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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. 2007 FINRA
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DEVELOPING ENFORCEMENT TRENDS AS NOTED BY BILL SINGER |
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REGISTRATION |
BORROWING |
AWAY ACCOUNTS |
E-COMMUNICATIONS |
MEMBERSHIP ISSUES |
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| Banif, Pactual, Advanced, Waddell, Labadie, Varner, Vo, Aladdin, Block, Waddell, Smith, Headwaters, HSBC, Natexis, Summit. Shemano, Paruch, Martins. McElwee, Thornes, Gordon, Huberman. Lee, Fidelity, Geneos, Hirth.Blacklake, White Pacific, Investprivate, Pension. Gunnar, Augusta. Dykes, Brookstreet, Boenning, Gem, Beerbaum; Dublind | Brighton, Clarke, Lane, Lenz, Alldredge, Day, Guzman, Kavalec, Roberts, Westfall, Cahn, Ehrenberg, Martin, Thomas, Gaskill, Tzamalas, Flitt. Nagler | Haywood, Malloy, Randall, Kao, DeAngelis, Wise, Hiller | Banif, Archer, Strand, Poultre, Legend, McKim, Utendahl, Mongelli, Smith, Itradedirect, Wilbanks,Fidelity, Essex,State Street, Bathgate, White Pacific, Roseman, Investprivate, Pension, Colonial, Equity, Legend, Sandgrain, WhiteMt, Augusta, brokersXpress, Kuzma, Nguyen, Empire, Georgeson, Midas, Mischler, K-One, Investors | McKim, McElwee, Vanthedge, Amerifinancial, BTIG, Griffin, Westrock, Empire, Brennan | ||
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David Anthony Nagler (Supervisor) OS/2005003406001/October 2007 Nagler borrowed $3,000 from a public customer contrary to his member firm ’s written procedures prohibiting its registered representatives from borrowing or lending money from or to a client under any circumstances. Nagler failed to request or obtain his firm ’s permission to borrow money from a public customer. He misled another member firm during the hiring process when he failed to advise the firm that he had been permitted to resign from a previous firm for violating its policy prohibiting borrowing funds from customers. David Anthony Nagler: Fined $10,000; Suspended 20 business days in all capacities |
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Maurice Duane Freed AWC/#20060060747-01/October 2007 Freed engaged in private securities transactions by selling $185,000 in promissory notes to public customers without prior written notice to his member firm of the sales or his role therein. Maurice Duane Freed: Fined $10,000; Suspended 6 months |
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| Bill Singer's Comment: See the Amsler case below for a second PN matter this month. | ||||||
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Daniel Stephan Flitt AWC/#2006005734401/October 2007 Flitt borrowed $2,660 from a public customer without his member firm ’s approval and contrary to his firm ’s written procedures prohibiting representatives from borrowing money from customers; and then failed to respond to FINRA requests for information. Daniel Stephan Flitt: Barred |
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Michael R. Colletti (Principal) AWC/#2005003383701/October 2007 Colletti submitted timesheets for certain individuals that were false when he executed them, in that he knew the individuals did not work the hours that the timesheets presented. Michael R. Colletti: Barred |
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| Bill Singer's Comment: Can you imagine this? False timesheets! Okay, bar the guy. Now, let's see how FINRA acts when it soon realizes the false pricing of all that subprime crap sitting in everyone's funds--and which have hammered the markets. I wonder how many of the big boys will be barred for such a violation? | ||||||
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Therese C. Castro (Principal) AWC/2005002680301/October 2007 Castro asked an unregistered employee of her member firm or its affiliate to place Castro’s initials on numerous pieces of branch correspondence as evidence that she had reviewed the correspondence, although she had not done so. Castro falsely certified in monthly reports submitted to her member firm that a supervisor had reviewed daily trade blotters when many had not been reviewed. Therese C. Castro (Principal): Fined $15,000; Suspended 1 year; Barred in Supervisory/Principal capacities |
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Bruce David Bullock AWC/#2006005693601/October 2007 Bullock held several seminars to promote the sale of equity indexed annuities and fixed annuities to retirees, promoted the seminars through the use of invitations and used a presentation that contained unwarranted, misleading, unsubstantiated and promissory statements, including false assurances of riskless investing and guarantees that the retirees would never run out of money. Bruce David Bullock: Fined $10,000; Suspended 20 business days. |
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Ramona Marie Bianchi AWC/#2007008767001/October 2007 Bianchi obtained possession of an automatic teller machine (ATM) card for a public customer’s account and, without the customer’s knowledge or authorization, used the ATM card to make unauthorized cash withdrawals from the customer’s bank account, and unauthorized purchases totaling $68,000 for her own benefit. Ramona Marie Bianchi : Barred |
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Barry Lynn Amsler AWC/#2006005252001/October 2007
Amsler engaged in private securities transactions for compensation; failed to give his member firm written notice; and his member firm did not authorized Amsler to engage in such activities. The firm ’s written procedures specifically prohibited representatives from becoming involved with the sale of promissory notes. Barry Lynn Amsler : Fined $50,000 (including $31,860 in disgorged benefits from sale of promissory notes); Suspended 24 months |
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| Bill Singer's Comment: I'm seeing a pick-up in private securities violations this year and a recent rise in promissory note cases. Be aware that a promissory note may be deemed a security. See the Freed case above for a second PN matter this month. | ||||||
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Pali Capital, Inc. AWC/#2005000717001/October 2007 The Firm permitted an associated person to engage in proprietary equity trading on the firm ’s behalf without being properly registered. While serving as the placement agent for an issuer conducting a private placement, the Firm instructed the escrow agent bank for the private placement to release funds to the issuer before the contingency amount set forth in the escrow agreement had been received in the escrow account. Pali Capital, Inc. : Censured; Fined $35,000 |
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K-One Investment Company, Inc. AWC/2006003768501/October 2007 The Firm failed to maintain and preserve copies of internal and external electronic e-mail communications as Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4 require; and failed to implement and enforce an adequate supervisory system governing the review of external communication. K-One Investment Company, Inc. : Censured; Fined $50,000 |
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Investors Capital Corporation AWC/2006003901001/October 2007 Some of the Firm's registered representatives sent business-related e-mail through external electronic servers without first obtaining firm approval; and in some of those instances, the Firm:
The findings also stated that the firm failed to retain certain business-related e mails its registered representatives sent and received using external accounts and, as a result, it failed to maintain and preserve all of its electronic communications as the Securities Exchange Act of 1934 and Rule 17a-4 requires. Investors Capital Corporation: Censured; Fined $75,000; Required to to review its procedures regarding the preservation of electronic mail communications for compliance with federal securities laws, regulations and NASD rules. |
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Bill Singer's
Comment: One of the problems with these cases is that you truly can't
figure out how much of the fine is fair and how much is excessive.
If this member firm's RRs sent business emails through external servers
"without first obtaining firm approval," how the hell does FINRA
suppose that the member firm was supposed to know about this? I mean
this seriously. If the RRs are not following firm policy and
intentionally doing an end run, how is the firm supposed to know?
Now, clearly, there are some reasonable precautions that member firms can
take in this regard, but where are they even noted in this decision?
Don't bother checking, no such help is offered.
