days

Davis is puzzling -- if only in the academic sense -- because it's unclear as to exactly what he did that was a violation.  If the customer complained about something and was reimbursed to settle the complaint, then that's an undisclosed settlement violation; however, we have no such indication of that situation.  If Davis had guaranteed profits to the customer and the reimbursement was a step towards reducing losses, then that's a violation; however, once again, that's not spelled out.  If Davis made the payment in violation of his firm's written policies, then that too could be a violation; however, that's not spelled out either.

As such, we appear to have an RR charged with engaging in an act without notifying his firm and then misleading his firm's compliance staff about that act.  It's not clear whether the fine and suspension were imposed in consideration that the act was a violation of FINRA/Firm rules and/or that Davis provided inaccurate information to his firm about said act.

Sure, all in all a somewhat academic objection.  Still -- you tell me?  Is it a violation to offer a commission rebate to public customers?  

Daeger attempted to settle a customer complaint by making a $1,500 deposit into the customer’s bank checking account without his member firm’s knowledge or consent. 

Jason Jude Daeger: Fined $5,000; Suspended 10 business days

Callahan electronically affixed two customer names to three solicitor disclosure statements without their specific authority, and created an email that was purportedly received from the customer, which he forwarded along with the false disclosure statements to his member firm for processing. By creating a false disclosure statement, Callahan caused his member firm to violate the requirements of the Investment Advisors Act of 1940 and, by creating the purported email, Callahan caused his firm’s records to be inaccurate and thereby prevented it from meeting its obligation to preserve, for a period of not less than six years, the first two years in an accessible place, all records required pursuant to SEC Rule 17a-4(b)(4). 

Also, Callahan engaged in outside business activities and private securities transactions without written notice to, or approval from, his member firm. Callahan failed to respond to FINRA requests for documents and information. 

Brian Raymond Callahan: Barred

Brubaker recommended that his customers invest in bearer bonds, falsely representing that the bond issuer was a non-profit entity that helped needy people and had been in existence for 15 years, when in fact, no such securities investment existed. Brubaker provided his customers with fake certificates for the bonds, and used the $180,000 he obtained from the customers for his personal benefit. Also, Brubaker misappropriated $49,000 of insurance proceeds that a customer entrusted to him after misrepresenting to the customer that the proceeds were invested in the bonds, when he had used the funds for his own benefit. 

Steve A. Brubaker: Barred

Breeze purchased a building from a customer for $850,000, with the customer (Breeze had a personal relationship with the customer outside of the broker/customer relationship) agreeing to finance the entire purchase. Breeze’s member firm’s written procedures allowed its registered representatives to borrow from customers, but prior written approval was required, and Breeze failed to obtain his firm’s written approval before entering into the borrowing arrangement with the customer. 

James Kelly Breeze: Fined $5,000; Suspended 60 days

KMF agreed to finance the purchase and Respondent therefore provided KMF with a promissory note for the entire purchase price, secured by the purchased building.  

I can easily imagine that Breeze believed that he was not "borrowing" money from a client but engaging in a commercial real estate transaction involving secured financing by the seller.  It was not the clear intent of Rule 2370 (the "Borrowing Rule") to cover such a transaction -- the focus was to prevent the direct borrowing/lending between clients and RRs.  While I understand and appreciate that the Borrowing Rule should/could cover the transaction set forth in Breeze, I think that we need to also appreciate that most RRs (and many of their legal counsel) might not recognize the applicability of the Borrowing Rule to this set of facts.

Ultimately, yeah, okay, when Breeze's firm discovered the deal they should have advised him that it was likely subject to the Borrowing Rule and immediately require that he submit written notice.  And, again, sure, the Firm might have been entitled to send Breeze a letter of admonition that he had violated the Firm's internal policy by not not submitting prior written notice and that such action may also be deemed to be in violation of FINRA rules.  However, I see little reason to impose a 60-day suspension and a $5,000 fine for such a slip up.  Since there is no statement in the AWC that Breeze knowingly sought to conceal the transaction as part of a wilful effort to violate the Borrowing Rule, this is one of those situations where nothing more than a letter of admonition from FINRA seems necessary.  

It is this type of case that raises concerns about so-called self-regulatory "speed trap" approaches to regulating and underscores my commitment to highlight such sanctions when I beleive that they serve no purpose other than to fill the regulator's coffers.

Altman was aware that a relative misappropriated in excess of $130,000 by depositing checks into her bank account at Altman’s employer, but Altman did not report it to anyone until she contacted her regional manager at a later date. 

Lena Michelle Altman: Barred

Alexander borrowed $29,000 from a firm customer contrary to his member firm’s compliance manual, which prohibited registered representatives from borrowing from customers other than relatives; the customer and Alexander were not related. Alexander failed to repay the loan, and subsequently failed to respond to FINRA requests for documents. 

Terrence Thomas Alexander: Barred

The Firm entered into a “selling agreement” with a company to serve as a selling agent for the company’s offering, and sold the unregistered offering pursuant to an exemption from SEC registration pursuant to Regulation D. Among other requirements, this form of Reg D (typically a Rule 506) required that the Firm have a substantive and preexisting relationship (to avoid a General Solicitation) with each investor prior to the time that, acting through its representatives, it offered the company’s investment to prospective investors. Acting on the firm’s behalf, its representatives made efforts to sell interests, and sold interests, in the company offering to prospective investors with whom neither the representatives nor the firm had any pre-existing relationship prior to the time the customers were contacted relating to a potential investment in the offering company. The customer contacts constituted engaging in a general solicitation with respect to the offering and, therefore, participated in the sale of unregistered securities. The Firm failed to maintain adequate written supervisory procedures relating to private offerings. 

Okoboji Financial Services, Inc.: Censured; Fined $30,000

NSM failed to preserve all of its business-related electronic communications, including communications exchanged with its clearing firm for over a year. 

NSM Securities, Inc.: Censured; Fined $50,000

The Firm allowed representatives to effect trades for their customers and earn commissions totaling $19,506.42 while the representatives were not registered with FINRA through any member firm. The Firm paid the representatives “retention payments/advances” based on commissions generated from account activity. 

Dinosaur Securities, L.L.C.: Censured; Fined $25,000

Verostko sold fixed annuities to customers without prompt written notice to his member firmof his outside business activities. Verostko could have sold the fixed annuities through his member firm; however, by conducting the transactions away from the firm, he received $100,000 more in commissions than he would have if the annuities had been sold through the firm. Verostko falsely certified to the firm that he was not engaged in any outside business activities. 

Paul Anthony Verostko: Fined $10,000; Suspended 18 months

Assuming that an RR's firm and another member firm are in a position to offer the same product and the sale of said product passes the suitability test, then why shouldn't a salesperson be permitted to offer that product through whichever firms is prepared to pay the highest commission?  Truly, I understand and know the legitimate objection but I raise this question somewhat rhetorically.  This temptation should not exist.  It is unhealthy for the industry, for the selling broker, and for the customer.

Seyller engaged in outside business activities, and received $11,925.66 in compensation, without prompt written notice to his member firm. Seyller falsely asserted on an annual certification statement that he was not engaged in any undisclosed outside business activities and did not receive any referral fees. He falsely denied any involvement with equity indexed annuity sales when a supervisor directly questioned him. 

Fabian Cesar Seyller: Fined $5,000; Suspended 6 months

Sellers borrowed $92,200 from a customer who surrendered a variable annuity to fund the loan, resulting in a $7,000 surrender charge. Sellers' member firm had written procedures forbidding registered representatives from borrowing money from, or lending money to, customers. 

Leonard Duane Sellers: Fined $5,000; Suspended 6 months

Quinn sent correspondence on his member firm’s letterhead that contained misleading and unwarranted statements concerning a potential investment. Quinn ignored red flags of possible fraud and failed to submit the letters for required supervisory approval, which exposed the firm to potential liability. 

Andrew William Quinn: Barred

After failing a Series 7 qualification exam, Associated Person Owenson induced a test center employee to provide him with a written exam score report that falsely reflected that he had passed, which he then gave to his member firm purporting it reflected his actual exam score. Owenson provided FINRA with materially false information, failed to provide other requested documents and provided false testimony under oath. Owenson submitted a fictitious letter to FINRA on a former employer’s stationery purportedly signed by an employee of that company which contained fabricated information. 

Jason Todd Owenson: Barred

Nussbaum failed to respond to FINRA requests for documents and information; and failed to honor an Arbitration Settlement Agreement.

Brad Niel Nussbaum: 

• for failure to respond to FINRA requests for documents and information: Barred 
• for failing to honor an Arbitration Settlement Agreement: Fined $10,000; and he is Suspended until the Settlement Agreement is paid or otherwise satisfied in full plus 30 business days thereafter but if he fails to so satisfy within 24 months of the decision, then the suspension converts to a Bar

Novella submitted, or caused to be submitted, a falsified request for reimbursement for $9,234.49 of client-related expenses. 

Anthony Peter Novella Jr.: Fined $5,000; Suspended 3 months

In connection with the purchase of a variable annuity, Nehmad created a handwritten statement and affixed a photocopy of a customer’s signature to make it appear that the customer had signed the statement acknowledging the percentage penalties she would incur for early withdrawals. Nehmad presented the statement to her member firm, falsely representing it to be a genuine copy of a document the customer had signed. 

Deborah Jean Nehmad: Fined $5,000; Suspended 1 year

Mazzella submitted false preliminary insurance applications for fictitious customers and a false preliminary insurance application for a customer without the customer’s authorization or consent. As a result,Mazzella received $3,379.28 in commissions from the insurance company. Mazzella failed to appear for a FINRA on-the-record interview. 

John Joseph Mazzella: Barred

Josephson engaged in unauthorized transactions in a relative’s variable annuity account by submitting surrender or withdrawal requests through his member firm to the issuer of the variable annuity, which caused the liquidation of $48,716.81 from the account without the relative’s knowledge or consent, and in the absence of written or oral authorization to exercise discretion in connection with the variable annuity. 

In furtherance of the above scheme, Josephson

• received checks payable to his relative in the total amount of $45,230.15 as a result of the unauthorized partial liquidations;
• negotiated the checks and spent the funds; and
• without his relative’s knowledge and consent, affixed, or caused to be affixed, her signature to surrender or withdrawal request forms and as endorsements to checks payable to her. 

Josephson failed to appear for a FINRA on-the-record interview. 

Jon Hadland Josephson: Barred

Hill issued checks totaling $479,450 from customer accounts to corporate payees representing that he was purchasing race horses for the customers; but, instead, converted $350,000 to his own use by arranging for the corporate payees to issue checks made payable to him for the same dollar amounts, less a small administrative fee. Also, Hill settled a customer complaint for $12,000 and failed to inform his member firm about the complaint. 

Richard Wayne Hill: Barred

Gruber permitted Helms to complete his member firm’s Firm Element Web-based courses and accompanying proficiency tests on his behalf, which Helms passed for Gruber. 

Joseph Benjamin Gruber (Principal): Fined $5,000; Suspended 3 months

Judy Dian Helms (Associated Person): Fined $5,000; Suspended 1 month

Associated Person Glaser misappropriated funds from a customer’s account for her own use and benefit. Glaser, who was responsible for establishing direct payments and paying some of the customer’s monthly bills, set up an account on a non-firm Web site that was an online bill paying payment service without the customer’s authorization. Glaser used this online service to direct unauthorized payments totaling $8,679.27 from the customer’s securities account to Glaser’s creditors to pay for personal expenses.

Kathleen Ann Glaser: Barred

While employed with a member firm, Associated Person Gerber found a registered representative’s bank account checkbook, took checks from the checkbook, made the checks payable to himself, forged the registered representative’s signature on the checks, cashed the checks and converted the proceeds of $7,360 for his own use and benefit. Gerber failed to respond to FINRA requests for information.

Adam Phillip Gerber: Barred

Fabian received $104,000 from an individual for the purchase of real estate. That individual requested documentation of his agreement and Fabian falsified a document to create the appearance that the funds paid to him were invested in real estate, but there was no evidence regarding what Fabian did with the money, although he eventually repaid the individual. Fabian engaged in outside business activities, for compensation, without prior written notice to his member firm. 

Joseph Stephen Fabian: Barred (based upon his failure to respond to FINRA requests for information)

Cyr willfully failed to disclose material information on his Form U4 or to report the matter to his supervisor.

Louis Andrew Cyr: Fined $5,000; Suspended 3 months

You know, with all the fancy schmanzy radio and television commercials that FINRA has running on the airwaves, you would think that the self-regulator would have a few bucks left offer to pay someone to provide us with just the barest of facts about its monthly disciplinary cases.  Yeah, I know, I can make a phone call or send an email to someone at FINRA and ask for the AWC but how many folks are going to bother with that?  At the end of the day, this decision as published is virtually useless as a teaching tool given the lack of meaningful disclosure.

