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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. 2008 FINANCIAL
INDUSTRY REGULATORY AUTHORITY
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DEVELOPING ENFORCEMENT TRENDS AS NOTED BY BILL SINGER |
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REGISTRATION |
BORROWING |
MEMBERSHIP AGREEMENTS |
E-COMMUNICATIONS |
WEBSITES |
PRIVATE PLACEMENTS |
FEE-BASED ACCOUNTS |
| American Securities; Lehman; Doolittle; Grady; Perpetual; Myers; Schinazi; Stipek; InvestMgmt. Peacock; Svete; Lindboe | Nay; Nemanich; Owen; Siero; Young ; Dixon ; Myers ; Ranfeld; Muia; Tiedeken; Mann | Investprivate; ITRADE; Redwood; Legend | American Securities; Hunter Scott; Green Manning; Kuprianchik; NIS; Schinazi; Seslia | American Securities; Oppenheim; Robins | ITRADE; Nemanich; Reinhard; Oppenheim ; Schinazi; InvestMgmt.; | BancOne; Reliance |
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Garry Bruce Lindboe AWC/2007007331101/April 2008 Acting through Lindboe, a member firm, operated a securities business without employing a properly registered financial and operations principal (FINOP); and failed to prepare a general ledger and a trial balance from February 2003 through October 2007. Garry Bruce Lindboe: Censured; Fined $25,000 (includes $2,500 jt/several but not noted as with what or whom) |
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Donald Fruehauf Chamberlin Jr. (Principal) AWC/2008012114301/April 2008 Chamberlin negligently allowed his father and brother, who were both barred from association with any broker, dealer or investment adviser pursuant to a settlement with the SEC, to engage in securities related activity with public customers. Donald Fruehauf Chamberlin Jr.: Censured; Fined $10,000; In the event that he becomes associated with a FINRA member firm at anytime in the future, must, within 30 days of such association, advise the compliance officer of the firm of the securities industry bars imposed on his father and brother. |
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Ibrahim Ziblim AWC/2007010930401/April 2008 Ziblim created an ATM card for a banking customer’s account without the customer’s authorization or consent, and subsequently used the card to withdraw $1,000 from the account, converting the proceeds for his own use and benefit. Ibrahim Ziblim: Barred |
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Fredrick Anthony Woods Jr. 2006005689501/April 2008 Woods submitted loan applications to a bank on public customers’ behalf and photocopied their signatures from their bank signature cards onto the loan documents before submitting them to the bank, without their knowledge, consent or authorization. Woods failed to respond fully to FINRA requests for information. Fredrick Anthony Woods Jr.: Barred |
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Ellerd Bruce Tomte OS/E0420040478-01/April 2008 Tomte failed to tell public customers that his member firm would not agree to him charging an hourly fee in lieu of receiving commissions for securities transactions in their account, but received $23,723.02 in commissions for the transactions he recommended and executed in their account. Tomte gave the customers excuses for why he could not give them an accounting of the hours he was purportedly charging to work on their account. Tomte submitted correspondence to the customers that contained exaggerated or unwarranted statements or claims without approval from his firm, in violation of his firm’s written supervisory procedures. Ellerd Bruce Tomte: Fined $5,000; Suspended 4 months |
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Bill Singer's
Comment: Once again, a FINRA decision that no matter how many times you
re-read it, still doesn't make much sense. Here's what is stated:
1. Tomte didn't tell his customers that his firm would not permit him to charge an hourly fee in lieu of commissions. 2. However, in that same sentence we are informed that he received commissions. 3. Then we are told that Tomte did not provide an accounting for hours charged--but, ummm, we are not told that he charged his clients by the hour (we're only told that he got commissions--there's no mention of his getting paid hourly fees). 4. Finally, reference is made to correspondence Tomte submitted to customers with exaggerated/unwarranted statements, but it is unclear as to whether those statements were in connection with the alleged hourly fees or something else. Helloooooooooooo, FINRA. Any chance of spending a bit more time writing and reviewing this monthly reports? |
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William Jerome Svete (Associated Person) AWC/E062005003201/April 2008 Svete actively engaged in the management of his member firm’s securities business without being registered with FINRA in a principal capacity. William Jerome Svete: Fined $10,000; Suspended 15 business days |
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Timothy James Stauffer AWC/20070094652/April 2008 Stauffer misappropriated $523,822.50 from his member firm’s public customers by obtaining letters of authorization (LOA) signed in blank by the customers and subsequently, without authorization, filled in the LOA to direct that checks or wire transfers be paid out of the customer’s account. Stauffer wrongfully used an ATM debit card issued to his brother’s account to misappropriate $8,134 by ATM withdrawals from the account. Stauffer failed to respond to FINRA requests to provide testimony. Timothy James Stauffer: Barred |
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| Bill Singer's Comment: We are seeing an explosion in ATM cases and I wish that FINRA would prepare a comprehensive Notice to Members in which it would offer some guidance as to how best to deter such misconduct and what, if any, preventative measures are being used by member firms with success. Here is the typical challenge that regulators consistently fail to surmount: You see a growing problem, you ramp up the prosecutions, but you fail to provide useful guidance as to how to detect and deter. Let's try to nip this garbage in the bud, for once. | ||||||
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Donna Marie Shurot AWC/2006006753101/April 2008 Shurot received $58,000 from a public customer to purchase a life insurance policy, deposited the funds in her own personal account at her member firm, transferred $58,479 to her IRA account at the firm and failed to submit a life insurance application for the customer to the firm . Shurot caused another member firm to transfer $6,712 from a deceased customer’s account at that firm by completing a request for redemption form, without authorization from the customer’s estate, and included instructions on the form that the funds be made payable to an account belonging to Shurot at her member firm. Donna Marie Shurot: Barred |
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George Sepero AWC/2006005804301/April 2008 Sepero effected unauthorized securities transactions in public customers’ accounts and provided false testimony during a FINRA on-the-record interview. George Sepero: Barred |
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| Bill Singer's Comment: As noted recently, FINRA now seems to be citing "false testimony" at OTRs with more frequency than in years past. See the S.G. Martin case for another recent example. | ||||||