Now, to be fair, the decision does note that "upon learning that the registered representatives were using external e-mail accounts" the firm failed to provide reasonable follow-up and review. If that's the case, then some fine is likely appropriate. The problem is that we are left to guess at the extent of the violation, we are left to guess at what the firm could have done to detect the external server use, we are left to guess at how much of the fine was attributed to failures upon notice of the violation. That's lousy regulation. Help us to do things better. Teach us. |
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First Montauk Securities Corp. (CRD #13755, Red Bank, New Jersey) AWC/#2006003821801/October 2007 The Firm's order tickets for corporate bond transactions were deficient, in that the order tickets failed to identify the terms and conditions of the order; did not contain the time of receipt and did not indicate whether the order was solicited or unsolicited. First Montauk Securities Corp.: Censured; $10,000 |
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Weller, Anderson & Co., Ltd. and Fenner Reese Weller Jr. (Principal) AWC/2006003681201/October 2007 Acting through Weller, the Firm failed to terminate the “minimum-maximum” offering memorandum and return investor funds after failing to raise the minimum offering amount represented by the offering memorandum during the offering period, thereby rendering the representations in the memorandum false. The offering memorandum represented that investor funds would be deposited into a bank escrow account until the minimum offering amount was raised, and that investor funds would be promptly returned if the minimum offering amount was not raised during the offering period. Also, acting through Weller, the Firm failed to establish and maintain supervisory system reasonably designed to achieve compliance with applicable securities, laws, regulations and NASD rules regarding contingent securities offerings. Weller, Anderson & Co., Ltd. and Fenner Reese Weller Jr. (Principal): Censured; Fined $10,000 jt/sev |
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| Bill Singer's Comment: 2007 has definitely become the year of the failed escrow. See the many cases discussed earlier this year for guidance. | ||||||
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Dublind Securities, Inc. and Nestor Joseph Olivier
(Principal) AWC/2006006666501/October 2007 Acting through Olivier, the Firm
Olivier acted in a capacity at the firm that required registration, while his registration status with FINRA was iinactive due to his failure to complete the Regulatory Element of the Continuing Education Requirements. Dublind Securities, Inc. and Nestor Joseph Olivier (Principal): Censured; Fined $15,000 jt/sev |
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Harvey A. Wall (Principal) AWC/2006003714901/September 2007 Acting through Wall, a member firm failed to adopt a supervisory system and written procedures reasonably designed to ensure that the firm obtained and retained the required written consent for Web CRD searches. As a result of the supervisory deficiencies, Wall failed to obtain and/or retain the required written consent in connection with Web CRD searches for individuals who were not seeking employment with the firm . Wall affirmed to Web CRD that he had obtained and would keep on file the required written consent in connection with the pre-registration searches of the individuals. Harvey A. Wall: Fined $4,000; Suspended 30 days in all capacities |
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Peter Tzamalas AWC/#2006006553601/September 2007 Without his member firm 's approval, Tsamalas borrowed $453,000 from public customers, contrary to his member firm 's written procedures that prohibit representatives from borrowing money from customers. Subsequently, Tzamalas failed to respond to NASD requests for documents and information. Peter Tzamalas: Barred |
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Jackie Gee-Kit To AWC/#2005002832901/September 2007 To plagiarized the content of a research report another member firm issued and internally circulated the report, indicating that he was its author. The report was published by To's member firm as a research report written by the firm 's lead analyst and To. Jackie Gee-Kit To: Fined $7,500; Suspended 60 days; Required to requalify by exam as a Research Analyst Part II-Regulations Mode within 90 days of reassociation with a member firm . If To fails to requalify as a Research Analyst Part II-Regulations Mode within the 90 day period, he will be suspended from acting in such capacity until the examination is successfully completed. |
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Bill Singer's
Comment: Oh FINRA, FINRA, FINRA . . . you do have the ability to drive me
nuts. Let me see if I get this one. To plagiarized a research
report. Okay, not a nice thing to do. Now, would someone
please pull out the FINRA rulebook and show me where it's a regulatory
violation to plagiarize a research report? I'm not saying this was a
nice thing to do, and if the other report were copyrighted, well, it might
certainly be an infringement of the copyright. However, is every single
misconduct (including personal indiscretions and professional miscues) by a registered person
a regulatory violation? I
mean, geez, where does this nonsense end? Let's assume, for the
moment, that Mr. To read this other report and agreed with its analysis,
conclusions, and recommendation. If he then issued the plagiarized
report under his own signature, that subterfuge may well give rise to a
lawsuit by the true author for copyright infringement, but I don't see how the "integrity"
of the issued report is at issue -- my example was premised upon the fact
that Mr. To agreed with all aspects of the prior report.
Separately, and more to the point, I invite you to look at many of the other cases I have reported on this page for 2007 -- or even go back over the years of my website's content. I want you to carefully consider the types of matters that result in lesser sanctions than that imposed upon Mr. To. For example, look down two cases to the Solash matter. There FINRA imposed a $7,500 fine and only a 45-day suspension on someone who effected unauthorized trades in an account related to a deceased customer. Is it truly fair to suggest that sending out a plagiarized report is a worse violation than unauthorized trading? Ultimately, you want to make Mr. To requalify, go ahead -- makes sense to me. You want to fine him a few thousand dollars on top of that? Okay, not much quibble from me on that too. However, at some point enough is enough -- did he really need to be suspended for two months AND required to requalify? |
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Richard Adam Thayer #2006005175401/September 2007 Thayer withdrew $2,000 from a public customer's bank account for his own use and benefit. In an attempt to conceal his wrongdoing, Thayer transferred $2,000 from another customer's account to replace the funds taken from the first customer and then transferred $2,000 from a third customer's account to restore the funds taken from the second customer's account. Subsequently, Thayer failed to respond to NASD requests for information. Richard Adam Thayer: Barred |
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| Bill Singer's Comment: Scorecards! Get your scorecards!! Okay, so the broker comes to bat and takes money from a customer's bank account. Strike One! Then he borrows from Peter to pay Paul. Strike Two!! Then, there's this third account . . . and . . . who's on first???? | ||||||
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Robert Howard Solash AWC/#2006004735501/September 2007 Solash effected unauthorized sale transactions in a deceased customer's corporate brokerage account. Robert Howard Solash: Fined $7,500; Suspended 45 days in all capacities |
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| Bill Singer's Comment: Talk about time and price discretion. | ||||||
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Florence Sarah Pollard (Principal) #CAF20030042/September 2007 on remand to Office of Hearing Officers from National Adjudicatory Council Pollard solicited and received payment on her member firm 's behalf from issuers in exchange for making markets in the issuers' stock and submitting Form 211 applications. Florence Sarah Pollard: Fined $5,000; Suspended 6 months in Principal capacity |
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Bill Singer's
Comment: Sometimes the NASD/FINRA makes it too easy for me to take pot
shots. Here's a perfect example. Ms. Pollard submitted herself
to a full-fledged hearing before the Office of Hearing Officers.