Without his member firm’s knowledge or permission, Conrod 

• used the firm's internal information, including some confidential and proprietary materials for a proposed hedge fund; 
• contacted potential investors, including some firm institutional investors, regarding possible interest in investing in the proposed hedge fund; and 
• used the firm’s name in the proposed hedge fund’s business plan in a manner which could be reasonably misinterpreted to indicate that the firm was aware of and/or approved of the proposed hedge fund. 

The materials Conrod created and utilized in communications with the public for the proposed hedge fund were not approved by a registered firm principal prior to use, were not fair and balanced, and contained statements that were exaggerated and/or unwarranted and contained promises of specific results, and/or predictions or projections of investment performance. The email correspondence Conrod utilized with the public contained false and/or misleading statements or claims. 

Douglas Franklin Conrod II: Fined $5,000; Suspended 3 months

While registered with member firms, Bonner engaged in outside business activities, for compensation, without prompt written notice to the firms. Bonner completed an Outside Activities Disclosure Form, which one firm required, and did not disclose his outside business activities. Also,  Bonner engaged in private securities transactions, for compensation, without prompt written notice to, and approval from, his member firms. Bonner borrowed $900,000 from firm customers when firm procedures prohibited such borrowing. 

Robert Michael Bonner: Barred

Contrary to his member firm’s policy and approval, Boeckel borrowed $5,000 from a relative, who was also a customer of the firm, and signed the relative’s name on numerous checks without authority.

Dustin Andrew Boeckel: Fined $5,000; Suspended 1 year

Boardman borrowed $25,000 from the customer contrary to her member firm’s written procedures prohibiting a representative from borrowing from a customer unless the two are related. Boardman was not related to the customer and failed to repay the loan. Boardman signed questionnaires certifying that she was in compliance with the firm’s compliance manual. Boardman failed to respond to FINRA requests for information.

Sarah Rebecca Boardman: Barred; Ordered to pay $25,000 plus interest in restitution to customer

Aylward caused his member firm’s books and records to be inaccurate by causing the cost basis of securities positions in customers’ accounts to be changed to understate the unrealized losses in each of the positions. Aylward exercised discretion in a customer’s account without the customer’s written authorization and his member firm’s acceptance of the account as discretionary. 

Joseph Kesl Aylward: Barred

Allen borrowed $24,815.72 from public customers contrary to his member firm’s written procedures forbidding the borrowing or lending of money unless the client is a member of the registered representative’s immediate family or the client is a financial institution or other entity or person that regularly engages in financing loans, which these customers were not. Also,  Allen failed to repay the loans. Allen completed and signed site inspection and compliance interview forms for his firm and misrepresented facts on the forms regarding the loans by stating that he had never borrowed money from a client.

Curtis Morgan Allen:  No monetary sanction was imposed because Allen was granted a discharge in bankruptcy after the events in question; Suspended 6 months in all capacities; 

Before you accuse me of going over to the other side and being a FINRA agent, please look at this case and explain the difference in outcomes to me: Boardman

HOWEVER, when the RR not only violates the rule BUT also fails to repay the loan AND it's not an isolated, singular loan but loans with an "s" AND that same RR lies about the loans on multiple inspection/compliance forms, well that's asking quite a bit of compassion from a typically pro-broker regulatory lawyers such as me.  If it were up to me, Allen might not get off with anything less than years of suspension if not a bar.  Perhaps there is more to this case than the slight facts provided in the official case squib -- I hope so.

The Firm failed to 

• establish and maintain an adequate supervisory system, including written procedures, to supervise the firm’s trading and market making;
• reasonably supervise individuals to detect their manipulations of the price of a thinly traded common stock;
• establish and implement AML policies and procedures that could reasonably be expected to detect and cause the reporting of suspicious securities transactions, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and the implementing regulations thereunder. 

Chicago Investment Group, LLC: Censured; Fined $150,000; Required to certify to FINRA that its AML policies and procedures are in compliance with NASD Rules 3011(a) and 3011(b), and that its system and procedures for trading and market making are reasonably designed to achieve compliance with applicable federal securities laws and FINRA rules; thereafter, the firm is required to certify its compliance quarterly for one year.

The firm failed to 

• provide for appropriate procedures and controls and an appropriate system of follow-up and review with respect to its obligations to provide 
  • appropriate procedures for supervision of business operations on the NYSE Trading Floor;
  • adequate supervision of its sole branch office, review of options accounts by a delegated person; ensure that its operational and regulatory activities were supervised and that it had systems, procedures and staff to follow-up and review all areas of its business activities, including its anti-money laundering (AML) program, suspicious activity reporting and its branch office to ensure compliance with applicable securities regulations and NYSE rules;

• supervise the trading activity of its president and chairman; 
• ensure that electronic communications with the public were reviewed and retained; 
• establish an AML compliance program that detected and caused the reporting of certain transactions; 
• establish and implement policies, procedures and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and the implementing regulations thereunder; 
• provide for independent testing for compliance; and designate adequate and trained staff to ensure compliance with the Bank Secrecy Act;
• document error accounts trades that a floor broker made;
• deliver original or updated options disclosure document prior to newly approved customers or previously approved options accounts;
• properly record all revenue and expenses on an accrual basis; 
• maintain minimum net capital compliance; and
• implement adequate best execution procedures and conduct a formal analysis of best execution data. 

The Firm 

• employed independent contractors without adequately complying with NYSE regulations;
• handled options accounts activity in violation of NYSE regulations; and 
• failed to comply with the firm element of the continuing education rule. 

Schumacher failed to 

• reasonably discharge his supervisory duties as president and chairman; and 
• document error accounts trades that a floor brokermade. 

Strasbourger, Pearson, Tulcin, Wolff, Inc.: Censured; Fined $100,000 jt/several with Strasbourger; Required to retain an independent consultant to conduct a comprehensive review of its policies, procedures and practices to ensure compliance with federal securities laws, NYSE/NASD rules, and to make recommendations to bring the firm into compliance to prevent a recurrence of the violations.

Michael J. Schumacher: Fined $100,000 jt/several with Firm; Suspended 30 days in Principal capacity only; Suspended 10 business days concurrent in all capacities

Associated Person Wilkerson failed to disclose material information on her employment application with a member firm. 

Adrienne Renee Wilkerson: Fined $4,000; Suspended 4 months

Webb 

• effected the purchase of stocks for an account, for which he was directly or indirectly interested, when he knew that a hedge fund customer who had moments earlier withdrawn an order it placed with Webb for the same stock, intended to purchase the stock elsewhere;
• provided false information to his member firm that he had executed a trade for a customer order when, in fact, he did not possess a customer order;
• attempted to conceal his misconduct by requesting sales traders at an affiliate firm to locate a buyer for stocks he had already purchased for his firm’s facilitation account, and to locate an existing order ticket with a time stamp prior to his purchase of the stock in order to make it appear that the purchase for his firm’s facilitation account had been intended for a customer.

Mark David Webb: Fined $12,500; Suspended 18 months

Weaver and Will participated in private securities transactions, for compensation, in the sale of securities issued by another firm and did not provide prior written notice to, or receive prior approval from, their member firm. They incorrectly answered “no”when asked on required annual compliance questionnaires whether they had ever been paid or received a referral or finder’s fee from anyone for referring securities clients and/or business. 

Randy Brian Weaver: No fine in light of financial status; Suspended 9 months

Richard Lance Will: No fine in light of financial status; Suspended 8 months

Toth willfully caused the filing of a Form U4 that contained a misrepresentation of material fact.

Douglas John Toth: Suspended 1 year

On July 3, 2003, the Attorney General of New Jersey and the New Jersey Bureau of Securities filed a civil complaint in the Superior Court of New Jersey against Toth and others, alleging, among other things, fraud in connection with the offer, sale or purchase of securities in 2001. The July 2003 New Jersey complaint alleged that Toth and others made materially false and misleading statements and omissions regarding the degree of risk associated with the investment, the intended investment aims of the defendants, and the suitability of the investment for 18 investors. In July 2005, the New Jersey Superior Court dismissed the July 2003 New Jersey complaint without prejudice.

The core fact here does not seem to be in dispute -- namley, that Toth's Form U4 in question failed to disclose the New Jersey civil action against him. The issue in dispute is whether Toth or a former employer was responsible for that failed disclosure.Toth testified that he informed his former employer of all disciplinary actions against him prior to the electronic filing of the Form U4. Toth’s former employer testified that Toth did not inform him of the New Jersey civil action, and that Toth did not review and correct a copy of the Form U4 that the former employer forwarded to him, despite repeated requests for him to do so. FINRA made a credibility determination in favor of the former employer’s version of events, which Toth unsuccessfully appealed.. 

http://sec.gov/litigation/opinions/2008/34-58074.pdf (SEC Decision)

The FINRA National Adjudicatory Council Decision

Tommasino 

• caused his member firm to 
  • maintain and preserve inaccurate books and records in violation of Section 17(a) of the Exchange Act and SEC Rules 17a-3 and 17a-4 thereunder, and NASD Rules 2110 and 3110; 
  • aid and abet a violation of Section 15(a)(1) of the Securities Exchange Act of 1934 by permitting a person not registered as a broker-dealer, who had been barred from the securities industry, to perform duties that required registration; and
  • to violate New York Stock Exchange (NYSE) Rule 345(a) by permitting a person who was not registered with, qualified by or acceptable to the Exchange, to regularly perform the duties customarily performed by a securities lending representative. 
• agreed to pay and caused transaction-based compensation to be transmitted to a non-registered person who had been barred from the securities industry, 
• failed to disclose to his firm that he had agreed to pay and caused transaction based compensation to be transmitted to a non-registered person who had been barred from the securities industry, and 
• failed to disclose to his member firm that he had agreed to pay and caused transaction-based compensation to be transmitted to a finder. 

Benedict Patrick Tommasino: Fined $30,000; Suspended 20 months with a consecutive 2 month suspension in Principal capacities only.

While his state registration status was inactive in Florida, Smalbach caused securities transactions that he had solicited to be placed through a junior registered representative whom he had hired. Smalbach caused false information regarding the identity of the registered representative of record to be provided to his member firm because he was in fact the representative of record for the securities transactions submitted by the junior representative to the firm for execution. 

Neal Seth Smalbach: Fined $10,000; Suspended 6 months

Skigen created falsified electronic notes of his purported meetings and conversations with a customer after the customer filed an arbitration claim. Skigen provided the falsified notes to outside counsel in the arbitration case, without advising counsel or his member firm that he had falsified and backdated the notes, and misrepresented that the notes had been prepared contemporaneously with the conversations. Skigen created similar falsified notes for another customer. Skigen provided false testimony during a FINRA on-the-record interview. 

Eric Scott Skigen: Barred

Shoff sold equity-indexed annuities for compensation outside the scope of his employment with a member firm without providing the firm prompt written notice of the business activity. 

Galen Mark Shoff: Fined $5,000; Suspended 3 months

Reams altered a customer’s option account agreement without the customer’s knowledge or authorization so that it would reflect that the account was approved for an additional trading strategy. By altering the agreement without the customer’s knowledge or authorization, she caused a business record of her member firm to be inaccurate. 

Frances Ann Reams: Fined $5,000; Suspended 3 months

Prophet's customer mistakenly received a $1,200 check from her variable annuity company and gave the check to Prophet so that he could return it to the company. Instead of returning the check to the company, Prophet, without the customer’s authorization, endorsed the check and deposited it into his bank account, using the funds for his own benefit. 

Andrew Seafus Prophet: Barred

Acting through Moore, his firm failed to 

• establish and maintain a system to supervise a registered representative’s activities and to adequately investigate the representative’s disciplinary background. The RR's' disciplinary history should have alerted the firm to the fact that the representative required heightened supervision, but the firm failed to establish procedures addressing heightened supervision and failed to implement the representative’s heightened supervision; and
• supervise the representative by failing to ensure that new account forms that he submitted contained the required information. 

Moore falsely represented to the Texas State Securities Board that the representative had not engaged in a securities business in Texas prior to the execution of an undertaking that his firm agreed to and that Moore signed for allowing the representative’s registration in Texas. Also, Moore unreasonably delegated some of his supervisory responsibilities to an inexperienced, untrained and unregistered subordinate, and failed to review firm records to learn about the extent of the representative’s activities in his customer’s accounts. 

Joe Farnham Moore Jr.: Fined $10,000; Suspended 2 years

By the way, Mr. Moore, please meet Mr. Smalbach

Londo made loans, in the form of casino chips or markers, totaling $270,000 to a firm customer who was also a close personal friend, contrary to his member firm’s written supervisory procedures that prohibited its representatives from lending to, or borrowing from, securities customers unless the customer was a family member, which she was not. Londo’s firm was not aware of his loans to the customer. 

Ray Matthew Londo: Fined $5,000; Suspended 20 business days

Laundrie failed to supervise his firm’s business consulting business by failing to take any action to determine whether his firm was providing services to stock issuers pursuant to its consulting agreements or was being paid solely for its market making activities. Laundrie failed to take any action to review or monitor his firm’s market making in the issuers’ securities. 