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Stephen G. Rittenberg AWC/2006006533901/April 2008 Rittenberg prepared and distributed unapproved sales literature at seminars for active and retired educators. The sales literature failed to disclose Rittenberg’s member firm, and a principal at his firm did not review the sales literature and evidence its review in writing. Some of the customer information questionnaires Rittenberg prepared for distribution at the seminars were misleading because they claimed that any information provided would be held confidential when that was not the case. Stephen G. Rittenberg: Fined $5,000; Suspended 30 days |
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| Bill Singer's Comment: Without question, FINRA has put the industry on notice that it is watching out for potential abuses in the seminar arena. The regulator has been steadily increasing its docket over the past few years with examples of misconduct in that arena, and as Rittenberg demonstrates, there is no let up. The confidentiality issue in this case is intriguing because it is clearly an area ripe for abuse and we haven't seen many FINRA actions involving such misconduct. | ||||||
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Paula Ludwig Nordquist AWC/2007009038901/April 2008 Associated Person Nordquist effected unauthorized withdrawals totaling $3,500 from a public customer’s bank account and used the funds for her own use and benefit. Paula Ludwig Nordquist: Barred |
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| Bill Singer's Comment: Usually I criticize regulators for using bureaucratic doublespeak to make their cases look better. Here, I'm sort of dumbfounded by the choice of description: unauthorized withdrawals. Are unauthorized withdrawals related to what many of us call stealing or larceny? Is there any relationship between an unauthorized withdrawal and--let me try my hand at this creative writing stuff -- borrowing without prior notice or approval? | ||||||
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Joel S. Mitchell (Principal) AWC/2007009448901/April 2008 Mitchell changed a public customer’s address for her individual retirement accounts to his own address without her authorization or consent, entered numerous unauthorized redemptions of mutual fund shares in the accounts, forged the customer’s signature on checks totaling $44,697.70, then converted the proceeds for his own use and benefit. Mitchell improperly opened several credit card accounts in the customer’s name, listed himself as an authorized user and obtained $63,169.16 in cash advances, which he misappropriated for his own use and benefit. Joel S. Mitchell: Barred |
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Susan A. Mann AWC/2007010717301/April 2008 Mann borrowed $10,000 from a public customer contrary to her member firm’s written supervisory procedures prohibiting its representatives from borrowing money from customers. Mann failed to inform her firm of the loan or otherwise obtain permission. Susan A. Mann: Fined $5,000; Suspended 10 business days |
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Julianna Lynn Makuch AWC/2006005191201/April 2008 Instead of requiring employees to execute new corrected investment-option selection forms for 401(k) retirement savings plans, Makuch completed the forms using information provided on the original employee forms and affixed a photocopy of the employee’s signature on the new forms. Julianna Lynn Makuch: Fined $5,000; Suspended 4 months |
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| Bill Singer's Comment: Without question we are in the midst of an explosion of these types of violations. If you merely look back over the past few months of 2008, you will see a number of "affixing" cases involving signatures of customers or colleagues. There is also a variant of this situation in which folks take CE or qualifying exams for others. Regardless of whether you think there is too much damn paperwork or it's too much of a bother to get an original signature--this is just not a smart alternative. I know my warning will continue to fall on deaf ears but, seriously folks, take the time to get the original signature. | ||||||
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Jeffrey Michael Laster AWC/2007009113301/April 2008 Laster submitted a falsified letter in another registered representative’s name requesting a hardship withdrawal of $3,308 from that representative’s trading account without his authorization or consent. Laster forged the registered representative’s signature on the letter and on the check that was subsequently issued as a result of his request and received the proceeds. Jeffrey Michael Laster: Barred |
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Mary Denise Gustavson 2006007458501/April 2008 Gustavson assisted a public customer in obtaining a loan from a bank and to ensure that the customer obtained the loan, she retrieved a financial statement from a third person and pasted the customer’s name and date of birth over the third person’s name and date of birth to make it appear as if it were the customer’s financial statement. Gustavson copied the altered document and submitted the copy to the bank to support the customer’s loan application. Gustavson failed to respond to FINRA requests for information. Mary Denise Gustavson: Barred |
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| Bill Singer's Comment: Wow!!! I can't even get a free toaster anymore when I open an account and, come to think of it, I think my bank stopped sending me those free calendars. This is what I call old-fashioned customer service. All kidding aside though, we are seeing an increase in these types of cut-and-paste cases. | ||||||
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Beatriz Fresquez AWC/#2007010423101/April 2008 Fresquez converted funds from a public customer by ordering an automatic teller machine (ATM) card for the customer, creating a personal identification number (PIN) number for the card and using the card to withdraw $23,323.50 from the customer’s bank account. Fresquez also used bank counter withdrawal forms to withdraw $42,923.50 from the account without the customer’s knowledge or consent. Fresquez failed to respond to FINRA requests for information. Beatriz Fresquez: Barred |
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Steven Dubinsky (Principal) and Michael John Pata (Principal) AWC/ELI2004035401/ELI2004035402/April 2008 Dubinsky and Pata failed to properly supervise a registered representative who was engaged in excessive trading in customer accounts. Steven Dubinsky (Principal) : Fined $5,000; Suspended 10 business days in Principal Capacity only Michael John Pata (Principal): Fined $5,000; Suspended 10 business days in Principal Capacity only |
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Gregory Orlan Dartez and Jerry Glenn Griggs AWC/20060066266-01/20060066266-02/April 2008 Dartez and Griggs wrote and disseminated press releases touting the securities of an oil and gas company that were not fair and balanced, and failed to provide a sound basis for evaluating the facts regarding the securities. The press releases omitted material facts, including the company’s recent revenues, causing the press releases to be misleading. Gregory Orlan Dartez: Barred Jerry Glenn Griggs: Barred |
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AWARD WINNER John Shim Cho FINRA's official monthly report states that Cho
John Shim Cho: Barred. |
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Bill Singer's
Comment: Okay, so...here's my first question to you: What exactly
did Cho do? Okay, now that you've sort of come up with an answer to
that first questions, here's a second one for you: What did Cho do that
was a violation?