Perhaps she could have settled the charges but decided she was "not
guilty" and sought her day in court. Rather than stand accused
of loading the issue, let me simply quote directly from the OHO decision
that was forthcoming after the National Adjudicatory Council agreed to
consider the Staff's appeal of Ms. Pollard's case:
Following a hearing -- let me repeat that: FOLLOWING A HEARING -- the Hearing Panel granted Pollard's motion to dismiss. And after all of that, the NAC entertains an appeal by Enforcement and reverses the Panel and finds Pollard guilty. Honestly, what the hell is the point of OHO? |
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Ralph Curtis Lewis AWC/#2006004774901/September 2007 Lewis borrowed $18,367 from a public customer even though his member firm 's written procedures prohibited registered persons from borrowing from customers, and Lewis neither disclosed the loans to his firm nor obtained consent from the firm to borrow from the customer. Ralph Curtis Lewis: Barred; Required to pay $18,367 plus interest in restitution to public customer |
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Richard James Johnson AWC/#2006006132001/September 2007 Johnson converted $42,000 from a church while serving as its treasurer. Richard James Johnson: Barred |
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| Bill Singer's Comment: Which just proves that you really can't make this stuff up. | ||||||
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Erica L. Hintze AWC/#2006007521401/September 2007 Hintze signed a branch manager's name on account-related documents and signed his name using a medallion guarantee stamp without his permission or authority. Hintze signed a public customer's name on name change forms without the customer's permission or authority. Erica L. Hintze: Barred |
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Lisa M. Hiller (Associated Person) AWC/2006003673301/September 2007 Hiller failed to disclose in writing to her member firm the existence of outside brokerage accounts in which she held a beneficial interest. She also failed to notify one of the member firms at which she had an account that she was associated with an NASD member firm . Hiller failed to respond to NASD requests to provide sworn testimony. Lisa M. Hiller: Barred |
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David S. Goldman OS/#2006005586701/September 2007 Without a public customer's written authorization, Goldman affixed the customer's signature to a 403(b) payroll deduction application for purposes of increasing her retirement account contribution. Goldman did not provide any notation evidencing his signature on the document and did not notify his member firm that he was signing on the customer's behalf. David S. Goldman: Fined $5,000; Suspended 90 days in all capacities |
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| Bill Singer's Comment: This case is a particularly poor example of FINRA's lack of clarity in explaining its sanctions. The SRO's report specifically notes that the signature was affixed without a "written" authorization -- which begs the question as to whether there was an "oral" authorization (and one which, perhaps, even the customer acknowledges). Are we to understand that the relatively modest fine and suspension were imposed in consideration of Goldman acting with "oral" but not "written" prior authorization, or did he simply sign the signature without any prior customer authorization? I would remind the regulator -- for the umpteenth time -- that it has an obligation to educate the member and registered community as to the basis for its charges and subsequent sanctions. This case is a terrible example of not saying enough. | ||||||
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Tearle Guy Gaskill #2006005746601/September 2007 Gaskill borrowed $3,000 from a public customer, contrary to his member firm 's written policies and procedures prohibiting representatives from borrowing money from customers; and he subsequently failed to respond to NASD requests to appear for an on-the-record interview and to provide documents. Tearle Guy Gaskill: Barred |
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Christopher Patrick Cataldo AWC/#2006006843901/September 2007 Cataldo falsely represented to a public customer that he had listened to a recorded conversation his member firm maintained of an earlier conversation between the customer and another firm representative indicating that the customer had been advised that he would be charged a contingent deferred sales charge if he liquidated his mutual fund before a certain date, when no such recording existed. Christopher Patrick Cataldo: Fined $5,000; Suspended 6 months in all capacities |
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| Bill Singer's Comment: Sounds like an old "Get Smart" episode --- Would you believe that I have a tape on which I told you that there would be a CDSC if you liquidated too early? No?? Would you believe I have a tape on which I told you that I was on vacation and couldn't take your call? No??? Would you believe . . . | ||||||
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Michael Forrest Brinlee (Principal) OS/#2005001575201/September 2007 Brinlee misappropriated funds from public customer's estate by writing a $9,045 check against the customer's bank account in order to make a tuition payment for a family member's benefit. Michael Forrest Brinlee: Barred |
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Kevin Patrick Brennan (Principal) and John Joseph
Conroy (Principal) AWC/#2006003890601/September 2007 Acting through Brennan and Conroy, the Firm
Kevin Patrick Brennan and John Joseph Conroy: Fined $20,000 jt/sev; Suspended 60 days in Principal capacity only. |
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Mark Allen Borsky (Principal) #2005000078501/September 2007 Borsky initially provided and caused his firm to provide false information to NASD although shortly thereof he corrected the false information. Mark Allen Borsky: Fined $5,000; Suspended 2 years in all capacities |
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Sidoti & Company, LLC AWC/#20060037743-01/September The Firm sent draft research reports to approximately 200 subject companies prior to publication that contained analyses, estimates, projections and conclusions; and one of the research reports contained a price target and research rating. Sidoti & Company, LLC : Censured; Fined $25,000 |
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National Securities Corporation AWC/#E8A2004064501/September 2007 The Firm ignored red flags indicating that a registered representative under heightened supervision was circumventing this supervision by engaging in a scheme with another registered representative who was his brother-in-law. National Securities Corporation: Censured; Fined $20,000 |
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Mischler Financial Group, Inc. AWC/#2006003738401/September 2007 While it maintained and preserved communication sent through its Bloomberg system which was the predominant means by which its representatives communicated with the firm 's clients, the Firm failed to preserve properly in a non-rewriteable and non-erasable format email communications sent to and from its email addresses as well as personal email addresses three firm representatives used. The Firm lacked fully compliant systems and procedures for the preservation of all of its electronic mail communications. Mischler Financial Group, Inc. : Censured; Fined $10,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with applicable NASD rules, and federal securities laws and regulations, and certify to NASD (and now, FINRA) in writing that it has established systems and procedures reasonably designed to achieve compliance with those rules, laws and regulations. |
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| Bill Singer's Comment: Thankfully FINRA is fairly consistent in applying sanctions to the same or similar violations. Otherwise, we would have fines and suspensions all over the place. I mean here in Mischler we have a failure to properly preserve emails and the firm is fined $10,000. And if you look one case down to Midas, you see that for a similar violation the firm was also fined $10,000 --- oh, wait a minute, Midas was supposed to be fined far more than $10,000 but out of the goodness of FINRA's heart, Midas was fined only $14,000. Okay, so that's not a big deal percentage wise over Mischler -- ummm, well, gee, that's 40% more! Well, thankfully, but for that one oddity, all of these email cases are closely sanctioned. Just look two cases down at Georgeson where another member failed to properly preserve emails. And they were fined . . . let's see . . . hmmm . . . $30,000. Well that's close enough to Mischler at a 300% difference and close enough to Midas at about a 200% percent difference. Wow, those Sanction Guidelines must be really flexible on the upside. | ||||||
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Midas Securities, LLC AWC/#E022005010601/September 2007 The Firm failed to establish and maintain a system to supervise the activities of each registered and associated person in a manner reasonably designed to achieve compliance with applicable securities laws and regulations, including email retention and review of correspondence. The Firm failed to establish, maintain and enforce adequate written supervisory procedures regarding electronic mail retention. Midas Securities, LLC: Censured; Fined $14,000 (Pursuant to the General Principles Applicable to all Sanction Determinations contained in the Sanction Guidelines, NASD imposed a lower fine in this case after it considered, among other things, the firm 's revenues and financial resources. See Notice to Members 06-55.); Required to review its procedures regarding the preservation of electronic mail communications for compliance with applicable NASD rules, and federal securities laws and regulations, and certify to NASD (and now, FINRA) in writing that it has established systems and procedures reasonably designed to achieve compliance with those rules, laws and regulations. |