Thomas William Laundrie: Fined $15,000; Suspended 45 days in Principal capacity only

Associated Person Kirschenbaum failed to disclose material information on his member firm’s pre-hire consent form and employment application. 

Stuart Ian Kirschenbaum: Fined $4,000; Suspended 5 months

Holder facilitated a customer’s purchase of life insurance policies in the name of the customer’s deceased son and used a false social security number on the policies. The customer forged her deceased son’s signature to execute the policies with Holder’s knowledge. 

John Michael Holder: Barred

Harding falsified a customer’s Individual Retirement Account (IRA) opening documents by cutting and pasting the customer’s signature from one document onto others without the customer’s authorization or knowledge. 

Maria Anne Harding: Fined $5,000; Suspended 3 months

Haas participated in outside business activities without providing his member firm with written notice of these activities. Haas falsified correspondence to cover up these activities and falsely certified to his firm he was not engaged in outside business activities. He failed to appear for a FINRA on-the-record interview. 

David Christian Haas: Barred

Friend became aware that her member firm had not processed a public customer’s rollover form and fixed and a variable annuity application, so she completed a new application with a more current date. Without authorization,Friend cut out the public customer’s signature from the first application and pasted it on a new application, changed the date on the rollover form because the firm had not processed this form, and submitted both documents for processing.

Debra Ann Friend: Fined $5,000; Suspended 4 months

While Effron was registered with a member firm, he engaged in outside business activities and failed to provide prompt written notice by completing and submitting an Outside Business Activity Notification Form. 

Effron placed variable annuity transactions through his member firm for customers of a representative from another member firm without discussing the transactions with the customers, and after receiving the completed and signed applications, he submitted them to his firm for processing. Effron received commissions from the transactions and forwarded most of the commissions to the representative without advising his firm of the arrangement. 

Steven Effron: Fined $10,000; Suspended 4 months in all capacities

Domson created financial planning agreements for customers, forged the customers’ signatures on the agreements and submitted them to his member firm, without the customers’ knowledge and consent. Domson paid the initial fees for the plans from his own funds and created the plans to generate sufficient sales of financial plans to enable him to reach a higher level employment status with his firm. 

Michael Francis Domson: Barred

Dion failed to comply with the terms of a written settlement agreement he executed in connection with an arbitration case. 

Richard George Dion: Fined $5,000; Suspended until he fully satisfies the terms of a settlement agreement by paying a former member firm $75,000 and providing satisfactory proof thereof to FINRA, or entering into a superseding settlement agreement with the firm and providing satisfactory proof of the agreement to FINRA; Suspended from association with any FINRA member in any capacity an additional 30 business days upon FINRA’s receipt of satisfactory proof of his full satisfaction of the original or superseding settlement agreement

1. pay $75,000  to his firm; or
2. enter into a mutually acceptable settlement agreement with his firm concerning that sum.

To instigate a prompt choice between the two options, FINRA has suspended Dion until he makes the choice and provides proof to the regulator of that phase.  Moreover, the sooner he gets to that point, the sooner he can start a 30 business day suspension.  All in all, a to-the-point sanction.

Byers repeatedly misrepresented the existence and value of assets and investments to a customer. In order to conceal these misrepresentations, Byers solicited and accepted approximately $331,120 in loans from other customers, contrary to his member firm’s written policies and procedures, and deposited the funds into the customer’s account. Byers did not repay the loans to the customers. 

Bruce Robert Byers: Barred

Boccio caused his member firms to fail to maintain their required net capital and filed inaccurate quarterly and monthly FOCUS Part IIA Reports on the firms’ behalf. Boccio failed to take adequate steps to verify and ensure the accuracy of financial information that his member firms provided to him. 

Frank Louis Boccio: Fined $7,500; Suspended 15 days in FINOP capacity only

Berteletti created a false and misleading account summary and provided it to a customer, and failed to respond to FINRA requests for information. Berteletti engaged in securities transactions in a customer’s account without the customer’s authorization and consent, and without discretionary authority. Berteletti settled a customer complaint away from his member firm. 

Richard M. Berteletti Jr.: Barred

Austin purchased shares of stock for his own account and did not have the funds to pay for the stock, in violation of Federal Reserve Board Regulation T. Austin obtained a Regulation T extension to have time to pay for the stock but failed to pay for the stock when the extension expired, causing his member firm to extend him credit in a manner not permissible under Regulation T by making the stock purchase without sufficient funds. Austin willfully caused his firm to extend him credit in violation of Federal Reserve Board Regulations T and X. Austin sold the stock to a public customer, which he was not permitted to do because he did not have his Series 7 General Securities Representative registration. FINRA found that Austin failed to timely transfer the stock out of his account to the customer after he had sold him the stock.

Sean Aaron Austin: Fined $5,000; Suspended 2 months in all capacities

Anderson failed to supervise a registered representative who made numerous unsuitable recommendations in a customer’s account. Anderson received adequate tools from his member firm to complete his supervisory duties but failed to detect and prevent the representative’s misconduct. 

Duane Franklin Anderson: Fined $5,000; Suspended 1 month in Principal Capacity only

The Firm failed to establish, maintain and enforce an adequate supervisory system and written procedures to detect statutorily disqualified individuals and to ensure the reporting of disclosable events as required by NASD Rule 3070. The Firm did not report to FINRA that it was associated with a person subject to statutory disqualification. 

Trade Station Securities, Inc.: Censured; Fined $15,000

The Firm failed to establish and maintain adequate written supervisory procedures relating to the conduct of private placements, and did not maintain required books and records in connection with the private placement offerings in that it failed to maintain all of the subscription agreements that customers who invested in the offerings completed and submitted, and any type of confirmation reflecting these investments. 

Marquis Financial Services, Inc.: Censured; Fined $13,500

The Firm 

• failed to evidence approval of research reports and to properly disclose securities holdings in research reports; 
• failed to, enforce procedures to ensure compliance with FINRA rules requiring approval of research reports, establish and maintain a supervisory system reasonably designed to ensure that disclosure of securities ownership complied with FINRA rules, promulgate and enforce firm policies and procedures concerning review of employee electronic communications with the public that comported with the standards set forth in FINRA rules; 
• failed to request and receive duplicate statements for employee brokerage accounts in contravention of its policies and procedures;
• was unable to evidence requests or approvals of dual employment for employees as required by its policies and procedures;
• failed to evidence that it conducted annual branch inspections;
• failed to file an accurate Annual Compliance Report for one year;
• failed to report customer complaints;  
• unable to evidence that it timely filed Uniform Termination Notices for Securities Industry Registration (Forms U5) and that its Compliance Registered Options Principal regularly furnished the required options activity reports to the compliance officer and other senior management;
• failed to file an accurate annual attestation regarding NYSE Rule 472; and
• failed to make and keep accurate records of the computation of aggregate indebtedness. 

Ladenburg Thalmann & Co., Inc.: Censured; Fined $200,000

The Firm participated in private placement offerings of preferred stock that an affiliate issued, and each offering claimed an exemption from registration under the Securities Act of 1933, when the offerings were not separate and distinct, and were, therefore, subject to integration. None of the offerings that were offered and sold were registered with the SEC. As a result of the offerings becoming integrated into one offering, the exemption under Regulation D of the Securities Act of 1933 did not apply and the offerings were subject to the securities registration requirements of public offerings. The private placement memoranda for the offerings failed to disclose to customers the existence of the common control of the issuer and the firm. The firm failed to provide or send written disclosure of such common control at or before the completion of the transactions with the customers. 

Bennett Ross, Inc.: Censured; Fined $20,000

Acting under Davis’ direction and control, the Firm participated in private placements of securities. The private placement memoranda for the offerings provided that the offerings were contingent upon receiving subscription agreements for established minimums, and the financing agreements provided that the escrow agent shall promptly return all escrowed funds to the investors should the contingencies not be met. The business bank accounts were established in the issuers’ names, into which the offering proceeds were deposited, and these business accounts failed to conform to the requirements of SEC Rule 15c2-4 for accounts holding investor funds pending satisfaction of an offering contingency. 

Paulson Investment Company, Inc. and Trent Donald Davis: Censured, Fined $10,000 jt/several; Required to provide certification that the firm has complied with SEC Rule 15c2-4 to FINRA within 10 business days of the closing of all contingent offerings conducted by the firm during the 12 months following acceptance of this AWC.

Windham and Constantin 

• refused to allow FINRA staff to enter the firm’s branch office to examine the firm’s books and records, and to otherwise conduct an on-site examination;
• failed to respond to FINRA requests for documents and information, and
• have not established the existence of the vast majority of the books and records that the firm is required to make and preserve.

Acting through Constantin, Windham failed to maintain and preserve numerous books and records required pursuant to Securities and Exchange Commission (SEC) Rules 17a-3 and 17a-4, and NASD Rule 3110. 

Windham Securities, Inc.: Expelled

Joshua Constantin (Principal): Barred

Chief Compliance Officer Strong failed to supervise a research analyst who sold securities in his personal trading account contrary to the recommendations contained in various firm research reports, and allowed the trader to execute purchase transactions during the blackout periods. Strong failed to include, or included insufficient or inaccurate required disclosures in research reports, and failed to timely file an annual attestation of supervisory procedures for research analysts.

http://sec.gov/litigation/opinions/2008/34-57426.pdf

Robert Eugene Strong: Fined $10,000

In sustaining these sanctions, we note that NASD's National Adjudicatory Council ("NAC"), which considered Strong's appeal from NASD's hearing panel, reduced the sanctions from the nine-month supervisory suspension and $15,000 fine imposed by the hearing panel. In reducing the sanctions, the NAC noted that it did "not find Strong's violations to be egregious" as had the hearing panel. The NAC considered "the circumstances under which Strong was operating," finding that Strong was "the sole compliance person in a 40-person firm that had previously neglected compliance." The NAC also considered, as mitigating, that the misconduct at issue occurred "within months of Strong's joining the Firm and when Strong was attempting to fulfill the broad-based compliance responsibilities put upon him." According to the NAC, "Strong was overwhelmed by the enormity of the responsibilities [and] . . . not equipped to undertake the responsibilities required of him at the Firm." In addition, the NAC found that Strong did not "personally benefit in any way" from his misconduct. Based on those considerations, the NAC determined that "the minimum sanction suggested in the Guidelines for the supervisory and disclosure violations" was "appropriate."

Walsh misappropriated stock and mutual fund shares valued at $2,057,248.52 from his member firm, sold the stock and made personal use of the proceeds. Walsh misappropriated $198,574.50 from a credit union affiliated with his firmby procuring a line of credit and creating false holdings in stock at his firmt o secure the loan. 

John Patrick Walsh: Barred

Stewart accepted $445,914.13 from an elderly public customer for investment in a corporation he organized and owned, and failed to issue the customer any ownership interest. Rather than using the funds as intended, Stewart converted the funds to his own use and benefit by depositing the funds into the corporation’s bank account and paid personal expenses directly from the account or transferred funds to his personal bank account, thereby converting the funds without the customer’s knowledge or consent.

Robert Kyle Stewart: Barred

Pramer altered customer telephone records at his member firm by deleting or inaccurately updating the numbers to slow down other registered representatives at his firm that he believed would be assigned to call his customers after he resigned. By changing customer telephone numbers, Pramer caused his member firm to create and maintain inaccurate books and records. 

Joseph Aloyisius Pramer III: Fined $5,000; Suspended 30 business days

Patton prepared and submitted a 403(b) ERISA Distribution Request form on a public investor’s behalf authorizing the distribution of 403(b) assets to a rollover IRA at his member firm. Although the investor had consented to the transfer of her 403(b) assets, she was ineligible because she was currently employed by the 403(b) plan sponsor. Patton was aware of her ineligibility, but provided false employment status information and forged the plan administrator’s signature on a distribution form to facilitate the rollover. 

Monty Chad Patton: Fined $5,000; Suspended 18 months

Noragon failed to cause his firm to conduct an annual compliance meeting, and failed to ensure that Offices of Supervisory Jurisdiction (OSJ) and non-OSJ branch offices were examined and the examinations documented. Noragan approved his member firm’s participation as an underwriter in securities offerings without ensuring that the prospectuses used in connection with the offerings contained adequate disclosures and were not materially misleading. 

Raymond Lee Noragon: Fined $25,000; Suspended 6 months in Principal Capacity only.

Moni recommended concentrated positions in the security of a clinical-stage drug development company to customers of his member firm. The concentrated positions were unsuitable for Moni’s customers in light of their financial profile, personal circumstances and limited ability to withstand loss. 

Charles James Moni: Fined $10,000; Suspended 3 months

Meadows borrowed $30,000 from a customer who was also a personal friend, but he did not obtain consent from the firm to borrow from the customer when the firm’s written procedures prohibited registered persons from borrowing from customers except under certain circumstances and also required the firm’s prior review and approval. Meadows failed to disclose the loan when completing the firm’s annual compliance questionnaires. 