In answering my own first question, the best that I can figure is that Cho "affixed" a customer's signature to a withdrawal slip for $8,400. Not sure why that's not called "forged" a signature but it's possible that the customer okayed the signature (in which case the act was legal and not forgery). But, hey, who am I to complain if FINRA doesn't take the time to explain things? Oh, yeah, I forgot, I make a living complaining about FINRA, so, guess I am the guy to complain. Moving along, then. So, Cho signs his customer's signature to a withdrawal slip for $8,400 and that is compensation from the customer for avoiding an overdraft? What I'm missing here is --- well, hell, I'm missing everything from what happened to what was done in violation of FINRA rules. It's possible, mind you, that Mr. Cho forged the withdrawal or that he lent money to the client in violation of company policy or that he waved a dead chicken around over his head and summoned the Devil. Unfortunately, regulation isn't supposed to be a guessing game and these cases should educate us as to what not to do and the consequences of such misconduct. |
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Dean Robert Bordeaux AWC/2007009423701/April 2008 Bordeaux solicited the purchase of a security to his customers although it was not blue-sky registered in Illinois during the relevant period. Bordeau mismarked order tickets for purchases of the security in some of his customers’ accounts as “unsolicited”when, in fact, the trades were solicited and caused Non-Solicitation Letters to be sent to some of the customers who purchased the security (the NSL stated that Bordeaux had not solicited in any way, nor had the purchase been made on the basis of any recommendation of information from his member firm, its Research Department, or any of its employees when, in fact, he knew that he had solicited these purchases at the time he caused these letters to be sent to his firm ’s customers. Dean Robert Bordeaux: Fined $10,000; Suspended 12 months |
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Tarrant McCutchen Augustine AWC/2007009299901/April 2008 Augustine created and sent falsified account statements to a public customer that inflated the value of the customer’s mutual fund. Tarrant McCutchen Augustine: Barred |
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Seslia Securities AWC/2007007154201/April 2008 The Firm failed to retain instant messages in violation of Securities and Exchange Commission (SEC) Rule 17a-4, and failed to maintain records documenting the content of its continuing education programs (firm element) and covered registered persons’ completion of the programs. Seslia Securities: Censured; Fined $17,500 |
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Pershing LLC AWC/2007009522001/April 2008 The Firm employed persons who were statutorily disqualified because it failed to submit the fingerprints of temporary workers who were working for the firm for a background check to the Federal Bureau of Investigation (FBI), and failed to promptly notify the New York Stock Exchange (NYSE) of its association with persons subject to statutory disqualification. The Firm failed to establish, maintain and enforce written procedures, including a system of follow-up and review of its business activities, with respect to its hiring of temporary workers to achieve compliance with federal securities laws, NASD and NYSE Rules relating to association with statutorily disqualified individuals. Pershing LLC: Censured; Fined $95,000 |
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ING Financial Advisers, LLC AWC/2007007182602/April 2008 The Firm failed to timely file summary and statistical information for numerous public customer complaints that the firm received. The Firm’s supervisory system
ING Financial Advisers, LLC : Censured; Fined $15,000 |
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The Robins Group LLC and Marcus Whitney Robins (Principal) AWC2005001863901/April 2008 The Firm permitted research analysts, including Robins, to execute
The Firm authorized stock transactions that NASD Rule 2711(g)(3) prohibited, purportedly based on an unanticipated change in the personal financial circumstances of the beneficial owner of the research analyst account, and failed to maintain written records regarding the transactions and the justification for permitting them for three years after the dates when the transactions were approved. The Firm, acting through Robin, published research reports another analyst had written regarding a company, but the report did not disclose that the company had compensated the analyst within the past 12months. The Firm published research reports regarding a company and failed to disclose that the company had compensated a business entity affiliated with the firm within the past 12 months. Robins published magazine articles, which a research analyst considered to be public appearances, and failed to disclose to the publisher that he or a member of his household had a financial interest in the securities of the companies, and the firm failed to maintain records of the articles sufficient to demonstrate Robins’ compliance with the applicable disclosure requirements of NASD Rule 2711(h) for three years after the articles were published. In addition, the Firm failed to adopt or implement written supervisory procedures reasonably designed to ensure that it and its employees comply with NASD Rule 2711. Moreover, the Firm published on its website an inaccurate list of its registered persons, including its research analysts, and the companies covered by their research, because some of the persons had terminated their association with the firm. The Robins Group LLC: Censured; Fined $25,000 ($5,000 of which jt/sev with Robins) Marcus Whitney Robins (Principal): Fined $5,000 jt/sev with Firm; Fined $31,458.59 (includes $16,458,59 disgorgement of benefits); Suspended 20 business days in all capacities |
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| Bill Singer's Comment: Note that FINRA sanctioned the firm because its website disclosed the ongoing employment of terminated individuals. | ||||||
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Kensington Capital Corp., Abram Joseph Silver (Principal) and Jeffrey
Mitchel Simon OS/2005000094003/April 2008 Acting through Simon, the Firm aided and abetted a market manipulation of a thinly traded over-the-counter bulletin board (OTCBB) common stock orchestrated by an individual previously barred from the securities industry, and his brother who had a retail account at the firm. Acting through Silver and another individual, the Firm failed to establish and implement AML policies and procedures reasonably designed to monitor, analyze and investigate suspicious transactions, and to achieve compliance with the Bank Secrecy Act and the implementing regulations thereunder. Acting through Silver, the Firm failed to establish, maintain, and enforce a supervisory system and written supervisory procedures appropriate to its market making and retail trading business and the activities of its registered representatives s relating to market making and trading. Because Silver failed to reasonably supervise Simon’s trading and market making activities, the Firm, acting through Simon, rendered substantial assistance to the stock price manipulation. Kensington Capital Corp.: Censured, Fined $85,000 ($10,000 of which was jointly and severally with Simon); Required to retain an independent consultant to conduct a comprehensive review of the adequacy of the firm’s trading and Anti- Money Laundering (AML) policies, systems and procedures (written and otherwise), and its training related to trading and AML. Abram Joseph Silver: Fined $10,000 jt/several with the Firm; Suspended from association with any FINRA member in any principal capacity for 90 business days and immediately upon the completion of the 90-day principal suspension, Silver has agreed not to serve in the capacity of Chief Compliance Officer for 6 months; must also complete 25 hours of AML continuing education within 12 months, and provide FINRA with written proof of his completion of the continuing education within 30 days. Jeffrey Mitchel Simon: Suspended from association with any FINRA member in any capacity for 6 months; Requalify by exam as a general securities representative (Series 7) and/or as an equity trader limited representative (Series 55) before again becoming associated with any FINRA member in those capacities. |