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| Bill Singer's Comment: Oh that someone at FINRA would routinely remind the powers that be, that the Sanction Guidelines are --duh -- GUIDELINES and not mandatory grids. Here a member firm was only fined $14,000 because its revenues and financial resources were questionable. Not that $14,000 is spit, but who knows how many more dollars the eager Staff was hoping to get for failing to retain emails. I mean, you know, that's got to be at least a million dollar fine (okay, sorry for the sarcasm). | ||||||
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Georgeson Securities Corporation AWC/#2006004077101/September 2007 The Firm failed to maintain and preserve all of its electronic communications as required by SEC Rule 17a-4. The Firm electronically "backed-up" electronic communications at the end of each day, but failed to capture, maintain and preserve any electronic communication deleted from user's deleted items folder during the day. Georgeson Securities Corporation : Censured; Fined $30,000 |
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| Bill Singer's Comment: Frankly, this one is sort of funny. The Firm apparently saves its electronic communications on an intra-day basis. Good! Then the firm does the next necessary step of electronically backing up each days communications at the end of the day. Good again! However, if someone merely deleted an item during the intra-day period, the member's system did not retain such deletions. Ooops. I mean, think about it, if all someone had to do was read an objectionable email alleging all sorts of nastiness and then simply hit delete, that wouldn't be much of an archiving system. | ||||||
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Dougherty & Company LLC AWC/#20050001341-01/September 2007 The Firm failed to purchase municipal securities for its own account from public customer or sell municipal securities for its own account to a customer at an aggregate price that was fair and reasonable, taking into consideration all relevant factors, including
The Firm bought/sold corporate bonds for its own account from /to another broker-dealer and failed to sell/buy the security to/from firm customer at a price that was fair, taking into consideration all relevant circumstances noted above. The Fiirm failed to report the lower of yield to call or yield to maturity for transactions in TRACE-eligible securities to TRACE and the Firm 's supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and Municipal Securities Rulemaking Board (MSRB) rules concerning municipal bond pricing, and NASD rules concerning corporate bond pricing and TRACE reporting. Dougherty & Company LLC: Censured; Fined $167,500; Required to revise its written supervisory procedures regarding municipal bond pricing, corporate bond pricing and Trade Reporting and Compliance Engine (TRACE) reporting. |
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Dominick & Dominick, LLC AWC/#20050006006-01/September 2007 The Firm bought/sold securities for its own account from /to another broker-dealer and failed to sell/buy the securities to/from firm customers at prices that were fair and reasonable, taking into consideration all relevant circumstances, including market conditions with respect to the securities at the time of the transactions, the expense involved, and that the firm was entitled to a profit. The Firm failed to adequately enforce its written supervisory procedures to ensure compliance with applicable securities laws, regulations and NASD rules concerning fair pricing and markups. Dominick & Dominick, LLC: Censured; Fined $18,000 |
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AIG Financial Advisors, Inc. AWC/#2006003910901/September 2007 The Firm permitted an individual subject to a statutory disqualification to be associated with the firm. AIG Financial Advisors, Inc. : Censured; Fined $15,000 |
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Ko Securities, Inc. and Terrance Yutaka Yoshikawa (Principal) #CMS000142/September 2007 United States Court of Appeals denied Petition for Review of a Securities and Exchange Commission Decision. The Firm and Yoshikawa executed short sales without making and annotating the affirmative determinations required for each short sale. Acting through Yoshikawa, the Firm failed to maintain a record of the terms and conditions, time of entry and execution time for each customer order. Ko Securities, Inc. and Terrance Yutaka Yoshikawa: Fined $147,450.81 jt/several; Firm fined $15,000 for recordkeeping violation. |
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Network 1 Financial Securities Inc., Richard William Hunt (Principal) and
Damon Domenic Testaverde (Principal) AWC/#EAF0400940001/September 2007 Acting through Testaverde, the Firm solicited one of its customers, who was a controlling shareholder of a company, to sell the firm shares of a common stock in amounts that exceeded the limits that a controlling shareholder could sell in public transactions. The Firm purchased these shares with the intent to distribute them through its market making activities and then resold them to the public. Acting through Hunt, the Firm failed to establish, maintain and enforce a supervisory system, including written procedures, reasonably designed to ensure compliance with the requirements of Section 5 of the Securities Act of 1933, and failed to reasonably supervise Testaverde's activities in connection with soliciting the customer to sell large blocks of stock to the Firm. Network 1 Financial Securities Inc.: Censured; Fined $100,000; Required to retain an independent consultant to conduct a comprehensive review of the adequacy of its policies, systems, procedures (written and otherwise) and training relating to market making and retail activity. Richard William Hunt: Fined $25,000; Suspended 45 days in Principal capacity only Damon Domenic Testaverde: Fined $50,000; Suspended 4 months in all capacities |
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Empire Financial Group, Inc., George Randy Cupples
(Principal) and Pamela Cathy Ohab (Principal) AWC/#2005000450504/September 2007 Acting through Cupples and Ohab, the Firm
The Firm
Empire Financial Group, Inc.:Fined $145k,000 ($10,000 jt/sev with Cupples; $10,000 jt/sev with Ohab) George Randy Cupples: Suspended 30 business days in FINOP capacity only Pamela Cathy Ohab: Suspended 30 business days in FINOP capacity only |
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| Bill Singer's Comment: Another one of these "once again" violations that I have been highlighting this year. Bottom line, if you engineer a material change to your member firm's business (or you are involved on the buyer's/investor's side of such a change), please make sure that someone has notified FINRA in advance of the PROPOSED change -- and then make sure that you get FINRA's approval and that your Membership Agreement is modified as required. | ||||||
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Beerbaum & Beerbaum Financial
and Insurance Services, Inc. and Hans Norman Beerbaum (Principal) Beerbaum, while suspended as a principal of the firm , actively engaged in the management of the firm 's securities business, and performed executive and supervisory responsibilities despite his suspension as a principal. See SEC decision at http://sec.gov/litigation/opinions/2007/34-55731.pdf Beerbaum & Beerbaum Financial and Insurance Services, Inc.: Fined $15,000 Hans Norman Beerbaum: Barred |
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Griffin, Mills & Long, LLC and Walter Andrew Mills (Principal) AWC/#2007007387901/September 2007 Acting through Mills and in participation with other registered representatives of the firm, the Firm sold common stock iin contravention of the terms of the private placement memoranda. Specifically, public customers who participated in the offering were instructed to make their checks payable to a company Mills owned and controlled that was not a FINRA member firm, or to wire transfer funds directly to the company's bank account. By directing customer funds to the company's account, the customer funds were commingled with funds unrelated to the offering. Further, acting through Mills, the Firm used the proceeds in a manner contrary to the representations made to the customers in the private placement memoranda. The firm and Mills failed to fully respond to NASD requests for information and documents. Griffin, Mills & Long, LLC : Expelled and Walter Andrew Mills: Barred |
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| Bill Singer's Comment: Clearly, 2007 continues to maintain FINRA's focus on escrow violations. Folks, the funds are supposed to go into an independent bank account subject to a written escrow agreement. If the funds are going into any other type of account, you're likely going to have a violation. | ||||||
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John Griffin Wise (Principal) AWC/#2006004364001/August 2007 Although Wise acted as the escrow agent for money-market escrow accounts, he did not disburse the additional interest earnings that were received into the escrow account after the transaction closed and escrowed funds had already been disbursed to the parties. Without the authorization or consent of the affected parties, Wise transferred $44,000 in post-closing earnings to a single consolidated account in his name, with his member firm identified as the registered dealer on the account statements. Wise guaranteed his own signature on wire transfer instruction letters he transmitted to mutual fund companies which required him to obtain a signature guarantee for letters that requested transfer of funds held in escrow in order to verify the authenticity of the escrow agent’s signature. Wise fabricated a signature guarantee on wire transfer instruction letters by altering the appearance of his signature and applying the bank's medallion guarantee stamp. Wise opened securities accounts at other brokerage firms without notifying his member firming writing that he had opened the accounts and also failed to disclose his affiliation with his member firm to the other brokerage firms. John Griffin Wise: Fined $8,500; Suspended 9 months |