Robert Brian Meadows: Fined $7,500; Suspended 90 days

Mathis used his manager’s user identification and password to make unauthorized credits to his brokerage account at his member firm and to his bank account at his firm’s bank affiliate. Mathis credited a total of $1,205 from the firm account used to provide credits to customers to which he was not entitled. Also, he failed to respond to FINRA requests for documents and information. 

Frederick Lee Mathis: Barred

McKinney was assigned a corporate credit card by an affiliate of hismember firm and, without the knowledge, authorization or consent of the affiliate or the firm, 

• used the credit card to purchase merchandise for his personal benefit and purchased additional merchandise for his personal benefit which was billed directly by the vendors to the affiliate; and
• sold some of the merchandise that he obtained and retained the proceeds of the sales. 

McKinney failed to respond to FINRA requests for information. 

Matthew T. McKinney: Barred

McCarthy 

• permitted an individual to perform functions requiring principal registration without being registered with FINRA in that capacity;
• failed to enforce his member firm’s written supervisory procedures requiring that a Watch/Restricted list be maintained while the firm participated in underwriting activities; and
• failed to file a Suspicious Activity Report (SAR) in connection with suspicious stock transactions and wire activity involving the sale of over one billion shares of a sub-penny stock from the account of one customer resulting in total proceeds of over $786,000. 

James Russell McCarthy Jr.: Fined $20,000; Suspended 2 months in Principal capacity only

Separately, not that there's all that much underwriting going on these days, but if you are venturing back into that arena, remember that you should always implement a Watch/Restricted List and make sure that its proscriptions are enforced.

Lorne made unauthorized withdrawals totaling approximately $12,101 from an organization for which he was treasurer, and hid the withdrawals from the organization’s officers and submitted false financial reports to the organization. Lorne converted the funds for his own personal use, except for a small amount that was for legitimate expense reimbursement, but repaid the organization after he was confronted about the unauthorized withdrawals. He engaged in outside business activities and failed to provide prompt written notice to his member firm, and made misrepresentations to his firm regarding any outside business activity. 

Nathan James Lorne: Barred

Lesko misappropriated $24,520 from customers’ accounts at the bank affiliated with her member firm. Lesko prepared fraudulent cash advance checks to cause unauthorized withdrawals from customers’ bank accounts and then deposited the funds into her personal bank account. 

Alexis Lesko: Barred

Lacour borrowed $5,000 from a customer contrary to his firm’s written supervisory procedures prohibiting registered representatives from borrowing from a customer without prior review and approval by the firm, unless the customer was a familymember or financial institution, which the customer was not. Lacour failed to pay the loan in full and failed to respond to FINRA requests for information. 

Bennett Joseph Lacour III: Barred; Ordered to pay $4,400 plus interest in restitution to customer.

The exact wording of the relevant part of FINRA's report, is that Kuklensi :

misappropriated $200 in customer funds from his member firm by removing the funds from a cash drawer after regular business hours. 

Derek Jon Kuklenski: Censured and Barred

Anyway, rant over, getting back to Kuklenski.  

I can't stand these euphemism cases. Here I thought that Bernie Madoff stole money by defrauding investors and I now learn that he merely "misappropriated" money by "removing the funds" from his client's accounts.  I mean, geez, would you wordsmiths at FINRA puhlease stop tidying up after these miscreants! Seems to me that Kuklenski stole $200 from a cash drawer.  Tell me where I'm wrong with that pointed rephrasing?

Finally, what the hell is a "Censure and Bar"?  Time and time again you just Bar the respondent and be done with him.  Why did this character wind up with a Censure--and who the hell cares about that wet noodle anyway?

In order to obtain authorization for withdrawals totaling $37,299.55 for a public customer directly from her IRA securities account, Kleinerman completed a distribution request form, dated the form in her own handwriting, affixed a photocopy of the customer’s signature onto the form and submitted it to her member firm. Kleinerman used a photocopy of the customer’s signature several times on distribution request forms with the customer’s full knowledge or consent. 

Jill A. Kleinerman: Fined $2,500 in light of her financial status; Suspended 30 days

It's nice that FINRA "only" hit Kleinerman with a $2,500 fine. It's also incredibly charitable to "only" suspend her for 30 days. Me? I dunno.  Under the somewhat extenuating circumstances here, I'm not sure that a fine and suspension were both necessary, and I certainly don't see the need for the wallop of $2,500 (yeah, FINRA, in case you haven't figured it out, we're in a recession--that's a lot of money) and 30-days on the bench.

Still, there is an important issue here of protecting the public. I'm not downplaying that. I'm just suggesting that if you look at the facts in this case, I think another set of sanctions would have sufficed.

Jensen paid $18,000 to another firm’s trader and the trader’s relative so that the trader would continue to conduct his firm’s securities transactions through its account with Jensen. Also, while serving as the registered representative of record on a customer’s corporate account, Jensen shared in losses and gains in the account without written authorization from his member firm or the customer, and he did not share in the profits and losses in direct proportion to his financial contributions to the account. 

Patrick James Jensen: No fine in light of financial status; Suspended 1 year

Hayworth prepared and submitted 403(b) Employee Retirement Income Security Act (ERISA) Distribution Request forms on public investors’ behalf authorizing the distribution of 403(b) assets to rollover Individual Retirement Accounts (IRAs) at his member firm. Although the investors had consented to the transfers, they were ineligible for rollovers because they were currently still employed by the 403(b) plan sponsor, and Hayworth was aware of their ineligibility but provided false employment-status information and forged the plan administrator’s signature on each distribution request form to facilitate the rollovers. 

Chuck Richard Hayworth: Barred

After learning that a customer’s enrollment form in a mutual fund had been rejected because it was submitted more than 30 days after it had been signed, Geske signed the customer’s name on a new enrollment form without the customer’s authorization or consent rather than asking the customer to sign a new application. 

Carol Ann Geske (Principal): Fined $5,000; Suspended 1 month

Garcia directed an individual to telephone the insurance affiliate of his member firm for a client history interview and to impersonate an insurance customer to obtain approval of life insurance policies for the customer prior to the deadline date. 

David Garcia: Fined $5,000; Suspended 30 business days

Associated Person Fry, while associated with a member firm, she transferred, or caused the transfer of, $25,000 from a customer’s brokerage account to her personal bank account, without the customer’s knowledge or consent, by creating a false Automatic Clearing House Transaction Request Form to which she forged the customer’s signature and used the funds to pay personal expenses. The firm repaid the customer’s funds, plus interest, and then Fry repaid the firm. 

Peggy Lyn Fry: Barred

NASD found that Associated Person Craig willfully failed to disclose four felony charges and one misdemeanor conviction on his Uniform Application for Securities Industry Registration ("Form U4") in violation of NASD Membership Rule IM-1000-1 and Conduct Rule 2110.The SEC imposed the sanction following appeal of a NAC decision. The sanction was based on findings that Craig willfully failed to disclose material information on his Form U4. 

SEC Decision: http://sec.gov/litigation/opinions/2008/34-59137.pdf 

Jason Adam Craig: Barred

Chun created false documents by misrepresenting that a customer had not been previously declined life insurance on variable life insurance applications when, in fact, the customer had been previously declined life insurance. Moreover, Chun’s actions caused the firm’s books and records to contain false and misleading information related to the customer’s life insurance application history. 

Young Jin Chun: Fined $10,000; Suspended 1 year

Brunert fraudulently obtained a customer’s signature on a wire transfer form in order to misappropriate $100,000 from the customer. Brunert transferred the funds into a bank account that he and a relative controlled for his own use and benefit, and used the funds to pay credit card debts and other expenses. He failed to respond to FINRA requests for information and to appear for an on-the-record interview. 

Christopher John Brunert: Barred

Bickford converted $21,667.05 of nonsecurities to her personal use by effecting unauthorized journal transactions from her member firm’s suspense account to her personal brokerage account at the firm.  Bickford failed to fully respond to FINRA requests for information. 

Mary Mae Bickford: Barred

Berkoff failed to enter a stop-loss order a customer requested, and borrowed $8,000 from the customer in violation of his member firm’s procedures and NASD Rules 2110 and 2370. 

Michael Ross Berkoff: Fined $10,000; Suspended 30 business days

Bancroft misappropriated $10,500 worth of cash premium payments that he received from insurance customers for his personal use. He attempted to cover up his misuse of customer funds by depositing some of the more recent cash payments he received from customers into the accounts of other customers whose money he had previously misappropriated. 

Joe Russell Bancroft: Barred

The firm and Baldwin failed to respond completely and fully to FINRA requests for information. For a commentary on this interesting case, see The Cost of Telling a Regulator to Go To Hell (figuratively, that is) at http://www.brokeandbroker.com/index.php?a=blog&id=118  What makes this case particularly interesting -- if not edgy? For starters, consider this language from the SEC's decision:

Moreover, we find troubling the contradictory statements given by Enforcement's witnesses with respect to respondents' failure to respond to the final disposition letter.  The differing responses from Enforcement's witnesses, coupled with the confused nature of the FINRA examiner's testimony, raise considerable questions concerning the accuracy of Enforcement's general assessment that respondents did not respond completely to the requests...

CMG Institutional Trading, LLC and Shawn Derrick Baldwin: Fined $25,000 jt/severally and suspended 2 years in all capacities.

• prosecution's witnesses had "differing responses," 
• examiners for that prosecutorial organization gave "confused" testimony, and 
• SEC had "considerable questions concerning the accuracy" of one of the core issues in the case.

On three separate occasions, Rodriguez deposited $6.00 to an account she maintained at her bank through a bank automatic teller machine (ATM) but intentionally entered $600 into the ATM as the deposit amount. Immediately after each deposit, Rodriguez caused roughly $500 to be transferred directly from the account to which she made the deposits to a separate account she maintained at her bank to pay personal expenses. The funds transferred to the second account temporarily enabled Rodriguez to have sufficient funds in that account to satisfy all payments and withdrawals made against it. 

Gail Marie Rodriguez: Fined $5,000;Suspended 4 months in all capacities

While associated with a member firm, Resnik contacted former member firm clients to determine if they were interested in moving their accounts to his current member firm so that he could provide assistance with the accounts. Resnick telephoned clients who had not responded to his earlier calls or correspondence, and left messages advising that he was going to submit a request to his former firm to have them reassigned to him as their registered representative unless they instructed him otherwise. When the clients did not respond to his call, Resnick cut and pasted their signatures to broker of record change forms without their authorization or consent. As a result of his actions, Resnick was able to continue to serve as the broker of record for the customers’ mutual fund accounts, but his current firm terminated him for his misconduct and ultimately returned the accounts to his former firm.

Michael Julius Resnick: Barred

Acting on a member firm’s behalf, Pellegrino failed to develop an adequate supervisory system reasonably designed to achieve compliance with applicable securities laws, regulations and NASD Rules, and ignored “red flags” that should have resulted in additional supervisory scrutiny. Pellegrino’s supervisory failures resulted in firm registered representatives making unsuitable recommendations and misleading customers as to the risks of proprietary products over an extended time. Pellegrino facilitated the representatives’ misconduct by promoting sales to firm customers rather than improving compliance. He failed to enforce the firm’s written supervisory procedures regarding suitability determinations, and failed to take reasonable steps to monitor and have the firm perform appropriate individual suitability determinations based on each investor’s personal financial needs as prescribed in the firm’s supervisory and compliance manuals rather than solely on suitability guidelines. 

READ SEC Decision

Ronald Pellegrino: Barred in Principal capacity only.

O'Callaghan improperly priced various corporate bond positions in his proprietary trading book to improve the profit and loss totals reported in his book. His member firm became aware of the mismarkings during a routine reconciliation of his positions for daily mark-to-market purposes. The mismarkings resulted in his firm recording inaccurate prices for corporate bonds on its books and records. 

Matthew Edward O’Callaghan: Censured; Fined $10,000; Suspended 18 months in all capacities

Murray charged a customer at her member firm a fictitious account “maintenance fee”when her firm imposed no such fee on customers. Murray directed the customer to pay the fee by way of a personal check written out to “cash” for $4,025.61, which Murray subsequently cashed. 

Patricia Estela Murray: Barred

Mueller executed discretion in customers’ accounts without prior written authorization that hismember firm accepted. In certain instances, Mueller exercised time and price discretion after the business day on which the customer granted authorization to purchase or sell a definite amount of a specified security, without the customers’written authorization. 

Rudy Rinehart Mueller: Fined $10,000; Suspended 10 business days in all capacities

Kelly borrowed $5,000 from a customer contrary to his member firm’s written supervisory procedures prohibiting registered representatives from borrowing from a customer unless the customer was a family member; and the customer was not related to Kelly. 