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Brian Anthony Zirnheld AWC/#2006005319701/March 2008 Zirnheld recommended the purchase of a variable annuity to public customers without having reasonable grounds for believing that the recommendation was suitable based upon the customers’ investment objectives, financial situation and needs. Zirnheld knowingly submitted a false written statement to his member firm claiming that at the time he made the unsuitable recommendation, he was not aware that both customers suffered from dementia. Brian Anthony Zirnheld: Fined $10,000; Suspended 1 year |
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| Bill Singer's Comment: Truly, this one bothers me. If the facts are as FINRA suggests -- that Zirnheld knew that the customers suffered from dementia, then why does that not get you barred? Moreover, assuming that the customers' mental states were so readily apparent that this RR should have known, why were the customers not declared mentally incompetent to handle their financial affairs by a court--or why had no one been appointed to act as their legal guardian? And, to follow that trend of thought, why doesn't FINRA think that any of those facts are worth disclosing as part of this supposedly educational monthly disciplinary report? | ||||||
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Roger Chi Fung Tsui AWC/20060069560-01/March 2008 Tsui possessed unauthorized materials during a General Securities Representative Qualification (Series 7) examination. Roger Chi Fung Tsui: Fined $5,000; Suspended 2 years |
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Joseph P. Tiedeken Jr. 2005003119501/March 2008 Tiedeken failed to completely respond to FINRA requests for information and documents. Tiedeken borrowed $11,000 froma public customer contrary to his member firm’s written policy that prohibited its registered representatives from borrowing money or securities from customers. Joseph P. Tiedeken Jr.: Barred |
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Dennis Wayne Sharp (Principal) AWC/2006006587101/March 2008 Sharp engaged in private securities transactions without prior notice to, and approval from, his member firm. Sharp represented to public customers that payments on promissory notes were guaranteed when he should have known that they were not guaranteed, and failed to inquire sufficiently into their status before making representations. Sharp made recommendations to public customers without reasonable grounds for believing they were suitable for the customers on the basis of facts disclosed by them as to their other security holdings, financial situation and needs. Dennis Wayne Sharp: Barred |
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Frank Giorgio Muia AWC/2007009609501/March 2008 Muia borrowed $2,700 froma public customer of his member firm without notifying or receiving written approval from his firm regarding the loan and in contravention of the firm’s written supervisory procedures prohibiting borrowing monies or securities from a firm customer. Frank Giorgio Muia: Fined $5,000; Suspended 30 days. |
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Shawna Lee Mendoza (Associated Person) AWC/2006006943001/March 2008 Mendoza was instructed by registered representatives at her member firm to complete missing items and obtain new customer signatures on Point of Sale-Variable Life (POS) forms that the customers had previously signed in connection with their applications for variable universal life insurance policies. Because Mendoza was unable to get timely responses from the customers and receive newly signed POS forms, she obtained information from other customer documents and, without the customers’ knowledge and consent, photocopied their signatures to the POS forms and inserted more recent dates tomake it appear that the customers had signed new POS forms. Mendoza altered the dates on the POS forms next to the registered representatives’ signatures without their knowledge and consent. Shawna Lee Mendoza: Fined $5,000; Suspended 3 months |
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James Robert Kelly (Principal) OS/2006005457801/March 2008 Kelly failed to provide complete and timely responses to FINRA requests for information. He willfully failed to amend his Form U4 with material information, and filed an amendment to his Form U4 that included an optional comment regarding an AWC which constituted a public statement denying directly or indirectly an allegation in the AWC, and created the impression that the AWC was without factual basis, which was in violation of the terms of the AWC. James Robert Kelly: Fined $10,000; Suspended 8 months |
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Bill Singer's
Comment: I have long counseled clients against denying the allegations set
forth in a settlement document that is predicated upon the
defendant/respondent neither admitting nor denying the allegations.
I guess the one thing here that puzzles me is whether this is yet another
example of how regulators apply a double standard as between the "big
fish" and the "small fry."
On May 2, 2003, the New York Times reported (MORGAN STANLEY DRAWS S.E.C.'S IRE by Floyd Norris) that the Securities and Exchange Commission, the New York State Attorney General (Eliot Spitzer) and other states alleged that Morgan Stanley paid $2.7 million to other Wall Street firms so that they would provide research on companies whose initial public offerings were underwritten by Morgan. The day after the announcement of a $1.4 billion settlement of the research scandal involving leading Wall Street firms, (Morgan's contribution to that settlement was $125 million) then Morgan Stanley CEO Phillip J. Purcell had attended a investors conference where he appeared to dismiss the allegations by stating that
As Norris reported, then SEC Chairman William H. Donaldson wrote a letter to Purcell:
I have found absolutely no indication that either Morgan Stanely or Mr. Purcell were sanctioned in any manner by the apparently outraged SEC, states, or NASD (now FINRA). Clearly, at some point, regulators must regulate and enforce the sanctity of their settlements. I fully appreciate the principle upon which Chairman Donaldson rebuked Purcell. Nonetheless, whatever James Robert Kelly did, it could not have risen to the enormity of the public comments by Morgan's CEO. Kelly seems to have taken a shot at a lousy AWC on his U4. Perhaps not the smartest move in the world, but not exactly the stuff makes the headlines of the next day's news. Odd, isn't it--that the Kellys of Wall Street wind up getting suspended for much the same misconduct that the CEOs of major firms get nasty letters. I am oh so heartened that FINRA's predecessor (NASD) shared the SEC's concerns and was in communication with Morgan Stanley. Now, why couldn't FINRA have just communicated with Mr. Kelly rather than suspend him? And before you're so quick to answer -- why didn't Purcell get suspended for eight months or fined one cent? You give me an answer that fairly addresses both scenaria and then we can begin the debate. |
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Kyle Timothy Holland (Principal) AWC/20060054866-01/March 2008 Acting through Holland, the Firm
The findings also stated that Holland engaged in activities requiring principal registration while suspended in that capacity. Kyle Timothy Holland: Fined $20,000; Suspended 30 days in all capacities; Suspended 3 months as a FINOP; Requalification by examination before acting in FINOP capacity. |
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| Bill Singer's Comment: More than two decades ago when I was a young lawyer with NASD, some of the most common violations that came across my desk were member firms that were receiving cash and/or certs from customers--and those same firms were operating under a Net Capital exemption that did not permit them to "hold" securities or cash but required that they be sent directly to the clearing firm. Okay, so, even as this decision notes, sometimes customers are not intentionally enticed by the firm to send case/certs but just make a mistake. Nonetheless, if the customer makes such an error, members must promptly forward the cash/certs to the clearing firm (or under certain circumstances return them to the client). Moreover, you must have policies in place that notify such clients not to continue the improper practice. Ignoring the goof is not enough, as this case shows. | ||||||