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| Bill Singer's Comment: It's nice that the escrowed funds were in an interest-bearing account, but no one gets to benefit from that accrual without written agreements to that effect. But, if you're going to fabricate signature guarantees, why let a little thing like a piece of paper get in the way of $44,000? | ||||||
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William Edward Thomas AWC/#2005003297801/August 2007 Thomas accepted $2,600 in loans from a public customer (not an immediate family member) in violation of his member firm’s written procedures prohibiting registered persons from borrowing from customers, except for immediate family members for non-securities purposes. The customer was not an immediate family member. William Edward Thomas: Fined $5,000; Suspended 10 business days |
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Long Hoang Nguyen AWC/#2006006999401/August 2007 While taking the Regulation Element of NASD's Continuing Education Requirement exam at a testing center, he reviewed email messages and made telephone calls on his wireless hand-held device contrary to the exam instruction's Rules of Conduct. Nguyen failed to respond to an NASD request for information. Long Hoang Nguyen: Barred |
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| Bill Singer's Comment: Did he also play any forbidden ringtones? | ||||||
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Peter John Murphy AWC/#20050003239-06/August 2007 Murphy aided and abetted an individual's fraudulent and manipulative bond parking scheme involving pre-arranged, non-bona fide sales and purchases of zero coupon subordinate municipal bonds with a face value of two million dollars. Murphy obtained permission from his member firm to make a proprietary purchase but did not inform his supervisor that he would hold the bonds as a favor until his friend repurchased the bonds and did not disclose that he had been guaranteed a profit when the bonds were repurchased. Murphy was directed to purchase the bonds from a third party with a same-day settlement rather than the standard settlement of three business days after the trade, and did not inform his supervisor that he made the purchase from a third party instead of his friend. The bonds were repurchased at an increased price generating a profit to the firm and Murphy. Peter John Murphy: Fined $10,000 (but consideration given to his financial status); Suspended 90 days in all capacities |
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| Bill Singer's Comment: Haven't seen a good, old-fashioned repo case in some time. Nice to see that somethings live on. | ||||||
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Dawn Anita Martin #2006004392801/August 2007 Martin borrowed $10,000 from public customer in contravention of her member firm's written supervisory procedures prohibiting borrowing money from customers, absent written authorization. Dawn Anita Martin: Fined $5,000; Suspended 90 days in all capacities |
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Andrew Joseph Lynch AWC/#2006006900201/August 2007 Lynch received an insurance application from joint applicants who signed their names on the wrong line of the application, crossed out the misplaced signatures, signed the customers' names on the correct line of the application, without the customers' authorization or consent, and submitted the application to the insurance company. Andrew Joseph Lynch : Fined $5,000; Suspended 3 months in all capacities |
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| Bill Singer's Comment: Oh, how these cases trouble me. On the one hand, I think a three month suspension for simply "fixing" an admittedly erroneous entry (which everyone understood as such and knew what was intended) is over-kill. On the other hand, there are few things more troubling in our industry than forgery or filling in the blanks. Still, all things considered, seems to me that a 30 day suspension plus the fine would have been okay here -- but I do appreciate and understand the NASD's concerns. Let's call this a push. | ||||||
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Frank Enrique Lumpuy AWC/#2006005568401/August 2007 Lumpuy shared in a public customer's loss without prior written authorization from his member firmer the customer before making the deposit into the customer's bank account. Frank Enrique Lumpuy: Fined $5,000; Suspended 10 business days in all capacities |
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Alan Edward Kuzma AWC/#20050033591-01/August 2007 Kuzma conducted financial services workshops and engaged email house to mail workshop invitations to prospective customers without advising his member firm that he was conducting the workshops or having invitations sent. Kuzma failed to request approval for the invitations by a registered principal of his firm prior to use; and the workshop invitations did not include all relevant information, were incomplete, and were not fair and balanced. Alan Edward Kuzma: Fined $5,000; Suspended 20 business days in all capacities |
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David S. Jarnoti AWC/#2007007962001/August 2007 Jarnoti signed a family member's name on change of address forms for individual accounts she held at his member firm without her permission or knowledge. Jarnot was attempting to change her home address to his address. David S. Jarnoti : Barred |
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Steven Wayne Grossman AWC/#2005001180201/August 2007 Grossman churned and excessively traded public customers’ accounts that resulted in commission-to-equity ratios in excess of 30 percent. Grossman recommended and effected securities transactions in customers’ accounts without reasonable grounds for believing that the transactions were suitable in view of the size and frequency of the transactions, nature of the accounts and the customers’ financial situation, investment objectives and needs. Grossman altered his member firm’s record relating to a joint account of customers by deleting certain securities positions from the customers’ Form 1099 and provided the altered document to their accountant. Grossman created a schedule of gains and losses for the customers’ account that contained false information. Steven Wayne Grossman: Barred |
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Anthony Mario Faiola AWC/#2006005577001/August 2007 Faiola and another registered representative sold $2,050,000 worth of limited partnership interests in a hedge fund that Faiola co-owned and controlled to public customers without prior written notice to, or prior written approval from, his member firm. Anthony Mario Faiola : Barred |
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John William Eugster AWC/#20050022712-01/August 2007 Eugster participated in a private securities transaction for compensation without prior written notice to, and written permission from, his member firm. John William Eugster: Fined $10,000; Suspended 2 months in all capacities; Required to demonstrate to FINRA that he has relinquished his entitlement to any profits realized by a limited liability company (LLC) he formed and managed upon the distribution to its members securities acquired in a private placement and any document pertaining to the LLC requiring revision or amendment to effect his relinquishment of his entitlement to any portion of profit has been revised or amended as evidenced by the submission to NASD of the document(s) in their original and revised or amended forms. |
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Donald Fred Ehrenberg Jr. AWC/#2006007413501/August 2007 Ehrenberg borrowed $120,000 from a public customer and failed to inform his member firm. Ehrenberg willfully failed to amend his Form U4 to disclose material information. Ehrenberg failed to respond to NASD requests for information. Donald Fred Ehrenberg Jr. : Barred |
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Brian James Dunn #2006004809201/August 2007 Dunn submitted false expense reports to his member firm and was reimbursed for the expenses, thereby converting firm funds for his own use. Dunn failed to respond to NASD requests for information. Brian James Dunn : Barred |
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Jeffrey Jay Cahn #2006005134301/August 2007 Cahn borrowed funds from a public customer in violation of his firm’s policy prohibiting registered employees from borrowing from, or lending to, public customers with the limited exception of immediate family members. Cahn settled a customer complaint without his member firm’s knowledge or authorization. The sanction was based on findings that Cahn failed to respond to NASD requests for information and documents. Jeffrey Jay Cahn: Barred |
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John Charles Burch (Supervisor) AWC/#2006004468101/August 2007 Burch deposited $6,000 into a bank account for purposes of avoiding a transaction reporting requirement under federal law, knowing that the property involved in the financial transaction represented the proceeds of some form of unlawful activity. John Charles Burch : Barred |