William Francis Kelly: Barred

Hagan evaded an Internal Revenue Service (IRS) garnishment of wages order by routing commissions he earned to an unregistered person at his member firm. Also, he willfully failed to disclose material information on his Forms U4. 

Joseph William Hagan: Fined $10,000; Barred in Principal Capacity; Suspended 3 months all capacities

De Zoysa published research reports in which she made false, exaggerated, unwarranted or misleading statements, and published the reports, which she knew were false or misleading. De Zoysa was involved in a romantic relationship with an executive of a company within her coverage area and failed to disclose the relationship, which created an actual, material conflict of interest. In contravention of her firm’s directive, De Zoysa created and deleted documents on her laptop computer after commencement of the firm’s internal investigation. 

Dhulsini Hemani De Zoysa: Fined $10,000; Barred in any capacity requiring the Research Analyst Series 86 (Analysis) and/or Series 87 (Regulatory Administration and Best Practices); Suspended 12 months in all capacities.

Clarkson 

• submitted variable life insurance applications for customers to his member firm, signing customers’ names on various documents without the customers’ knowledge, authorization or consent; and
• created checks purporting to be from the customers (or purchased money orders with his own funds, signing the customers’ names to the money orders) and submitted them with the insurance applications to his member firm without the customers’ knowledge, authorization or consent. 

By engaging in this conduct, Clarkson received $41,667.98 in commissions from his firm, which subsequently reversed the commissions. 

Patrick Vern Clarkson: Barred

Chen engaged in misuse of customer funds when, without a customer’s knowledge, authorization or consent, he caused the transfer of $10,000 from the customer’s bank account to the bank account of a business acquaintance to whom Chen owned money. The Firm’s operations personnel detected the transaction and then Chen reversed it. 

Bill Q. Chen: Barred

Call supplied price quotes to a propriety trader at another broker dealer without any independent verification of the accuracy of the prices, but made it appear as if he were providing good faith price quotes. Had he attempted to verify the actual market prices of the corporate bonds at issue, he would have known that the pricing information he re-sent to the trader was inaccurate. The other trader relied on the inaccurate prices quotes to mark positions in his trading book, thereby enhancing his profit and loss statement at his firm, causing the firm to record inaccurate prices for corporate bonds on its books and records. 

Christian Powers Call: Censured; Fined $5,000; Suspended 45 days in all capacities

StockCross failed to preserve all employee electronic communications, including personal email and instant messaging services. The Firms written procedures failed to provide for any reasonable follow-up and review to ensure that electronic communications were, in fact, being printed out and reviewed, and because it failed to adequately preserve employee electronic communications, it could not show that it was reviewing and approving them. The Firm failed to demonstrate that it was preserving or reviewing facsimile communications that branch office employees sent or received. The Firm failed to make and preserve books and records related to customer accounts, and failed to maintain a record of the individual at a branch office who could explain the types of records maintained at that branch and the information contained in the records. 

StockCross Financial Services, Inc.: Censured; Fined $60,000

Schonfeld accepted customer short sale orders in certain securities and, for each order, failed to make/annotate an affirmative determination that the firm would receive delivery of the security on the customer’s behalf or that the firm could borrow the security on the customer’s behalf for delivery by settlement date. In connection with orders, the firm effected short sales in certain securities for its proprietary account(s) and failed to make/annotate an affirmative determination that the firm could borrow the securities or otherwise provide for securities’ delivery by settlement date. The Firm accepted short sale orders in an equity security from another person, or effected short sales in an equity security for its own account, without borrowing the security, or entering into a bona fide arrangement to borrow the security; or having reasonable grounds to believe the security could be borrowed so that it could be delivered on the date delivery is due; and documenting compliance with SEC Rule 203(b)(1) of Regulation SHO. The Firm failed to provide documentary evidence that it performed the supervisory reviews set forth in its written supervisory procedures concerning NASD Rule 3370 and SEC Rule 203(b)(1). Also, the Firm failed to timely report Reportable Order Events (ROEs) to OATS. 

Schonfeld Securities, LLC: Censured; Fined $47,500

National failed to establish, maintain and enforce an adequate supervisory system and written supervisory procedures to supervise its securities lending business and registered securities lending representatives to prevent and detect fraudulent activity. 

The Firm failed to

• include a description of 
  • what managers were to look for in reviewing Loanet reports, 
  • the steps to be taken if questionable activity was discovered, and 
  • how to document and maintain documentation of supervisors’ oversight activities;
• failed to take steps to detect and prevent a registered representative from participating in fraudulent stock loan transactions for his personal benefit;
• establish and maintain a separate system of follow-up and review to ensure that delegated supervisory authority and responsibility were being properly exercised. 

National permitted a stock loan supervisor to review his own transactions. 

National Investor Services Corp.: Censured; Fined $75,000

EuroPacific failed to

• timely adopt a written Anti-Money Laundering (AML) program, provide AML training and respond to information requests from the Financial Crimes Enforcement Network of the U.S. Department of the Treasury;
• file an application to obtain FINRA’s approval for a material change in its business operations when its minimum net capital increased due to the receipt of customer checks; and
• establish and maintain a supervisory system and written procedures reasonably designed to ensure compliance with rules concerning best execution of customer foreign securities transactions. 

Also, the Firm's Website did not present balanced discussions of risks and contained misleading, exaggerated and unwarranted statements, and contained comparisons of services that failed to disclose all material differences. 

EuroPacific Capital, Inc.: Censured; Fined $37,500

The Firm failed to accurately complete Forms U5 following the termination of registered representatives alleged to have committed theft, fraud or violations of investment-related rules. The failure to complete Forms U5 hindered the investing public’s ability to access information regarding the termination of registered representatives. Also, the Firm failed to establish and maintain a supervisory system and written procedures reasonably designed to achieve compliance with its obligation to complete and submit accurate Form U5 filings to FINRA. 

Chase Investment Services Corp.: Censured; Fined $150,000

Acting through Kaplan, LF Financial failed to

• report, or timely report, disclosable settlements and disclosable regulatory orders; 
• timely file summary and statistical information for customer complaints that the firm received. 
• file a Uniform Application for Securities Industry Registration or Transfer (Form U4) amendment and failed to timely file amendments to Uniform Applications for Broker-Dealer Registration (Forms BD), Forms U4 or Uniform Termination Notices for Securities Industry Registration (Forms U5). 

LF Financial, LLC: Censured; Fined $15,000 jt/several with Kaplan

Jed Philip Kaplan (Principal) Censured; Fined $15,000 jt/several with LF Financial

Acting through Dash, Hallmark 

• filed a membership application that was incomplete or inaccurate so as to be misleading, and failed to correct the filing, and T
• failed to file a required application with FINRA for approval of change of ownership. 

Dash engaged in private securities transactions without providing prior written notice to his member firms or securing the firms’ written approval. 

Hallmark Investments, Inc.: Censured; Fined $15,000

Steven Gary Dash (Principal) No Fine in light of financial status; Suspended 2 months in all capacities

Acting through Itzen, Choice 

• approved a research report for a company that was issued to the firm’s customers, but did not contain a disclosure that the firm had received compensation for investment banking services from the company, and
• failed to ensure that the research reports contained such disclosure. 

Choice issued subsequent research reports that did not contain such disclosure. 

Choice Investments, Inc.: Censured; Fined $20,000 ($10,000 Jt/severl with Itzen)

Donald Arthur Itzen (Principal): Fined $10,000 jt/sev with Choice; Suspended 20 business days in Principal capacity only.

Smith failed to

• enforce his member firm’s supervisory procedures concerning the review of outgoing written correspondence of registered representatives to ensure that communications with the public were not false or misleading; and
• ensure that his firm’s compliance department pre-approved correspondence sent to more than 10 individuals. 

Michael Francis Smith: Censured; Fined $10,000

Thomason entered false information in the firm’s records by providing incorrect answers on firm forms, thereby concealing his violations of its policies. Thomason violated the firm’s policies when customers, who were not related to him, purchased fixed annuity policies through him and made him their beneficiary without the firm’s prior written permission. Thomason received a customer’s mail at his home or at an address he controlled contrary to his firm’s written policies and without written authorization. 

Gerald Lee Thomason: Barred

In response to customers’ requests to withdraw funds from bank-issued instruments each owned, Stain accessed the computer system of a bank affiliated with her member firm, and, in violation of the bank‘s internal policies and without its authorization, caused the customers’ instruments to be liquidated in a manner that enabled them to avoid fees and/or charges that they otherwise would have incurred. This unauthorized conduct caused the bank to lose revenue to which it was entitled.

Kimberly Ann Stain: Fined $5,000; Suspended 2 years

What?  You think I'm going a bit overboard here? You're entitled to your opinion, even if it's wrong.  Anyway, this is my website.  You don't like it...go start your own.

Sirota attempted to settle a customer complaint by sending the customer a check and a letter for her to sign retracting the complaint, without providing prior notice to his member firm or obtaining the firm’s consent. 

Ronald Harris Sirota: Fined $5,000; Suspended 10 business days

McGarrah instructed his assistant to withdraw $60,000 from the joint account of his customers, who were relatives, and make the check payable to them, forged their signatures on the issued check and deposited it into his personal account, without their knowledge or consent. McGarrah subsequently wrote a letter on firm letterhead, informing the customers that the withdrawal was an error and was being rectified, and forged the signature of a supervisor who was no longer employed at the firm to conceal his conversion of customer funds. McGarrah failed to appear for a FINRA on-the-record interview. 

Richard Allen McGarrah: Barred

Markovich borrowed $14,480 from a firm customer, contrary to his member firm’s compliance manual prohibiting borrowing money or securities from a customer. 

L. Vincent Markovich: Fined $5,000; Suspended 10 business days

Kiley received $20,382.07 in compensation for participating in the sale of life settlements totaling $160,601.24, and failed to give prior written notice to, or receive prior written approval from, his member firm. The compliance manual for Kiley’s member firm explicitly prohibited the sale of viatical and life settlements. 

Donald Walter Kiley: Fined $5,000; Suspended 3 months

Here's my question: Any of these high-placed regulator types ever think that maybe we should set up a national data bank in which we monitor all financial services transactions and require fingerprints and social security numbers for all salesperson (oh, yeah, I forgot -- we already do require that stuff...okay, sorry again, just me being incredibly sarcastic).  So, you know, like maybe any time a Donald Walter Kiley is the salesperson for a stock, bond, commodity, insurance policy, mortgage, his name could be cross-referenced by computer to see if his legally qualified to engage in such sales and that same amazing computer could generate form letters to notify all of his current employers as to his varied sales activities -- you know, just in case a brokerage firm might want to know that its written procedures were being violated?  What's the point of all these rules and regulations if they are only enforced in the breach?  

Jaramillo acted unethically and failed to deal fairly with a customer by inducing him to provide funds for an investment by falsely describing the investment as "risk free" and guaranteed a 35% return within 10 weeks; after 10 weeks, falsely told the customer he had sent payment; sent several checks backed by insufficient funds; and failed to repay the customer's funds until two years later. Jaramillo failed to respond to FINRA requests for information. 

Armando Jaramillo Jr.: Barred

Goldberg falsified information on wire authorization forms for customers who had ordered wire transfers, and submitted the falsified forms to his member firm. He fabricated a notary’s signature and commission stamp impression on a customer’s wire authorization form. Goldberg failed to appear for a FINRA on-the-record interview. (FINRA Case #)

Eric Steven Goldberg: Barred

http://registeredrep.com/mag/finance_signed_sealed_suspended/

Garretson falsely represented to New York Stock Exchange (NYSE) Regulation examiners that his member firm did not employ any interns at the firm’s branch office. Garretson denied to the regulators that the branch office he supervised employed non-registered cold callers who used telemarketing scripts. Garretson instructed staff at the branch office that, if asked, the branch office employees were to tell the regulators that there were no interns employed at the branch office. Garretson purposefully failed to correct his misleading statements to the regulators. 

Rodney Scott Garretson: Fined $5,000; Suspended 6 months in all capacities

Epstein received $280,500 from customers in their nineties to hold for distribution to a relative upon their deaths. Epstein deposited the funds in an account for a business he operated and distributed the funds to individuals other than the customers. Epstein knew that his member firm prohibited his acceptance, commingling and misuse of the customers’ funds, and after the firm discovered his activities, he repaid the customers. Also, Epstein failed to fully and timely respond to FINRA requests for information and documentation. 

Keith Lowell Epstein: Fined $10,000; Suspended 2 years in all capacities

Devastey completed documents for a customer to purchase a life insurance policy without the customer’s knowledge or consent, back-dated the documents and forged the customer’s signature on the documents. Devastey wrote a check from a closed checking account to pay the initial premium on the insurance policy, wrote the customer’s name on the check and forged the customer’s signature on it. Devastey submitted, or allowed the submission of, the documents for processing, and Devastey admitted to the forgeries only after the check bounced and the customer was asked to make the initial payment. 