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Hossien Shane Dez Dezfoolyzadeh AWC/2007008657501/March 2008 Without the customers’ knowledge or consent, Dezfoolyzadeh signed their names to firm forms in order to transfer their customer accounts from his prior firm to his then current firm. Hossien Shane Dez Dezfoolyzadeh: Fined $5,000; Suspended 6 months. |
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Jill Erin Dell AWC/2006006604001/March 2008 Dell deposited $30,500 into a public customer’s bank account through monthly payments of $500 as purported income from a variable universal life policy to avoid a complaint from her member firm’s customers. Dell’s payments to the customer precluded a timely analysis of whether she had made misrepresentations and omitted material facts in connection with the sale of the policy to the customer. Jill Erin Dell: Fined $10,000; Suspended 30 business days |
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Gloria Michelle Crayton AWC/20070082798-01/March 2008 Crayton submitted payroll reimbursement claims totaling $11,440 to an affiliate of her member firm for an individual who did not work for her, and Crayton did not actually incur the payroll expenses claimed. Gloria Michelle Crayton: Barred |
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Timothy Patrick Barry AWC/20060063677-01/March 2008 Barry attempted to compensate public customers for losses incurred related to a delay in processing a stock sale. Barry wrote personal checks totaling $7,000 to the customers without informing his member firm that he had attempted to compensate the customers, and without obtaining authority from his firm to settle the loss in this manner. Timothy Patrick Barry: Fined $5,000; Suspended 10 business days |
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Andrew Cy Banks AWC/2007009447801/March 2008 Banks mismarked order tickets corresponding to discretionary transactions executed in a public customer’s account as “unsolicited,” when in fact the transactions were solicited. Banks exercised discretionary authority in the customer’s account without prior written authorization, and failed to make and preserve accurate books and records. Andrew Cy Banks: Fined $5,000; Suspended 10 business days |
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Strand, Atkinson,Williams & York, Inc. AWC/2006007078101/March 2008 The Firm
Strand, Atkinson,Williams & York, Inc.: Censured; Fined $15,000 |
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| Bill Singer's Comment: Not an earth shattering case in terms of facts, violations, or sanctions, but, nonetheless, an interesting topic. We don't see many allegations of "average price" misconduct and that should serve to compel compliance staff to consider this case. Keep in mind that when a member handles an agency order on an average price basis, members are required to show the receipt and execution of the customer order by reporting a New Order Report and an Execution Report to OATS, with the time of execution reflected as the time at which the average price of the agency execution was determined. | ||||||
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Reliance Securities, LLC AWC/2006003957801/March 2008 The Firm failed to establish, maintain and enforce adequate written supervisory procedures related to fee-based brokerage accounts, and overcharged accounts for fee-based services even though the SEC had previously found the firm to have overcharged customer accounts. (FINRA Case #) Reliance Securities, LLC: Censured; Fined $25,000 |
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| Bill Singer's Comment: Another fee-based case--clearly, FINRA is revisiting this issue with gusto in 2008. See the Fee-Based Account box in the Developing Trends matrix atop this page. | ||||||
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Peacock, Hislop, Staley & Given, Inc. AWC/2007007461501/March 2008 The Firm knowingly permitted an individual to continue to associate with the firm while statutorily disqualified, and permitted the individual to function as a municipal securities representative although he was not registered with FINRA or the MSRB in any capacity. Peacock, Hislop, Staley & Given, Inc.: Censured; Fined $30,000 |
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Berry-Shino Securities, Inc. OS/E3A20050037-02/March 2008 The Firm effected mutual fund transactions for public customers and charged transaction fees that were unreasonable and unfairly discriminatory. Some of these transactions involved the purchase of mutual funds with sales loads and that the firm 's imposition of charges in addition to the sales loads constituted the sale of mutual funds at prices other than the current public offering prices described in the funds' prospectuses. The Firm failed to report, or timely report, items that NASD Rule 3070(a) required to be reported, and failed to timely report customer grievances required to be reported pursuant to NASD Rule 3070(c). The Firm failed to file required amendments to Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5), and submitted amendments to Forms U4 and U5 late. The Firm transacted an options business in a branch office without a qualified on-site principal. The Firm voluntarily created a heightened supervision plan for a registered representative but failed to implement the plan. Berry-Shino Securities, Inc.: Censured; Fined $40,000; Ordered to pay $24,918.62 plus interest in restitution to public customers. |
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Bill Singer's
Comment: Okay, where to start? One, if you have a complicated
written document detailing all those mutual fund charges, maybe it's not
that great an idea to take on additional charges that aren't set forth in
that same document. Two, pay attention to those nasty 3070 and U4/U5
disclosures. Three, once again (second so far this month), if you
have a heightened supervision plan make sure to enforce it.
Finally, a little bit of nuance for all you compliance nerd. Rule 3070(c) actually states: (c) Each member shall report to the Association statistical and summary information regarding customer complaints in such detail as the Association shall specify by the 15th day of the month following the calendar quarter in which customer complaints are received by the member. For the purposes of this paragraph, "customer" includes any person other than a broker or dealer with whom the member has engaged, or has sought to engage, in securities activities, and "complaint" includes any written grievance by a customer involving the member or person associated with a member. So, what's with the red-lettered and highlighted language? Well, a lot of you haven't digested what it says. First, a customer is any person other than a broker or dealer. Okay, so that's like a lot of folks, including children and maybe even dogs that are dressed up on Halloween to look like Winston Churchill, Abe LIncoln, and so on. Not sure about the dogs part, but I'll check that out. Anyway, getting back to the serious stuff, so a customer is anyone whom the member has "engaged" (okay, so that's like an actual paying customer) and "sought to engage, in securities activities." That's a truly amazing bit of expansive language. If you seek to engage in securities activities with anyone, they are a customer; and if they "complain" about you, then you have a 3070 disclosure. So...if you get someone on the phone and they were in the shower and are annoyed about that, I guess if they file a complaint against you that it's now a 3070 item. Oh "no," you say! Complaining that you got them out of the shower and that they dripped water on the carpet is not reportable. The "customer" (the guy or gal in the buff who is dripping water on their floor) hasn't complained about a securities matter. Oh yeah, I says. Go look at the definition of "complaint": "any written grievance by a customer..." ANY...WRITTEN...GRIEVANCE. Of course, it would help if we knew what's a "grievance" and what's not a "grievance." |
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Sisung Securities Corporation and Lawrence John Sisung Jr.