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Porter Bernard Bingham (Principal) and Hal Butts Jr. (Principal) OS/#E072005021301/August 2007 Bingham and Butts failed to cause their member firm to maintain its required minimum net capital. They prepared and/or were responsible for the preparation of inaccurate net capital computations, trial balances and general ledgers for their member firm. They prepared and/or caused the preparation of inaccurate FOCUS reports for their member firm and filed the inaccurate reports with NASD. Bingham and Butts failed to submit timely notice to NASD of their firm’s net capital deficiency. Bingham failed to file his member firm’s annual audit report in a timely manner. Porter Bernard Bingham: Fined $10,000; Suspended 1 year in Principal capacity; Required to requalify as Principal Hal Butts Jr.: Fined $5,000; Suspended 15 business days as FINOP |
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Glenn Edward Best (Principal) AWC/#2006004125201/August 2007 Acting through Best, the Firm used the instrumentalities of interstate commerce to conduct a securities business while failing to maintain its minimum required net capital. Glenn Edward Best: Fined $5,000; Suspended 30 business days in FINOP capacity; Required to requalify as a FINOP |
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Michael Clark Behrend AWC/#20060069702-01/August 2007 Behrend created phony correspondence and forged signatures on requests for disbursements of funds from insurance and investment accounts held at his member firm and its affiliate in order to obtain money and property by false means. Behrend requested that checks drawn on customer accounts be sent directly to him, forged the customers’ signatures on the back of the checks and added his own signature on the back of the checks. He deposited $20,460.99 into his own bank accounts through this scheme and never returned any of the funds to customer accounts. Behrend failed to respond to NASD requests for information. Michael Clark Behrend: Barred |
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Westrock Advisors, Inc. AWC/#20060037272-01/August 2007 The Firm effected both a 100 percent change in its direct ownership and a material expansion of its business operations without seeking and obtaining approval for these changes as NASD Rule 1017 required. The Firm added branch offices without notifying NASD within 30 days of their opening as NASD By-Laws required, and failed to have reasonably written supervisory procedures in place to ensure compliance with NASD Rule 2711. The Firm conducted a securities business when the firm’s capital was below the minimum amount required. The Firm failed to timely report customer complaints and did not report additional complaints as NASD Rule 3070(c) required; and failed to amend, and timely amend, Forms U4 or U5 for registered representatives to reflect customer complaints. The Firm conducted an options business at a branch office with a supervisor who was not registered as either an options principal or as a limited principal – general securities sales supervisor. Westrock Advisors, Inc.: Censured; Fined $42,000 |
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| Bill Singer's Comment: Ouch! I've been doing these sales of BDs for nearly two decades and one of the first things I remind the buyer and the seller is that the sale will constitute a "material change" under the Membership Agreement and to make sure that the NASD is notified of the proposed change. You cannot simply finalize the transaction and then send the NASD notice. The NASD (now FINRA) has to review and approve the transaction. This oversight often causes a major headache in terms of approval delays and possible sanctions. Make sure it's on your punchlist when you buy/sell a BD. | ||||||
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Perrin Holden and Davenport Capital Corp. aka PHD Capital AWC/#E102002046001/August 2007 The Firm failed to report, or to timely report, to NASD statistical and summary information relating to customer complaints the firm received. Perrin Holden and Davenport Capital Corp. aka PHD Capital: Censured; Fined $12,500 |
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Janco Partners, Inc. AWC/2006003976301/August 2007 The Firm permitted associated persons to function as research analysts without being properly registered with NASD and issued research reports the unregistered analysts prepared. The Firm’s written supervisory procedures were not reasonably designed to achieve compliance with NASD Rule 2711 in that the procedures did not include steps to monitor and achieve compliance with the rule. The Firm failed to
Janco Partners, Inc. : Censured; Fined $60,000 |
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| Bill Singer's Comment: Seems we have a couple of firms that haven't been on this planet for a few years. Read the Source case for some similar problems. Here, it's a simple proposition: You cannot serve as an analyst if you are not registered and you can't issue reports from unregistered analysts. Period. | ||||||
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Grant Bettingen, Inc. AWC/#E0220050073-02/August 2007 The Firm participated in private placement offerings of stock and failed to transmit investor funds to an unaffiliated bank to hold in escrow until the offering contingency was met but, instead, investor checks were either made payable to and held by a law firm as escrow agent or were made payable to the firm and deposited into a bank account without a written agreement with the bank to hold the funds in escrow. The Firm the instrumentalities of interstate commerce to engage in the securities business while failing to maintain required minimum net capital. Grant Bettingen, Inc. : Censured; Fined $10,000 |
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| Bill Singer's Comment: All of sudden we're seeing more escrow problems. See the Wise case.. | ||||||
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First American Capital and Trading Corporation fka STC Securities,
Inc. AWC/SAF2004044701/August 2007 The Firm failed to
In addition, the Firm’s procedures identified various AML “red flags,“ including large wire transfers and deposit of large amounts of low-priced securities, but failed to identify and analyze these transactions to determine if they were in fact suspicious and were required to be reported on a SAR-SF. First American Capital and Trading Corporation fka STC Securities, Inc: Censured; Fined $30,000; Required to have all its registered persons register for three hours of anti-money laundering (AML) training. |
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| Bill Singer's Comment: Nothing gets a regulator's goat more than to see that you have drafted procedures but not followed them. Of course, as we've discussed throughout this year, once NASD says there was a "red flag" and you missed it, well, that's going to be a major to-do. | ||||||
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brokersXpress, LLC AWC/#2006003865601/August 2007 The Firm executed transactions in municipal securities that were not reported to the MSRB within 15minutes of execution time, and transaction information was reported inaccurately. The Firm failed to
brokersXpress, LLC : Censured; Fined $50,000 |
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American SkandiaMarketing, Inc. AWC/August 2007 The Firm failed to maintain and preserve all of its electronic communications as SEC Rule 17a-4 requires. The findings stated that the firm’s supervisory system and procedures were not reasonably designed to ensure that the required written consent for Web CRD searches was retained by the firm. American Skandia Marketing, Inc.: Censured; Fined $75,000; Required to review its procedures regarding Web CRD searches and the preservation of electronic mail communications for compliance with federal securities laws, regulations and NASD rules. |
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| Bill Singer's Comment: NASD's 2007 poster child: improper Web CRD searches. In case you haven't heard the news, you must get prior written consent from the subject of your searches. | ||||||
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Source Capital Group, Inc., John Philip Boesel III (Principal) and Joseph
Ezekiel Blankenship II AWC/#2006003803601/August 2007 Acting through Blankenship, the Firm sent drafts of a research report prior to its issuance to the subject company that included the research summary, research rating and price target. Blankenship, as the author of the research report, was restricted from purchasing the company’s stock 30 days prior to the issuance of the report but acquired stock from the company prior to issuance. Inconsistent with his buy recommendation in the research report, Blankenship then sold his shares. Acting through Blankenship, the Firm issued the research report and failed to disclose Blankenship’s acquisition of the shares of stock from the company. Acting through Boesel, the Firm failed to implement the firm’s written supervisory procedures to ensure that the firm and its employees complied with the provisions of NASD Rule 2711. Source Capital Group, Inc.: Censured; Fined $20,000 ($10,000 jt/sev with Boesel, and another $10,000 jt/sev with Blankenship) John Philip Boesel III: Censured; Fined $10,000 jt/sev with Firm Joseph Ezekiel Blankenship II: Censured; Fined $10,000 jt/sev with Firm; Fined additional $5,000 |
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| Bill Singer's Comment: In the past ten years, has there been any more-publicized new rules than those pertaining to research? You can't sent out a draft of a report to the covered company before publication. That's basically chiseled into stone. Of course, it's also not exactly a brilliant idea these days to obtain stock from a covered company (before you send out a supposedly pristine piece of research) and then sell the damn shares while your report is pumping them! Now I do allow for the fact that some folks have been visiting the moon since Spitzer was the NYAG and now the state's Governor. So that might explain the confusion. See Janco for a similar research violation. | ||||||