Clifford Dominick Devastey: Fined $5,000; Suspended 2 years in all capacities

Burgos falsified customers’ signatures on documents to effect transactions the customers requested, lthough they did not expressly give her permission to sign their names. Burgos’ member firm detected an instance where she falsified customer signatures and confronted her about it. Burgos admitted to the falsification of these signatures only, but later admitted to the additional falsifications when the firm discovered them. 

Maria Antonia Burgos: Fined $5,000; Suspended 1 year in all capacities.

Brochu and Schlesinger sold Class B units pursuant to a private placement memorandum containing inaccurate financial projections. Brochu and Schlesinger worked on the private placement memorandum, and Brochu supervised registered representatives who worked on the memorandum’s financial projections. Brochu discovered inaccuracies in the financial projections contained in the memorandum and reported them to firm managers, but incorrectly determined that the inaccuracies were not material and did not disclose them to customers who had purchased the securities. Schlesinger accepted the determination that the inaccuracies were not material and should not be disclosed. Brochu and Schlesinger continued to use the inaccurate private placement memorandum to sell additional units. Acting through Brochu, a member firm failed to establish, maintain and enforce a reasonably designed supervisory system and written procedures regarding its registered representatives’ private securities transactions. 

David Francis Brochu (Principal): Fined $20,000; Suspended 15  business days in all capacities

Jill Schlesinger (Principal): Censured; Fined $10,000

Seems to me that we have a fairly diligent Principal who actually read the memo and said: Hmmm, this doesn't look right, let me bring it to my boss' attention. Since FINRA doesn't tell us that the firm's management decided that the projections were materially inaccurate, I'm going to assume that such did not occur (why?  Well, because, as FINRA says, that fact would be a material fact in this case and the regulator would certainly disclose that.) Similarly, since FINRA doesn't explain to us the nature of this material inaccuracy, I'm again going to assume that it's just not such a clear-cut error or the regulator would have taken the time to elucidate.  So, Brochu is fined a whopping $20,000 and suspended for half a month because he found a mistake, told his firm, and mistakenly assumed that the goof was immaterial.  C'mon -- since none of this appeared to be intentional, why the hell did FINRA load up on this guy?  And don't even begin to get me started as to why Schlesinger got fined $10,000.  

Bottom line: Why wouldn't a simple cautionary letter have been just as meaningful as the dollars and downtime in this specific case, with these specific facts.  An unintentional mistake is not going to be prevented by such a fine or suspension.  This just strikes me as an excuse to ring the cash register and act like a tough guy.

Please see an interesting Blog discussion of this case at

http://www.brokeandbroker.com/index.php?a=blog&id=154

and then an unexpected revelation at 

http://www.brokeandbroker.com/index.php?a=blog&id=155

Benz manipulated the thinly traded common stock of an oil and gas exploration company by making trades in a customer’s account and making a market in the company’s common stock. Benz opened an account at his member firm for a corporate customer, and that Benz’ close relative, who was the controlling manager of a hedge fund with a significant position in the company, controlled the account. Benz effected trades in the company’s stock in the account to create activity and raise the price of the stock for the purpose of inducing others to purchase it. Benz traded at the end of the month, which inflated the month-end value of the hedge fund, and in turn increased its monthly management fees, which benefited Benz’ relative. Benz earned about $87,750 in trading commissions. Benz failed to respond to FINRA requests for documents and information, and to appear for an on-the-record interview. 

Paul Joseph Benz: Barred

Bell failed to follow-up on “red flags” indicating possible misconduct by a registered representative. He failed to investigate why many of the representative’s accounts had “sellouts,” and why certain of the representative’s new customer accounts failed to pay for securities purchases that had appreciated in value. Bellia failed to adequately enforce his member firm’s heightened supervisory measures against the representative. 

Robert Anthony Bellia Jr.: Fined $10,000; Suspended 10 business days in all capacities; Suspended 90 days in Principal/Supervisory capacities only.

Kudos to FINRA on this one.  Maybe you could promote the staff that handled this case?

Ayre failed to take appropriate action to supervise a firm registered representative reasonably designed to prevent him from permitting an unregistered individual from conducting a securities business with firm customers. Ayre ignored “red flags” indicating possible misconduct, failed to conduct any meaningful review of the registered representative’s activities, and never conducted an internal inspection of his office. Acting through his member firm, Ayre failed to establish, maintain and enforce a supervisory system and written procedures to supervise the activities of each registered person that were reasonably designed to achieve compliance with the applicable rules and regulations in the following areas: discretionary accounts, branch operation supervision, heightened supervision, form filings, business continuity planning, net capital requirements, Regulation S-P, transaction reporting and variable product suitability. 

Timothy Tilton Ayre: Fined $10,000; Suspended 1 month in Principal Capacity only.

Legent failed to develop and implement a written AML program reasonably designed to achieve and monitor its compliance with Bank Secrecy Act requirements. The written AML program did not adequately consider the money laundering risks its introducing firms posed; some of which were conducting high risk AML activities. The AML training program was deficient, and that the firm failed to provide an adequate AML training program for new and existing employees. The Firm failed to file, and to timely file, Suspicious Activity Reports (SARs), and failed to document any internal discussions it might have had, or the reason for any decision that it might have made, not to file an SAR. The Firm effected improper trades by permitting customers to sell securities in cash accounts before making full cash payment, which was in violation of Regulation T, and failed to properly restrict accounts from trading subsequent to this activity. The Firm failed to ensure that, for each transaction in a cash account, full cash payment was made within two days of the settlement of each purchase, regardless of whether or when the security was sold, and the firm’s written supervisory systems and procedures did not adequately address the Regulation T provisions. The Firm failed to make accurate reserve computations. 

Legent Clearing LLC: Censured; Fined $350,000; Required to adopt and implement policies and procedures reasonably designed to ensure compliance with Parts 220.8(a) and 220.8(b) of Regulation T, and to have an officer of the firm certify to FINRA, in writing within 60 days, that the firm has adopted and implemented such policies and procedures.

The Firm's AML procedures were not tailored to reflect its business model, but instead used procedures designed for retail firms although it was not a retail brokerage firm. The section identifying “red flags” of suspicious activity copied examples in NASD Notice to Members 02-21 and were not modified to reflect issues that might arise in its wholesale trading business. The findings also stated that the firm’s supervisory procedures and compliance manual were not cross-referenced to the AML procedures, and failed to give employees guidance on what action to take in an AML context if suspicious activity was detected. The Firm’s failure to customize its AML procedures to its business left employees to devise their own red flags to address the firm’s market-making activities and to determine how to apply AML procedures. 

Hudson Securities, Inc.: Censured; Fined $10,000

But why is it that firms like Hudson always wind up with the same issue? Why do FINRA members try to copy other's WSPs or wind up filling pages with cut and pastes from FINRA's website or other sources--and, admittedly, the result isn't exactly pretty to look at or often tailored for the member firm?  You read your firm's WSPs within the last year? You even know where the WSP are in your firm? Yeah, I didn't think so.  This isn't regulation. This is going through the motions.

I read the lecture from FINRA about things not being cross-referenced and a lack of guidance to employees.  I mean, geez, we all know how very, very helpful cross-referencing is and that employees daily (hell, hourly) use the WSPs to ensure that they are always doing the correct thing (okay, you got me again -- more dripping sarcasm).  And, for extra measure--you know, that one last unnecessary punch from the bully--we're told that because the firm didn't have the AMLs FINRA wanted ,that its poor employees were left to figure out how to make sure the company's market making was AML compliant. Talk about loading up that last punch.

Look, the problem here is two-fold. One is the fiction that WSPs do anything.  Fact is, these written documents could be helpful but they've become so swollen with nonsense and fanciful language that they are little more than door stops. And don't blame me for that -- I'm just telling it like it is.  Two is the sanction here: a whopping $10,000 fine for what...failing to add more useless information to a useless document?  I'm not sure that a $100 or $1,000 fine isn't just as meaningful here.

Acting through Jahre, the Firm filed a misleading and inaccurate Uniform Termination Notice for Securities Industry Registration (Form U5) in connection with a registered representative’s termination. 

Hedge Fund Capital Partners, LLC: Censured; Fined $10,000

Howard Gordon Jahre: Fined $10,000; Suspended 10 business day in Principal Capacity

The Firm 

• prepared and maintained inaccurate customer reserve formula computations and failed to make required deposits to its Special Reserve Account as required by the Securities Exchange Act, and failed to notify FINRA of its failure to make the deposits;
• prepared and maintained an inaccurate net capital computation, trial balance and general ledger, and filed a materially inaccurate Financial and Operations Combined Uniform Single (FOCUS) report in which it overstated its net capital;
• failed to conduct an accurate box count (in that there were certificates in the box for positions that were not on the firm’s stock record, and the amount of shares in the box did not match the firm’s stock record); 
• failed to maintain an accurate securities position record, and did not take steps to obtain physical possession or control of securities failed-to-receive by initiating a buy-in procedure or otherwise in automated customer account transfers (ACATs) failures and customer-related fails; 
• failed to liquidate, or timely liquidate, unpaid-for customer securities positions in cash accounts as required by Regulation T, and permitted customers to purchase securities in accounts that were frozen pursuant to Regulation T without having cash on deposit for the purchases, and failed to liquidate customer positions in a timely manner in customer margin accounts that fell below FINRA’s maintenance margin requirements;
• permitted an individual to act as its operations manager and to perform functions requiring registration as a Financial and Operations Principal (FINOP) when she was not so registered, and also employed a chief compliance officer who was not registered with the firm as a general securities principal or registered in any capacity with the firm;
• had not recently conducted an independent test of its anti-money laundering (AML) compliance program, failed to provide prompt notification to FINRA of the change of its AML compliance officer, failed to conduct ongoing AML training for appropriate personnel, and its AML compliance program was inadequate in that it failed to establish policies and procedures that could reasonably be expected to detect and cause the reporting of suspicious transactions;
• failed to maintain all internal electronic correspondence on non-erasable, non-rewriteable media, and its supervisory system was deficient in that registered persons could delete emails at will, and its written procedures were deficient because they lacked details or explanation;
• failed to maintain a continuing and current firm element continuing education program;
• failed to establish and maintain a reasonable supervisory system for financial and credit risk management relating to its correspondent business;
• failed to reasonably supervise its operations system conversion and its operations activities to detect and/or prevent violations including, but not limited to, inaccurate box counts, position records, buy-in procedures, Regulation T and NASD Rule 2520,maintenance of electronic correspondence and customer account transfers;
• engaged in the practice of improperly liquidating customer money market fund positions and failing to sweep customer free credit balances into customer-designated money market funds or a bank deposit account to create cash flows to meet its daily settlement obligations;
• failed to maintain and provide account documentation to FINRA for accounts liquidated to meet its daily settlement requirements, and failed to comply with FINRA’s Uniform Practice Code in that it validated account transactions and transfers late; and
• failed to report to FINRA, for itself or for any of its correspondent firms, daily INSITE information regarding the number and type of transactions conducted each day, the dollar value of the transactions, the net liquidating equity in proprietary trading accounts, the dollar amount of unsecured customer debits, information about margin debits, and calls in customer accounts and short interest information. 

North American Clearing, Inc.: Expelled

Without a bank customer’s authorization or consent, Slusher transferred $4,000 from the customer’s account to an account he had opened in a fictitious customer’s name, then withdrew $300 from that account for his own use and benefit. Slusher also failed to respond to FINRA requests for information. 

Michael Slusher: Barred

Savage altered a subscription agreement by signing a customer’s initials on the agreement after the customer had failed to initial one section of the agreement. Savage’s firm had both a specific policy prohibiting the alteration of subscription agreements and a more general policy requiring that firm records be truthful and accurate. Savage acknowledged that she was aware of the firm’s policy against alteration of documents and knew it was a violation when she initialed the paperwork on the customer’s behalf. 

Diane Jo Savage: Fined $5,000; Suspended 30 days in all capacities

Russell loaned $150,830 to a firm customer, but her member firm had policies prohibiting this activity, and she neither had permission to loan the funds, nor did she make her firm aware of the loans to the customer. Also, Russell engaged in an outside business activity, for compensation, without providing verbal or prompt written notice to her firm. 

Yvonne Yuliene Russell: Fined $10,000; Suspended 30 business days in all capacities

Roberts borrowed $10,000 from a public customer without written approval in accordance with his firm’s written procedures, and engaged in an outside business activity with the expectation of compensation without prompt notice, written or otherwise, to his member firm. 

Daniel Joseph Roberts: Fined $10,000; Suspended 100 days in all capacities

Pan completed and submitted to his member firm variable universal life insurance applications for public customers on which he falsified the customers’ states of residence in order to circumvent state registration requirements because Pan was not registered in the states in which the customers resided. Also, Pan provided false financial information on an insurance application in connection with the purchase of a life insurance policy by a corporation he owned in order to obtain approval of the policy. 