(Principal) C0520030036/March 2008 Securities and Exchange Commission set sustained/set aside in part findings of violation and sanctions on appeal of a National Adjudicatory Council decision on appeal from Office of Hearing Officers decision NASD found that SSC violated Municipal Securities Rulemaking Board ("MSRB") Rules G-37(b), G-37(c), G-37(e), G-8, and G-9, and that Sisung violated, or was responsible for SSC's violations of, MSRB Rules G-37(c), G-8, and G-9. NASD fined SSC $20,000 for its violations of Rules G-37(b) and (c), fined Sisung $20,000 for his violations of Rule G-37(c), fined SSC and Sisung $10,000, jointly and severally, for the violations of Rules G-8 and G-9, and fined SSC $10,000 for its violations of Rule G-37(e). Firm and its president appealed NASD findings that they engaged in municipal securities business with an issuer within two years of contributions to an official of such issuer, solicited contributions to an official of an issuer with which the firm was engaging in or seeking municipal securities business, and failed to record or report contributions. On appeal, the SEC was unable to find violations of MSRB Rules G-37(b) or (c) on this record, and thus have set aside NASD's sanctions with respect to these alleged violations. With respect to the fines NASD imposed for the violations of Rules G8, G-9, and G-37(e), the SEC sustained. Sisung Securities Corporation and Lawrence John Sisung Jr. (Principal): Fined $10,000 (jt/sev); Firm fined additional $10,000 |
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Purshe Kaplan Sterling Investments, Inc.and Peter John Sheehan
(Principal) AWC/2006007370401/March 2008 Acting through Sheehan, the Firm failed to establish, maintain and/or enforce a supervisory system and written procedures reasonably designed to achieve compliance with securities laws, regulations and NASD rules concerning suitability reviews of customer mutual fund transactions, and failed to enforce written procedures providing for special supervision of registered representatives after customers filed complaints. Purshe Kaplan Sterling Investments, Inc.: Censured; Fined $50,000 (jt/sev with Sheehan) Peter John Sheehan (Principal): Fined $50,000 (jt/sev with Firm); Suspended 30 days in Principal Capacity |
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| Bill Singer's Comment: Certainly an area of increasing FINRA focus: What are firms doing when notified of a customer complaint against an RR. Here a Firm had WSPs providing for special supervision, but apparently failed to enforce those policies. The regulators will get you every time for such a lapse. | ||||||
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S.G.Martin Securities LLC and Emanuel Pantelakis (Principal) OS/2005000191701/March 2008 Through the actions of Pantelakis and registered representatives, the firm fraudulently misrepresented and omitted material facts to public customers in connection with the sale of securities. The firm and Pantelakis failed to
The findings also included that Pantelakis knowingly provided false testimony during a FINRA on-the-record interview. S.G.Martin Securities LLC: Ordered to pay $25,294, plus interest, in restitution to investors and to retain an independent consultant to review its policies, systems and procedures (written and otherwise) and training related to sales practices and supervision, and to make recommendations which the firm should implement or suggest alternatives for approval by the consultant. and Emanuel Pantelakis (Principal): Barred |
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| Bill Singer's Comment: The supervisory issues aside, I find it interesting that Pantelakis "knowingly provided false testimony." Frankly, that's a rare allegation to find in these reports because folks who expect to lie usually refuse to testify, or, if they do testify at an on-the-record interview, the regulator simply goes ahead and charges them with the underlying violation and not the "perjury" issue. Given that the old NASD referred such testimonial misconduct to criminal prosecutors in the past, it will be interesting to monitor this case to see whether that happens here. See the Sepero case for a more recent example. | ||||||
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Investment Management Corporation, Brian Young Horne
(Principal) and Kevin Dee Kunz (Principal) OS/#2005000960301/March 2008 Kunz, knowingly and willfully, caused the firm to participate as primary placement or sales agent in public offerings, even though the firm was suspended from participation in securities offerings as primary placement or sales agent until it complied with the independent consultant requirement imposed in a previous NASD (nka FINRA) decision. Acting through Kunz and Horne, the Firm processed commissions earned by firm representatives in the private placements through a non- member mortgage company that Horne owned. Kunz functioned as a principal of the firm even though he was suspended in that capacity from an earlier NASD (nka FINRA decision). Horne, as the firm's president and compliance officer, knew of the independent consultant requirement in the earlier decision or acted with reckless disregard by failing to apprise himself of the sanctions imposed in the decision, but knowingly or recklessly permitted the firm to participate in the offerings without satisfying the independent consultant requirement. Horne knew, or should have known, that Kunz was not permitted to act as a general securities principal but failed to supervise Kunz to prevent him from functioning as a principal while suspended. Investment Management Corporation: Expelled Brian Young Horne (Principal) and Kevin Dee Kunz (Principal): Barred |
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| Bill Singer's Comment: As I noted in 2007 and predicted would continue into 2008 (see Developing Trends matrix at top of this page), "Private Placement" violations are clearly a regulatory hot topic. And as I have noted countless times over the years, suspended firms cannot violate the terms of their suspension (duh) and suspended individuals cannot violate the terms of their personal suspension (double duh, or duh duh--as you prefer) and Presidents and CCOs of member firms who fail to abide by the terms of a regulatory sanction will not be shielded from personal liability (ah, the ever rare and elusive triple duh with oakleaf flourishes). | ||||||
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State Farm VP Management Representatives March 6, 2008 FINRA Press Release FINRA Fines, Suspends 16 State Farm Representatives for Test-Taking Irregularities in the Firm's Continuing Education Program/Supervisors Directed or Allowed Registered Representatives of State Farm VP Management Corp. to Take "Firm Element" Proficiency Tests for Supervisors or Other Representatives FINRA fined and suspended 16 current and former registered representatives of State Farm VP Management Corp. of Bloomington, IL (which is engaged in the business of selling mutual funds and variable products) for misconduct involving FINRA's Continuing Education requirements for registered representatives. The representatives engaged in this misconduct without any authorization from State Farm. State Farm reported the misconduct to FINRA after uncovering test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provided FINRA with its findings. The Continuing Education requirements consist of a Regulatory Element and a Firm Element. The Regulatory Element requires all registered persons to take computer-based training, devoted to industry rules and regulations, on the second anniversary of their initial securities registration and every three years thereafter. The Firm Element requires firms to administer appropriate training to their registered persons who have direct contact with customers, and to the registered persons' immediate supervisors, on an ongoing basis. The training must cover topics specifically related to their business, such as new products, sales practices, risk disclosure, and new regulatory requirements and concerns. The 2005 Firm Element designed by State Farm was an internal, computer-based system. Covered representatives were required to complete a two-hour training session and then pass a proficiency test with a minimum score of 80%. In order to access the Firm Element training session and proficiency test, the participant was required to sign on to the system using a user ID and password. The subordinate representatives who took the test for their superiors signed on as the superiors for whom they were taking the test, using the superiors' user IDs and passwords. One sanctioned representative, a former registered principal of the firm, Rebecca Sappington directed a subordinate to obtain the user IDs and passwords of at least four State Farm registered representatives working in her area, and complete the Firm Element program for these representatives by taking their proficiency tests. When Sappington learned that her directive had not been carried out, she instructed her subordinate to delegate the task to another person, who was an unregistered and newly hired employee of State Farm. This unregistered person then obtained the user IDs and passwords for at least four representatives, logged onto the system and completed the Firm Element program for the representatives by taking their proficiency tests. In concluding these settlements, the registered representatives neither admitted nor denied the charges, but consented to the entry of FINRA's findings. The individuals agreed to the following sanctions: Series 26 Principals who directed a subordinate to take their proficiency tests:
Series 26 Principal who directed subordinates to take the test for others:
Series 6 Representatives who directed or allowed a subordinate to take their proficiency tests:
Series 6 Representatives who completed the proficiency tests for their superiors:
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Fredricka Dale Watson 20060052704/February 2008 Watson took notes into a Regulatory Element of Continuing Education exam and looked at them before they were confiscated by an examiner, even though she had acknowledged that it was prohibited prior to the exam. Watson failed to respond to FINRA requests for information. Fredricka Dale Watson: Barred |
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Dominic Joseph Vricella (Principal) AWC/2007008938701/February 2008 Vricella engaged in private securities transactions without prior written notice to, or prior written approval from, his member firm. Vricella settled a customer complaint without his member firm 's knowledge or approval. Also, he failed to reasonably supervise a registered representative engaged in private securities transactions to prevent his violations and achieve compliance with applicable securities rules, regulations and NASD rules. Dominic Joseph Vricella: Barred |
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Edward Martin VanGrouw VanGrouw obtained contingent deferred sales charge waivers for customers selling Class Bmutual fund shares by falsely claiming that the customers were disabled. The suspension in any capacity is in effect from July 2, 2007 through July 1, 2009. (FINRA Case #) Edward Martin VanGrouw: Fined $20,000; Suspended 2 years; Requalify by exam as registered rep |
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| Bill Singer's Comment: Folks, this isn't anything new or clever, and if you try this device, chances are you're going to eventually get caught. See Schwartz for another example. | ||||||
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Malcolm Thomas 2006004663901/February 2008 Thomas submitted to his member firm forged forms for the purpose of requesting compensation for work he had not done. Thomas failed to respond to FINRA requests for information and to appear for an on-the-record interview. Malcolm Thomas: Barred |
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Leslie Clark Stipek (Principal) AWC/2006005166801/February 2008 While acting through a limited liability company he owned that was not a FINRA member, he effected securities transactions on public customers' behalf and received $1,248,340 in commissions for the sales. Acting thorugh Stipek, the LLC acted as a broker-dealer without being registered with the SEC. Stipek failed to appear for a FINRA on-the-record interview.
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Andrea Marie Selander AWC/2007007771001/February 2008 Selander cut and pasted a public customer's signature on withdrawal request forms without the customer's knowledge or consent in order to expedite the withdrawal of funds from the customer's securities account at the firm to the customer's bank account. Andrea Marie Selander: Fined $5,000; Suspended 60 days |
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| Bill Singer's Comment: Cut and paste? Cut and paste?? As in, cut with a scissor and then glue the signature on??? Though tempted to ask what she was thinking, perhaps I'll show some charity and just let it go...cut and paste???? | ||||||
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Harvey Mitchell Schwartz E102004083703/February 2008 Schwartz made false entries in his member firm 's electronic entry system that claimed that public customers were disabled when they were not, in order to obtain Contingent Deferred Sales Charges for mutual fund shares without informing the customers or confirming the practice with his branch Manager. Schwartz' false claims caused his firm 's books and records to contain false and misleading information. Harvey Mitchell Schwartz: Fined $1,000; Suspended 4 months |
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| Bill Singer's Comment: Folks, this isn't anything new or clever, and if you try this device, chances are you're going to eventually get caught. See VanGrouw for another example. | ||||||
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Isaac Schinazi (Principal) and Robert Ware
Middleton AWC/#2005000777001/ 2005000777002/February 2008 At a time when the original stated contingency of $500,000 had not been met in connection with a "minimum maximum" contingency private placement offerings of securities, they caused investor funds to be disbursed from a bank account and transferred to the issuer and their member firm , and failed to return funds to the investors from whom the firm received the funds, rendering the terms of the private placement memorandum false and misleading. The Firm failed to maintain an escrow account to hold customer funds pending occurrence of each offerings' contingencies but instead, Schinazi and Middleton caused customer funds to be deposited with a bank in a savings account that was not an escrow account. Acting through Schinazi, the Firm failed to maintain the required minimum net capital while conducting a securities business and thus, Schinazi caused his firm to violate SEC Rule 15c3-1. Schinazi permitted Middleton to engage in activities that required him to be registered as a general securities principal when he was not so registered. Acting on his member firm 's behalf, Schinazi failed to maintain and preserve all of the firm 's electronic communication in violation of Exchange Act Rule 17a-4. Isaac Schinazi (Principal): No fine in light of financial status; Suspended 10 business days in all capacities; Suspended in Principal capacity 50 days Robert Ware Middleton: Fined $22,500; Suspended 30 days |
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| Bill Singer's Comment: Because I read every NASD, NYSE, and SEC regulatory case, I'm often in a somewhat unique position to spot developing enforcement trends (which I note in a matrix at the top of this page). This case was a three-bagger that touched on three of the trends I first noted at the beginning of 2008: 1. Private Placements; 2. Registrations; and 3. Electronic Communications. As such, Compliance Departments might want to circulate this one around the office as a head's up. | ||||||
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Bruce Gilbert Reich AWC/2006007035301/February 2008 Reich borrowed $309,000 from public customers contrary to his member firm 's written procedures prohibiting its registered representatives from obtaining loans from customers unless they are immediate family members. Bruce Gilbert Reich: Fined $10,000; Suspended 60 days |
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Gary Lynn Ranfeld (Principal) OS/2007007834501/February 2008 Ranfeld borrowed $34,120 from public customers in contravention of his member firm 's written supervisory procedures specifically prohibiting borrowing money from customers, without exception. Ranfeld failed to respond to FINRA requests for information. Gary Lynn Ranfeld: Barred |
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Darren James Powell 2005002154901/February 2008 Powell opened accounts for public customers without their authorization and effected unauthorized transactions in the accounts. Powell failed to appear for a FINRA on-the-record interview. Darren James Powell: Barred |
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Daniel M. Myers AWC/E9B2005014201/February 2008 Myers lent $540,000 to public customers contrary to his member firm 's prohibition against lending money to customers. Myers performed functions at his firm requiring registration as a principal without being registered with FINRA in that capacity. Daniel M. Myers: Fined $15,000; Suspended 4 months |
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| Bill Singer's Comment: Typically, the RR is borrowing from and not lending to a customer. If nothing else, this case is a helpful reminder that the violation is a two-way street. | ||||||
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William Dennis Mattes Sr. 2006005936701/February 2008 Mattes created an Automatic Teller Machine (ATM) card in the name of one of his customers and used it to make unauthorized withdrawals from the customer's accounts. William Dennis Mattes Sr. : Barred |
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William Wells Learned Jr. AWC/2006007082701/February 2008 Learned signed a public customer's name to a form that authorized the release of the medical records of the customer's relative without the customer's knowledge or consent in order to obtain a life insurance policy for the customer's relative. William Wells Learned Jr.: Fined $5,000; Suspended 2 months |
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Bill Singer's
Comment: Okay, here's my challenge. Read the above fact pattern once
and then close your eyes. Hey!!! No peeking. Now, you get one
and only chance to explain exactly what happened.