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Gem Advisors, Inc. and Julio Alfonso Marquez (Principal) OS/# 20050024626-02/August 2007 The Firm and Marquez failed to employ a registered Financial and Operations Principal (FINOP). The Firm was deficient in that it had failed to employ at least two registered general securities principals with respect to each aspect of the firm’s investment banking and securities business for more than two years and 10 months before applying for a waiver of the requirement. The Firm failed to timely file a Financial and Operational Combined Uniform Single (FOCUS) report. Gem Advisors, Inc. and Julio Alfonso Marquez (Principal): Censured; Fined $15,000 jt/sev (Firm fined an additional $2,500) |
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| Bill Singer's Comment: Two comments. First, you must have a FINOP (and if you can't afford a full-timer, there are folks who serve as what has pejoratively become known as a rent-a-FINOP) and the rule is that you must have at least two General Securities Principals (but you can apply for a waiver). Second, you mean to tell me that after nearly 3 years the good old NASD (now the more impressive sounding FINRA) didn't notice that one of its member firms had no FINOP and lacked two GSPs? | ||||||
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Boenning & Scattergood, Inc., Thomas John
Chancler (Principal) and James Still (Principal) AWC/#2006003777301/August 2007 Acting through Chancler, the Firm permitted Still to head its Investment Banking Department and to engage in conduct that required registration as a general securities principal, even though he was not registered with NASD in any capacity. The Firm failed to timely report transactions in Trade Reporting and Compliance Engine (TRACE) eligible securities. Boenning & Scattergood, Inc., Thomas John Chancler (Principal) and James Still (Principal): Censured; Firm fined $20,000 (Chancler and Still jointly and severally liable for $15,000) |
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| Bill Singer's Comment: We're seeing a noticeable increase in both "parking" cases and unregistered persons. Sometimes the failure to register situation arises because of a failed transfer of prior registration (which wasn't caught or someone thought was but never checked). With year-end approaching, this might be a good time to do a routine check of registrations. | ||||||
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Brookstreet Securities Corporation, Stanley
Clifton Brooks (Principal) and Kathleen Margaret McPherson
(Principal) AWC/#EAF0400570001/August 2007 The Firm failed to file, in a timely manner, Form U4/U5 amendments and initial Form U5 termination filings, and did not have adequate policies or procedures designed to ensure reportable items were forwarded to the firm’s registration department and filed in a timely manner with NASD. The Firm's policies and procedures failed to enumerate which types of events are reportable, had no system to monitor timely filing of Forms U4/U5 and to provide for supervisory reviews for compliance. Brooks and McPherson had assigned responsibility for filing amendments to a non-registered clerical employee, and the firm did not have adequate policies or procedures with respect to the individual’s duties. The Firm submitted Form U4/U5 amendments with electronic signatures before a registered principal of the firm received, reviewed and approved the amendments. Brooks signed U4/U5 amendments although he did not supervise registration functions related to filing of Forms U4/U5 or amendments, and approved of the firm’s registration department submitting Form U4/U5 filings with his electronic signature before he received, reviewed or signed these filings. Brookstreet Securities Corporation: Censured; Fined $200,000 ($25,000 jt/sev with McPherson); Required to retain an independent examiner to conduct an audit to assess the effectiveness of its system and procedures for ensuring the timely filing of amendments to Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5) and initial U5 termination filings, and required to implement and certify changes in its supervisory system and personnel. Stanley Clifton Brooks" Fined $35,000; Suspended 60 days in supervisory capacity Kathleen Margaret McPherson" Suspended 45 days in principal capacity |
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Martin Yura (Principal) AWC/#E0420040369-03/July 2007 Yura instructed another supervisory principal to create a document stating that a registered representative had been suspended for resolving an incident with a public customer by paying the customer money when he had not been suspended. The document was to be placed in the representative’s file at a branch office. Yura falsely advised his firm’s chief compliance officer that the representative had been suspended. Martin Yura: Fined $10,000; Suspended 1 year in all capacities |
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| Bill Singer's Comment: Wouldn't you love to know what started this mess? Oh children. Behave yourselves. | ||||||
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Abigail Mann Whittle AWC/#2006006019001/July 2007 In order to transfer a public customer’s account to her member firm from another broker dealer, Whittle contacted the other broker dealer and impersonated the customer over the telephone without the customer’s knowledge or consent. Abigail Mann Whittle : Fined $5,000; Suspended 20 business days in all capacities |
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| Bill Singer's Comment: Okay, but was it at least a good impersonation? | ||||||
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Steve Brian Westfall AWC/#2006005361201/July 2007 Westfall borrowed $30,000 from a public customer in violation of his member firm’s written procedures and failed to request an exception from his firm. Steve Brian Westfall: Fined $7,500; Suspended 30 days in all capacities |
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Ronald Vaughn #2006004213401/July 2007 Vaughn falsely represented to an insurance company that a public customer had not received $74,240.41 due to him from the liquidation of his fixed annuity when in fact, the customer had received the payment and used these proceeds to purchase a fixed annuity through another insurance company. The insurance company mailed a second check to Vaughn, who forged the customer’s endorsement to the check and deposited the check to his personal bank account, thereby converting the funds to his own use and benefit. Vaughn failed to respond to NASD requests to appear for an on-the record interview; and willfully failed to amend his Form U4 to disclose material information. Ronald Vaughn: Barred |
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| Bill Singer's Comment: Yeah, but the customer did purchase that fixed annuity from another insurance company. I mean you can't just let the client get away with that. If you have to forge the client's name and steal his money in order to teach him or her a lesson, what's wrong with that? Bet you the client will think twice before taking his business elsewhere in the future. (For those of you who can't tell --- I'm being incredibly sarcastic). Moi???? | ||||||
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Eduardo M. Tejeda AWC/#2005003386301/July 2007 Tejeda provided a company with letters on his member firm’s letterhead that contained false and misleading representations confirming the company’s credit line and funds availability, although he knew the company planned to use the letters in an attempt to secure a loan, the company had no credit line at the firm and had not established an account with the firm. Eduardo M. Tejeda: Barred |
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Wilbert Kneeland Roberts (Principal) AWC/#2006006198001/July 2007 Roberts borrowed $3,500 from a public customer without providing notice to, or obtaining approval from, his member firm. Roberts refused to submit to an NASD on-the-record interview. Wilbert Kneeland Roberts: Barred |
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John Francis Kavalec #2005002707301/2006004842802 consolidated/July 2007 Kavalec borrowed $25,000 from a public customer in contravention of his member firm’s written supervisory procedures specifically prohibiting borrowing money from customers. John Francis Kavalec : Barred |
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Kenneth Cecil Holtsclaw (Principal) AWC/#2006006831001/July 2007 Holtsclaw falsified business expense reports, receiving $282.72 to which he was not entitled, because he requested reimbursement for restaurant gift cards or meals for unauthorized guests in addition to reimbursement for actual meal expenses in violation of his member firm’s written supervisory procedures. Holtsclaw failed to appear for an NASD on-the-record interview. (NASD Case ) Kenneth Cecil Holtsclaw : Barred |
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Adeline Aguilon Guzman (Principal) AWC/#20060064931-01/July 2007 Guzman borrowed $3,000 from a public customer in violation of her member firm’s written procedures that prohibited borrowing money from customers under any circumstances. Adeline Aguilon Guzman : Fined $5,000;Suspended 10 business days in all capacities |