Jeff Yuejian Pan: Fined $5,000; Suspended 18 months in all capacities

Nord loaned to or borrowed from firm customers amounts ranging from $4,000 to $500,000, sometimes on more than one occasion, without his member firm’s written approval in accordance with the firm’s written procedures. Nord engaged in an outside business activity, for compensation, without prompt notice, written or otherwise, to his member firm, and failed to respond to a FINRA request to appear for an on-the-record interview. 

Brian Robert Nord: Barred

May misappropriated $437,000 from a trust account for which an individual at his member firm acted as trustee. May transferred the funds to his own bank account by forging transfer requests with the trustee’s signature, without having provided May with authority to sign his name or to effect the transfers. 

Fred Luther May III: Barred

Kimbrough borrowed $10,000 from a public customer and the loan document was re-executed in the loan amounts of $10,600 and $7,200. Kimbrough borrowed the funds without his member firms’ written pre-approval. Kimbrough signed a firm annual certification form in which he represented that he understood that borrowing from a customer was prohibited. 

Danny Lynn Kimbrough: Fined $5,000; Suspended 3 months in all capacities

Helton owed a bank $533 in overdraft charges and other charges to her checking account; wrote a check from another checking account for $533, knowing she had inadequate funds in the account and submitted the check to the first bank, but the check was returned for non-sufficient funds. Helton failed to respond to FINRA requests for additional information. 

Amalia Lillian Helton: Barred

Guckert promised in an oral agreement to provide a financial service plan to a customer for two years and, instead of complying with the terms of the agreement and forwarding the customer’s funds to his member firm’s corporate office, Guckert endorsed the check and deposited it in an unknown account. Guckert provided some financial planning advice to his customer over a short time period, but resigned from his firm without notifying the customer that he would not be providing further services, and failed to return any of the funds paid by the customer for the agreed-upon services. 

Jeffrey David Guckert: Barred

Gossett made unsuitable investment recommendations to public customers, in that they were inconsistent with each customer’s financial situation, investment objective, circumstances and needs. In verbal and written communications with customers, Gossett made misleading or unwarranted claims about his investment strategy, particularly regarding investment risks, and made predictions or projections of the future performance of the strategy without providing a sound basis for evaluating his assertions. Gossett prepared and distributed to prospective customers sales literature about his investment strategy that failed to include risk disclosures and provided misleading information about past performance; provided incomplete and/or misleading information to customers about the performance of their investments and/or the account balance; and prepared an account statement for a customer in which he did not report all of the customer’s account holdings and thus reported an account balance that was greater than actual. 

Gossett exercised discretion in firm customer accounts without the customers’ prior written authorization and his member firm’s prior written acceptance. Gossett enlisted the service of a non-registered individual to solicit investors to open accounts with Gossett, promote Gossett’s investment strategy, assist customers with completing application forms and serve as Gossett’s primary point of contact. As compensation for the services, Gossett agreed to pay the individual half of the commissions he generated from trades in the customers’ accounts. 

In addition, Gossett opened a securities brokerage account with another FINRA member without providing written notice to his member firm and without advising the other firm of his association with a member firm; failed to disclose the account to his member firm after he opened the account; and failed to provide written notice to his member firm that he was engaged in an outside business activity. In response to a request for information, Gossett knowingly provided false and misleading information. 

James Stanley Gossett: Barred

Fisher solicited and accepted a $48,500 loan from a public customer without seeking or obtaining his member firm’s written permission. 

John Walter Fisher: Fined $5,000; Suspended 30 business days in all capacities

Farrar forged his supervisor’s signature on checks made payable to Farrar or to his creditors, and misappropriated $14,739.03 from his supervisor’s business checking account. Farrar refused to provide a signed written statement and supporting documents FINRA requested regarding the circumstances surrounding the termination of his employment by his member firm. 

Randle Wayne Farrar Jr.: Barred

Dorn signed customers’ names to insurance-related documents in violation of his firm’s policy prohibiting registered representatives from signing or initialing documents on customers’ behalf, without exception. Some customers had authorized Dorn to sign their names, but others had not. Dorn signed a customer’s name to a letter representing that the customer had removed a wire-transfer machine from his business premises so that an insurance company would renew the customer’s policy, even though Dorn knew that the machine had not been removed and the customer had not authorized Dorn to sign his name on the letter. 

Dennis Dean Dorn: Fined $5,000; Suspended 15 months in all capacities

permission from, her member firm. (FINRA Case #2007009262301)

I guess Burse could have avoided this mess if she sent a simple, letter --- oh, no, please, let me write that for you:

Dear Member Firm:

I intend to participate in a fraudulent pyramid scheme in the form of investment contracts.  This letter should constitute my formal, prior written notice to you.  I am seeking your permission to further this fraud.

Sincerely,

Gabriela Frances Burse.

Respondents allowed a subordinate client associate to complete the Firm Element training programs for them by completing the modules and taking the applicable proficiency tests using their user IDs and passwords. 

Troy Eric Brown: Fined $5,000; Suspended 10 business days in all capacities

Larry Michael Cole: Fined $5,000; Suspended 10 business days in all capacities

Jeffrey David Swanson: Fined $5,000; Suspended 30 business days in all capacities

================================================================

Callaway allowed a subordinate client associate to complete firm training programs, including FirmElement training, for him by completing the modules and taking the applicable proficiency tests using his User ID and password. Callaway condoned allowing client associates to complete firm training, including Firm Element training, for members of his business unit. 

Michael Alvin Callaway: Fined $5,000; Suspended 3 months

Blue completed firm financial documents for customers containing their confidential financial information, which he provided to a third party, without the customers’ knowledge, approval or consent, causing his member firm to violate Rule 10 of Regulation S-P. Blue’s member firmwas unaware of his misconduct and failed to update its initial and annual privacy disclosures in violation of Rules 4 and 5 of Regulation S-P. 

James Albert Blue: Barred

Aul created and submitted falsified Letters of Authorization (LOAs) to his member firm that bore forged customer signatures requesting that the firm transfer funds from the customers’ accounts to the accounts of people unknown to the customers but known to Aul. Aul’s acquaintances transferred the funds to Aul, who used the funds for personal expenses including paying off large gambling debts. Aul converted more than $1.5 million of customer funds. Aul failed to respond to FINRA requests for information.

Ching Yang Aul: Barred

Anderson misappropriated money from public customers’ pension plans. This is an interesting scheme, so let me set it out in order and some detail:

For starters: 

Anderson’s company was a third-party administrator for a number of pension plans.

And now the fun begins:

Nastiness #1

1. Anderson received monthly checks from one customer and deposited the funds into his company’s account;
2. However, Anderson failed to forward the funds to the company in which the customer’s pension plan was invested;
3. INSTEAD, Anderson used the funds, which totaled to $222,700, for his own benefit. 

Nastiness #2

4. Anderson removed $250,000 from another customer’s pension plan by using signed blank withdrawal/transfer forms to cover up the $222,700 he had misappropriated from his other customer and used the remaining funds for his own benefit;
5. Following the withdrawal, Anderson created and provided to the second customer falsified statements containing information that would have applied if the $250,000 had not been withdrawn;
6. Then, Anderson used the remaining blank forms to further withdraw funds totaling $62,288 from the customer’s account for his own benefit;
7. Because of the falsified statements, Anderson was able to prevent the customer from discovering the misappropriation in excess of $312,000 for about 14 years. 

Big Surprise!

In addition, Anderson failed to respond to a FINRA request for information and documents and to appear for an on-the-record interview. 

Ward Byron Anderson: Barred

Aldieri performed certain supervisory functions requiring principal registration without being registered with FINRA in that capacity. 

Dale Robert Aldieri: Fined $15,000; Suspended 6 months in all capacities

The Firm distributed a mailing referencing private placements offered by the firm that were represented to be exempt from registration pursuant to SEC Rule 506 of Regulation D, which requires compliance with SEC Rule 502 that prohibits general solicitations. Because individuals who received the mailing lacked a pre-existing business relationship with the firm, the mailing was considered a general solicitation in contravention of SEC Rule 502 and therefore, the firm’s transactions did not qualify for an exemption under SEC Rule 506--no other exemption was available and the securities were not registered. Individuals made investments in the offerings and the transactions constituted the sale of unregistered securities. The firm’s supervisory system and its written supervisory procedures addressed private placements but were not reasonably designed to achieve compliance with the registration requirement of Section 5 of the Securities Act of 1933 or the eligibility requirements for Regulation D exemptions. The system and procedures did not provide adequately for the detection and prevention of general solicitations by firm personnel. 

Stonehurst Securities, Inc.: Censured; Fined $25,000

The Firm

• failed to preserve business-related instant messages its associated persons sent or received; and 
• failed to establish and maintain a supervisory system reasonably designed to achieve compliance with securities laws, regulations and FINRA rules applicable to the preservation of business-related instant messages. 

The Firm’s membership agreement with FINRA precluded it from holding customer securities and, without filing an application for approval of a material change in business operations, the firm held customer securities on numerous dates within an eight-month period. The Firm conducted a securities business without maintaining its required net capital and maintained materially inaccurate computations of its excess net capital in its books and records for several months. 

Nexcore Capital, Inc.: Censured; Fined $35,000

The Firm failed to establish and maintain a system to retain for more than 30 days its electronic communications related to the firm’s business, including emails firm employees sent or received, and failed to retain a record of supervisory review of those electronic communications for production to FINRA upon request. 

Meyers Associates, L.P.: Censured; Fined $60,000

The Firm failed to develop and implement a customer identification program. The Firm’s Checks Received and Forwarded Blotter or an equivalent record was inadequate in that the firm failed to record checks received. The Firm failed to develop and maintain a continuing and current education program for its covered registered persons for one year, in that it failed to develop a written training plan outlining the Firm Element program and failed to maintain records documenting the content and completion of the Firm Element by its covered registered persons. 

Kern, Suslow Securities, Inc.: Censured; Fined $22,500

The Firm failed to enforce written supervisory procedures, in that it failed 

• to maintain separation between its sales and investment banking departments to prevent communication of material, non-public information concerning investment activity to anyone outside the investment banking department without the prior approval of designated managers; 
• to establish “Grey List” procedures to be implemented when the firm is about to obtain, or has obtained, material, non-public information concerning a security; and 
• to establish a “Restricted List” procedure designed to prohibit insider trading violations and appearances of impropriety. 

The Firm failed to enforce written policies and procedures reasonably designed to prevent the misuse of material, non-public information by the firm or any person associated with it. 

David A. Noyes & Company: Censured; Fined $22,500; Required to revise its supervisory system regarding 

• the misuse of material, nonpublic information by the firm or any person associated with it; 
• maintaining separation between its sales and investment banking departments to prevent communication of material, non-public information; and
• establishing “Grey List” and “Restricted List” procedures.

Noyes is as close to a perfect self-regulatory case as I could hope for!  First, FINRA is truly on the side of the Angels with this one because it goes to the heart of what regulation needs to do.  Few things undermine the public's confidence more than the appearance of insider trading or the leaking of inside information.  As such, this case touches on two important regulatory concerns.  On the other hand, since there is no allegation of any insider trading or misuse of inside information, it seems that FINRA was largely citing lapses in the member's supervisory system--which perfectly plays into the need for proactive regulation.  Finally, while FINRA could have imposed a six-figure fine, the outcome here seems fair and balanced: a relatively modest fine and an even more important effort to deal with the problem in the most direct and effective means, e.g., rewrite the offending written supervisory policies/procedures.

Now if you folks would just stay the course here, maybe I could continue to send you these laudatory comments.  We'll see.

The Firm 

• did not adequately retain and archive back-up tapes, 
• permitted representatives to change their desktop computer settings to stop outgoing emails from being retained automatically, and 
• did not prevent representatives from deleting emails or moving incoming emails to their desktops prior to daily backups so that emails would not be retained automatically. 
• utilized an email system that overwrote email back-up tapes that contained emails employees sent or received every three or four weeks. 
• permitted representatives to use, or failed to prevent them from being able to use, public instant messaging and other means of electronic communications without retaining the communications. 
• implemented a new email retention system, but the system malfunctioned and the firm did not have adequate systems and procedures in place to detect and prevent the malfunctions. 

"FINRA found that the deficiencies did not result in the firm’s failure to produce emails that were material to any regulatory investigation or legal proceeding."

AXA Advisors, LLC: Censured; Fined $350,000

Separately, and "no" I can't resist taking this shot, I hope that FINRA and the SEC both note that AXA was charged with using a supervisory system that "malfunctioned" and prevented the organization from having "adequate systems and procedures in place to detect and prevent the malfunctions."  Perhaps when the Madoff affair and other fraud cases are finally over, some independent prosecutor will investigate apparent lapses by Wall Street's regulators and similarly conclude and charge that those regulators implemented malfunctioning regulatory policies and procedures that failed to detect and prevent fraud.  Of course, unlike FINRA's conclusion in the AXA case, I would likely argue that such "deficiencies" did result in harm to the public.

