NOTE: Stipulations of Fact and Consent to Penalty (SFC); 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 & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
David Alan Schams
OS/2009018293201/ 2011
Schams
accepted appointment
as an alternative agent attorney-in-fact over a customer account,
without his member
firm’s express written consent.
Schams was to receive
approximately $90,000 from the
customers’ estate. Schams accepted two $20,000 interest-free loans
on the anticipated
inheritance, without signing a promissory note evidencing the
loan, contrary to the
firm’s compliance policies that prohibited registered
representatives from exercising or
maintaining discretionary authority or power of attorney over
customer accounts and
borrowing money, accepting loans, issuing or transacting
promissory notes or other similar
forms of debt for customers without the express written consent of
the firm’s compliance
department.
Schams made material
misstatements to his
firm in a compliance questionnaire regarding borrowing money or
accepting a loan from
a client, holding any securities, stock powers, money or property
belonging to a client,
accepting client checks made payable to him, or endorsed to him
personally or in the name
of an entity, and managing or handling, in any way, the affairs of
any client account on a
discretionary basis.
David Alan Schams: Barred
Howard Sang Lee
AWC/2009019154301/ 2011
Lee
borrowed $20,000 from his customer and
repaid the loan in full,
plus interest. During the time of the
loan transaction, the firm’s
procedures specifically prohibited registered representatives from
borrowing money from
customers.
Lee’s conduct was aggravated by the fact that he failed
to disclose the loan
when completing the firm’s annual compliance inspection forms for
two years, when he
answered “yes” to the question, “Do you understand and comply with
the rule that you
cannot loan money to, or borrow money from your clients?”
Howard Sang Lee: Fined $5,000; Suspended 3 months
John Maraldi Grover III
AWC/2010022180101/ 2011
Grover borrowed $67,326.68 from a customer contrary to his member
firm’s prohibition of
registered persons from borrowing money from customers. Grover
signed and dated a form acknowledging that the firm prohibited its
representatives from
borrowing money or securities from a client. In light of the fact that the customer was not
a member of Grover’s
immediate family and was not in the business of lending money, his Firm did not
approve the loan.
John Maraldi Grover III : Fined $5,000; Ordered to pay $67,326.68 plus interest as restitution to a customer; Suspended 90 days.
Ronald John Garabed Sr.
AWC/2010024175501/ 2011
Garabed
borrowed $15,000 from his customer at his firm contrary to
his firm’s procedures,
which did not permit loans between registered representatives and
their customers
under any circumstances. Garabed
agreed to repay the
customer the principal loan amount plus an additional $5,000, he
ultimately repaid a total
of approximately $15,200. Garabed
denied on a compliance
questionnaire that he had ever solicited or accepted a loan from a
client.
Garabed willfully failed to update his Form U4
to disclose material
information.
Ronald John Garabed Sr.: Fined $10,000; Suspended 6 months
Steven Gayne Winters (Principal)
OS/2009019911701/ 2011
Winters willfully failed to timely amend
his Form U4 to disclose a
material fact and he borrowed $20,000 from a customer contrary
to his member firm’s written procedures that expressly prohibited
firm employees from
borrowing money from, or lending money to, firm customers. Winters neither sought nor obtained approval from the firm before
receiving the loan from
the customer, and his arrangement with the customer did not
satisfy any of the conditions
set forth in NASD Rule 2370(a)(2)(A)-(E). To date, a $5,500
balance remains unpaid by
Winters on the principal of the loan.
Steven Gayne Winters (Principal): FIned $10,000; Ordered to pay $5,500 restitution to a customer; Suspended 8 months
William Alexis Cronin Jr.(Principal)
AWC/2011025885801/ 2011
Cronin participated in
private securities transactions without prior written notice to,
and prior written approval
from, his member firm. The findings stated that Cronin
sold
approximately $1,712,500 in
notes and debentures to investors, most of whom were his firm’s
customers at the time.
The notes and debentures, which were securities, were sold through
private placements.
Cronin received approximately $171,000 in commissions from these investments.
Cronin borrowed $10,000 from one of his
customers at his firm.
Cronin executed a promissory note stating that the loan was to be
paid in full by a certain
date, but failed to repay the loan according to the terms of the
note. Cronin eventually
repaid the loan with interest, but only after the customer filed
an action against him.
Cronin borrowed $5,000 from another
customer through a loan
that was not reduced to writing, and had no repayment terms;
Cronin repaid the loan.
Cronin did not disclose either of the loans to
his firm, which prohibited
loans from customers without prior firm approval.
William Alexis Cronin Jr.(Principal): Fined $181,000 (included $171,000 disgorgement of commissions); Suspended 2 years