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Joseph Marshall Francis Jr. AWC/#20060066655-01/July2007 Francis opened brokerage accounts on a foreign citizen’s behalf without disclosing that the citizen was the accounts’ true beneficial owner. Francis failed to disclose to the member firms at which the accounts were opened that he was a registered representative of another firm and lied to a representative of one firm about the source of the funds he used to open the account. Francis failed to properly notify his member firm of the existence of the outside securities accounts. Francis engaged in an outside business activity without notifying his member firm. Joseph Marshall Francis Jr. : Barred |
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Marlene Hall Foster AWC/#20050002644-02/July 2007 By passively participating in a company’s recruitment of new investors, opening new accounts for them, accepting customer funds and orders, and later complying with the stock promoter’s instructions on when public customers were to purchase stock in the company, Foster negligently assisted the promoter in artificially increasing the company’s stock price. Marlene Hall Foster: Fined $10,000 (includes $2,459 disgorgement); Suspended 6 months in all capacities |
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| Bill Singer's Comment: What????? "Negligently assisting a promoter to artificially increase prices?" What does that even mean? And how does one even begin to define what is "passively" participating as opposed to regular participation? If you carefully read this case, Foster opened new accounts (legal); accepted customer funds and orders (legal), and then did something referred to as "complying" with a promoter's instructions on "when" customers were to purchase the stock (not sure whether that's a violation or not). | ||||||
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Carliss Donald Dykes (Principal) OS/#E062004029602/July 2007 Despite knowing an individual was not registered with NASD, Dykes instructed the individual to contact public customers and discuss investments with them. The individual gave Dykes an application and other documents for the transactions involving a public customer, Dykes assigned the accounts to other registered representatives who had no involvement with the transactions and instructed one of the registered representatives to give the unregistered individual a $2,000 personal check as compensation for the sale of the annuities. Carliss Donald Dykes: Fined $10,000; Suspended 3 months in all capacities |
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Charles Lawrence Doraine AWC/#2005002388201/July 2007 Doraine effected securities transactions in a public customer’s account pursuant to instructions from a third party who, although verbally authorized to trade the account, was not authorized in writing to execute transactions in the account. Charles Lawrence Doraine: Fined $5,000; Suspended 5 business days in all capacities |
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Kayel Guy DeAngelis (Principal) #ELI2004032101/July 2007 DeAngelis engaged in private securities transactions and maintained an outside securities account without prior written notice to his member firm. DeAngelis failed to respond to NASD requests for information. Kayel Guy DeAngelis: Barred |
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James Russell Day AWC/#2006005543701/July2007 Day engaged in outside business activities without prompt written notice to his member firm. Day accepted $35,000 in loans from public customers without his member firm’s approval. James Russell Day: Fined $10,000;Suspended 2 months in all capacities |
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Robert Scott Copeland (Supervisor) AWC/#E9B2004057401/July 2007 Copeland
Customers suffered $88,242 in losses from this unsuitable short-term buying and selling activity, while Copeland received net commissions of $37,000. Robert Scott Copeland: Fined $7,500;Suspended 6 months in all capacities; Ordered to pay $88,242 in restitution |
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Paul Jude Casella (Registered Principal) #ELI20040411-01/July 2007 Casella caused his member firm to charge customer accounts a $150 fee for the costs associated with his firm changing clearing firms, although none of the firms actually incurred the costs. Casella’s firm would not have met its net capital requirement but for the $91,950 capital infusion obtained through the assessment of the $150 fee. Paul Jude Casella: Fined $10,000; Suspended 1 year in all capacities |
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| Bill Singer's Comment: What???!!! You can hit your accounts with a bogus $150 fee and use that money to keep your firm afloat, and all that warrants is a $10,000 fine and a one year suspension? Compare with the Bruno and Bremmer cases below (both resulted in Bars) and explain what the difference was? | ||||||
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Eric Whetham Carlton (Registered Supervisor) OS/#2005000726801/July 2007 Carlton submitted forged and falsified documents to his member firm, causing its records to be falsified. Carlton misused $33,000 of public customers’ funds by causing unauthorized transfers from the customers family trust account to other customer accounts; and he engaged in unauthorized trading in a public customer’s account without the customer’s knowledge, authorization or consent. Carlton forged, or caused to be forged, customers’ signatures on a letter of authorization that directed transfer of $5,250 out of the customers’ family trust account. Eric Whetham Carlton: Barred |
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Stephen Ennio Capella AWC/#2007008076101/July 2007 Capella received a completed application for an insurance policy from a public customer that was signed incorrectly. Capella crossed out the misplaced signature, signed the customer’s name on the correct line of the application without the customer’s authorization or consent and then submitted the application to the insurance company. T Stephen Ennio Capella: Fined $5,000; Suspended 3 months in all capacities. |
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| Bill Singer's Comment: I have long railed against forgery (and the NASD's many euphemisms for same) but this case troubles me -- even if only a bit. I fully respect the decision to sanction this conduct because you simply do not want RRs signing customers' names to anything, without the customer's prior authorization. Moreover, even with prior authorization, it's far better conduct to absolutely prohibit such an accommodation, which is what many firms follow. Okay, so now we get to the big HOWEVER. Going solely on the basis of what the NASD reported, I would have agreed with the imposition of the $5,000 fine (although $1,000 would have been fine with me). However, I see no reason to impose a 3 month suspension given the facts. And for those who believe a suspension is necessary, I would suggest that one week or one month would have been more than appropriate. | ||||||
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Anna Bruno (Principal) AWC/#2006004927401/July 2007 Bruno improperly obtained $193.50 from a bank at which she was employed by submitting expense reports that overstated her actual expenses. Anna Bruno: Barred |
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Shannon Lynn Bremmer #2005003490501/July 2007 While working in a branch bank affiliate of her member firm, Bremmer "removed $7,800 in cash from the vault and her cash drawer without authority and converted the funds to her own use." Shannon Lynn Bremmer: Barred |
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| Bill Singer's Comment: What wonderful regulatoryspeak! Where you and I would simply say that Bremmer "stole" the cash, the NASD manages to expand that term into removing the cash without authority and converting the funds for her own use. It must be nice to have such a large dictionary at one's disposal. | ||||||
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Timothy Behany (Registered Supervisor) #E9B2003026301/July 2007 Behany improperly obtained contingent deferred sales charge (CDSC) waivers for public customers in connection with mutual fund redemptions by falsely representing on his member firm’s electronic order entry system that the customers were disabled. As such, several mutual fund companies were deprived of fees to which they were otherwise entitled; and his member firm’s books and records relating to redemptions to contain false and misleading information regarding the customers. Timothy Behany: Fined $40,000; Suspended 2 years in all capacities and required to requalify |
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Ruben Francisco Augusta (Principal) AWC/#E9B2005016801/July 2007 August performed Web CRD searches on individuals who were not seeking employment with his member firm and falsely affirmed to Web CRD that he had obtained and would keep the required written consent in connection with those searches on file. Augusta failed to comply with his member firm’s written supervisory procedures to retain hard copies of business-related email correspondence from outside email accounts in a file at his member firm. Augusta permitted associated persons to act in the capacity of research analysts without being properly registered with NASD. Finally, Augusta failed to review registered representatives’ business-related email correspondence when they used outside email accounts. Ruben Francisco Augusta: Fined $25,000;Suspended 1 year in Principal capacity; Suspended 1 month in all capacties. |
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| Bill Singer's Comment: And yet another Web CRD case this month. Once again, if the guy or gal isn't registered with your firm, you're supposed to get written consent to conduct the search. And, as in this case, if they're not even seeking employment with your firm, then you probably shouldn't even think of checking them out on CRD. Why? Well, geez, let's think about it for a second -- you're accessing of the records is l | ||||||