Acting through Orr, the Firm participated in private placements that were contingent upon receiving a minimum and/or a maximum of investor funds and during the offering periods, the firm failed to transmit investor funds to a bank that had agreed, in writing, to hold such funds in escrow for the investors until the offering contingency was met but, instead, investor funds were held in an account over which Orr had control as escrow agent. As a result of the firm’s control over the funds held in connection with the private placements, it was deemed to be in control of customer funds, which resulted in an increase in its net capital requirement, but the firm was found to be deficient in its net capital while conducting a securities business. 

On the firm’s behalf, Orr failed to maintain a Cash/Checks Received and Forwarded Blotter, or an equivalent record to reflect the receipt and/or forwarding of funds as required by SEC Rule 17a-3. The Firm did not have an adequate email retention system and therefore failed to adequately preserve emails as required. The Firm failed to establish and maintain a supervisory system reasonably designed to ensure compliance with applicable laws, rules and regulations in connection with the private placements conducted by the firm, and the firm failed to retain a written record of the dates upon which reviews and branch office inspections were conducted. 

G.C. Andersen Partners Capital, LLC: Censured; Fined $65,000

Bruce Neal Orr (Principal): Censured: Fined $15,000

Acting through Chachkes, Edelman and others, the Firm sold securities short during the five business days before the pricing of public offerings and then engaged in covering transactions with shares from public offerings in violation of SEC Rule 105: Short selling in connection with a public offering. 

The Firm’s supervisory system 

• failed to provide for adequate and reasonable supervision of the individual representatives’ activities, and its supervisory system and written procedures did not provide for supervision reasonably designed to achieve compliance with and prevent violations of SEC Rule 105. 
• did not include written supervisory procedures providing for a statement of the steps to be taken by the responsible person in connection with SEC Rule 105 supervision. 

The Firm 

• provided inaccurate information in response to a FINRA inquiry, which was caused by its failure to have in place adequate supervisory procedures reasonably designed to ensure that the firm provided responsive information to regulatory inquiries;
• failed to make and preserve books and records, in conformity with SEC and FINRA rules; 
• order tickets did not reflect the correct price, lacked time stamps or contained inaccurate time stamps; and
• failed to preserve brokerage order memoranda for a period of not less than three years, the first two in an accessible place. 

First NewYork Securities, L.L.C.: Censured; Fined $170,000; Ordered to disgorge $171,504.44 in unlawful profits; Required to revise its written supervisory procedures to achieve compliance with, and prevent violations of, Securities and Exchange Commission (SEC) Rule 105, and to include the supervisory steps to be taken by the responsible person in connection with SEC Rule 105 supervision.

Larry Chachkes:Censured; Fined $30,000

Joseph Eric Edelman: Censured; Fined $50,000

Acting through Davenport and other individuals, the Firm 

• failed to obtain written consent to conduct Web CRD searches pertaining to individuals not seeking registration or assignment with the firm, and 
• falsely certified that written consent had been obtained fromthe individuals whose CRD records were searched.

The Firm failed to establish and maintain adequate written procedures to supervise the use of Web CRD, and failed to adequately train and supervise all of the employees who were permitted access to Web CRD to ensure that the requisite written consents were obtained prior to conducting all Web CRD searches. 

Fifth Third Securities, Inc.: Censured; Fined $20,000 ($5,000 jt/sev with Davenport)

Cynthia Lynn Davenport (Principal): Fined $5,000 jt/sev with Firm; Suspended 2 months in all capacities

Without permission or authorization from his member firm, he paid $29,000 to public customers in an attempt to prevent them from filing a complaint against him with his firm. 

Lance Jeffrey Ziesemer: Fined $5,000; Suspended 20 business days in all capacities

Wacik borrowed $45,000 from a public customer, contrary to his member firm’s policy prohibiting registered representatives from borrowing froma customer, and concealed the loan from his member firm by falsifying a response on an annual compliance questionnaire, and failed to repay $40,000 of the loan. Wacik willfully failed to disclose material information on his FormU4. (FINRA Case #)

Brian Mark Wacik: Ordered to pay $40,842.78, plus interest, in restitution to a public customer; Barred

Tipton engaged in an outside business activity, for compensation, without prompt written notice to his member firm. Also, he loaned $600 to a public customer in breach of his firm’s procedures that prohibited borrowing and lending transactions with customers. Tipton failed to appear for a FINRA on-the-record interview. 

Jeffrey Eugene Tipton: Barred

Stebbins engaged in his member firm’s investment banking and securities business in capacities requiring registration as a representative and principal, but he was not registered in those capacities. Stebbins engaged in an outside business activity, for compensation, without prior written notice to his member firm. Stebbins had a beneficial interest in securities accounts maintained at other member firms and failed to disclose to the carrying broker-dealers that he was associated with FINRAmembers, and also failed to give his member firms written notification that he had a financial interest in securities accounts with the carrying broker-dealers. 

Stebbins knowingly provided false and/or misleading information in response to FINRA requests for information; and failed to respond to FINRA requests to appear for an on-the-record interview and to provide information and documents. 

Jeffrey Michael Stebbins: Barred

Without his member firm’s knowledge or consent, Mispel borrowed $20,000 from a public customer in contravention of his firm’s procedures prohibiting the borrowing and lending money between a registered person and the firm’s customers. 

Shane David Mispel: Fined $5,000; Suspended 30 days in all capacities

Marshall engaged in a private securities transaction despite his member firm’s denial of authorization because the size of the investment would concentrate too much of a trust’s assets in a single investment. Marshall requested his firm to wire the transaction amount to an outside bank account where it was invested in the hedge fund through Marshall’s partner, knowing it was an unapproved private securities transaction. Marshall failed to provide an accurate and complete response to his firm when asked why the trust was moving funds out of the firm. 

John Gilbert Marshall Jr.: Fined $7,500; Suspended 6 months in all capacities

See the Private Securities Transactions page for more details

Contrary to the instructions given her, Langlois left the testing center during the course of the Series 66 examination, reviewed written notes that contained material relevant to the examination, returned to the testing center and completed the examination. 

Madeline Marie Langlois: Fined $5,000; Suspended 2 years in all capacities; Required to retake and pass the Series 66 prior to resuming registered activity

NAC Decision

SEC Remand Decision

This matter was remanded from the SEC to redetermine the sanctions that should be imposed on Richard F. Kresge ("Kresge"), formerly the president of Yankee Financial Group, Inc. ("Yankee Financial" or "the Firm"), for supervision, reporting, and registration violations. Kresge's violations occurred during a period when new representatives of the Firm engaged in fraudulent sales practices and unsuitable recommendations that caused substantial harm to customers. 

NASD barred Kresge in all capacities, ordered restitution to the customers at issue in the amount of $3,866,426, plus interest, and assessed costs of $9,519.61. NASD stated, “[W]e aggregate respondents’ misconduct for purposes of imposing sanctions because such misconduct emanated from a single, underlying problem: respondents’ addition of, and failure to monitor, the Brooklyn office.” 

The SEC sustained NASD’s findings that Kresge violated Conduct Rules 2110, 3010, and 3070(c) and Membership and Registration Rules 1021(a), 1031(a), IM-1000-1, and IM-1000-3. However, the SEC set aside NASD’s findings that Kresge was liable for violations by certain registered representatives of Yankee Financial of Exchange Act Section 10(b), Exchange Act Rule 10b-5, and Conduct Rules 2120, 2310, and IM-2310-2. The SEC set aside FINRA's earlier findings that Kresge had secondary liability for such fraudulent and unsuitable recommendations. Accordingly, the SEC remanded this proceeding to NASD for a redetermination of the sanctions to be imposed upon Kresge. 

Kresge failed to 

• establish or maintain a system of supervision reasonably designed to achieve compliance with applicable securities laws;
• register an individual, either as a principal or a representative, who was actively engaged in the management of the firm’s securities business as either a principal or representative of his member firm; and
• report customer complaints to FINRA.

The NAC considered Kresge’s violations as a whole and imposed the sanction of a bar in response to the totality of the misconduct. The NAC weighed each violation, in addition to Kresge’s “highly troubling” disciplinary history, and found a bar necessary “to protect investors.” 

Richard Francis Kresge: Barred

Jordan failed to 

• establish, maintain and enforce an adequate supervisory system and written supervisory procedures with respect to the business conducted in a branch office; 
• establish, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with the recordkeeping requirements of SEC Rule 17a-4 as it pertains to preserving electronic communications; 
• develop and implement adequate AML procedures to achieve and monitor its obligations under the Bank Secrecy Act and related U.S. Treasury regulations; and 
• report customer complaints to FINRA. 

Dennis Jordan: Fined $60,000; Barred in Principal capacities only.

Jacobs failed to properly supervise the private securities transactions of registered representatives at his member firm and failed to ensure that the transactions were recorded on the firm’s books and records. 

Alan Lawrence Jacobs: Fined $10,000; Suspended 30 business days in Principal capacities only.

Harris falsified an annuity distribution request form by cutting signatures from another document and taping them to the form, then transmitting or causing it ot be transmitted to the insurance company for payment. Harris forged a customer’s initials without his knowledge, authorization or consent on a Subscription Agreement that the customer had previously signed, and then submitted it to the issuer. Harris failed to respond to FINRA requests for information and to appear for an on-the-record interview. 

Stephen Colley Harris: Barred

While associated with a member firm, Chiappetta loaned $14,222.45 to unrelated public customers in violation of the firm’s written procedures that prohibited its registered representatives from borrowing or lending to customers unless the customer is an immediate family member of the representative. 

Gino Nick Chiappetta:  Fined $5,000; Suspended 5 business days in all capacities

Cagan failed to inform his member firm of securities accounts he maintained at other member firms; and failed to provide written notice of his association with a member firm to the member firms where he maintained accounts. 

Laird Quincy Cagan (Principal): Fined $5,000; Suspended 10 business days in all capacities

The Firm failed to comply with the Taping Rule, in that it 

• provided certain representatives with access to unrecorded telephone lines;
• allowed representatives to accept customer orders on unrecorded telephone lines when the representatives were out of the office; and 
• failed to catalog tape recordings that registered persons had made. 

During a later period, the Firm installed a new system that recorded telephone calls to the hard drives of the computers on representatives’ desks, which was not password protected and was backed up by the firm only once a year, and which allowed representatives access to erase recorded telephone calls. 

Carlton Capital, Inc.: Censured; Fined $40,000; Required to Comply with the NASD Rule 3010(b)(2) (the Taping Rule) for an additional three years until February 17, 2012 and to Retain an independent consultant to conduct a comprehensive review of the adequacy of its policies, systems and procedures (written and otherwise) and training related to compliance with the Taping Rule, and adopt and implement the consultant’s recommendations

The Firm permitted Marshall 

• and another individual to execute trades in covered securities during a period beginning 30 calendar days prior to and ending five calendar days after publishing research reports concerning the subject companies; 
• to trade in a manner that was inconsistent with his recommendation, as reflected in the most recent research report the firm published. 

The Firm and Marshall provided a subject company with a draft copy of a research report that contained prohibited information before the report was published. 

Acting through Marshall, the Firm issued research reports that failed to disclose that Marshall and/or a member of his household had a financial interest in the securities of the subject company and the nature of the financial interest. 

The Firm failed to 

• affirmatively disclose in one research report that an affiliate owned more than one percent of a subject company’s common equity securities, and failed to disclose in research reports the risks that may have impeded achievement of the price target stated in each report;
• develop and implement adequate written supervisory procedures reasonably designed to ensure that the firm and its employees complied with the provisions of NASD Rule 2711; 
• provide an attestation to FINRA for a year that it had adopted and implemented procedures regarding compliance with NASD Rule 2711, and failed to develop and implement any written supervisory procedures concerning watch or restriction lists; and
• develop and implement a Firm Element Continuing Education program, specifically, to develop a written training plan for its covered registered persons. 

The Firm's research reports did not include clear, comprehensive and prominent disclosures regarding whether it or any of its affiliates, officers or employees held interests in the subject companies’ securities.

First Dallas Securities: Censured and fined $50,000 ($10,000 of which was jointly and severally with Marshall)

Eric Jay Marshall: Fined $10,000 jt/sev with Firm and an additional $5,428.07 (includes $428.07 in disgorged trading profits; Suspended 15 days as a research analyst

Acting through Associated Person Cotto, the Firm 

• permitted Cotto to manage and control its securities business and otherwise engage in activities and functions that required registration with FINRA as a general securities principal, even though he was not registered with FINRA, and while he was suspended by FINRA for six months in any capacity;
• failed to respond fully and completely to additional FINRA requests for information; and
• willfully filed false or inaccurate amendments to its Uniform Application for Broker-Dealer Registration (Form BD)

Cotto failed to produce certain documents at a FINRA on-the-record interview, and willfully failed to amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose material information.

Harvest Capital Investments, LLC: Expelled

Dennis Cotto: Barred