ANSWER: Learned signed a customer's name on a form that authorized the release of the customer's relative's medical records, not the customer's records but the customer's relative's records, but the customer had no knowledge that Learned was going to sign his name on the release form for his relative and the customer didn't even consent to that signing of the release form -- well, yeah, that's sort of obvious that the customer would not consent to something that he had no knowledge of in the first place but I digress -- so, let's see, after signing the customer's name on the release of the customer's relative's medical forms, Learned then submits that release in order to obtain a life insurance policy not for the customer but for the customer's relative. I dunno know about you but I'm guessing that they fined him $5,000 and suspended him for 2 months just for driving everyone crazy trying to figure out what the hell was going on here. If you don't have time to re-read the case, I believe that there is a DVD version coming out next month, and there's a director's cut bonus in which we learn that the relative was actually an alien whose spaceship crashed at Roswell and who has assumed the identity of a subprime mortgage broker. |
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Candice Elicia Hall AWC/2007008809001/February 2008 Hall intentionally submitted a Request for Verification for Employment that overstated her salary and reflected an incorrect length of service of employment and incorrect position title; she transmitted the document to a mortgage company in connection with an application for a home mortgage loan. Candice Elicia Hall: Barred |
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| Bill Singer's Comment: Please see my comments in the Lerner case -- again, why did the firms discussed in that comment appear to have gotten off so lightly, whereas Hall was barred? One promising aspect of this case is that we now know that FINRA, the SEC, and the states will all aggressively pursue and sanction the many financial entities who prepared and transmitted overstated financials and misstated representations in connection with subprime mortgages and their subsequent securitization. I am absolutely certain of that. Positive. Well, okay, you know me too well -- I'm not holding my breath for that one. | ||||||
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Gregory Gibala AWC/2007008400401/February 2008 Gibala wrote checks against his mutual fund account at a company affiliated with his member firm and deposited the checks into his checking account even though he knew the mutual fund account had insufficient funds to cover the checks, and that no additional funds would be deposited into the mutual fund before the checks were presented for payment. Gibala withdrew funds from the bank checking account although he knew, or should have known, that, excluding the mutual fund checks he had deposited, the checking account did not contain sufficient funds to cover the withdrawals. Gregory Gibala: Fined $5,000; Suspended 4 months |
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Bill Singer's
Comment: So let me get this straight. FINRA is now a collection
agency for its member firms when an employee's checks bounce? Look
-- don't get me wrong -- it's a serious matter to write a check when you
KNOW that you lack sufficient funds and you KNOW that you will not have
such funds in time to cover. Fact is, in most states that is a
crime. Notwithstanding all of the above, I would like to know
whether Gibala was convicted of a crime or whether the employer even filed
criminal charges. I would also like to know the sum involved -- not to
excuse the conduct but to place it within a given context.
Finally, and this is what ultimately troubles me, why is it that FINRA always seems ready and willing to go after industry employees for these types of violations but rarely seems to take up the banner when its vice versa? I'm sure we all are aware of allegations by employees that they have not been paid, or not timely paid, or that they have been underpaid. Does FINRA investigate those allegations and charge member firms with the same frequency and zeal as here? We just finished a round of cases in which some BDs were found to have violated state/federal wage laws --anyone see FINRA file complaints against those member firms? When firms are named in racial or sexual discrimination/harassment suits (and often found guilty in court), does FINRA also fine and suspend the member firm? I submit that one reason for this unfair discrepancy is that FINRA is a self-regulator in which only member-firm-employers have a vote on any proposal or in any election. FINRA is essentially a tool of management because it has totally disenfranchised hundreds of thousands of registered men and women. RRs have no vote on any FINRA matter. Member firms do. You don't think it matters? Then explain to me the philosophical rationale for going after RRs who issue NSF checks but not after employer who abuse their employed RRs? |
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Charles Todd Finley (Principal) AWC/2006005217301/February 2008 Finley
Charles Todd Finley: Fined $25,000; Barred in Principal capacity; Suspended 2 years all capacities |
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Joan Lynea Elam AWC/2007009097601/February 200 Elam engaged in the unauthorized use of a co-worker's credit card to purchase personal items totaling $1,005.94, without the individual's knowledge, authorization or consent. Joan Lynea Elam: Barred |
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Timothy Edward Dixon AWC/2007009992101/February 2008 Dixon borrowed $24,000 from one of his member firm 's public customers in contravention of the firm 's written procedures prohibiting registered representatives from borrowing money from customers. Timothy Edward Dixon: Fiend $5,000; Suspended 10 business days |
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David Michael DeMartino AWC/2007009521201/February 2008 DeMartino selectively disseminated information obtained from a public company relating to its expected updated earning guidance before its official public release. David Michael DeMartino: Fined $15,000; Suspended 3 months. |
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Richard Alan Daniels AWC/2005003642901/February 2008 Daniels sold unregistered securities in the form of promissory notes to public customers, and the securities did not have the represented purpose of generating extraordinarily profitable returns for investors, but rather had the purpose of promoting an illegal "Ponzi" scheme and supporting Daniels' personal debt and expenses. Daniels failed to respond to FINRA requests for information. Richard Alan Daniels: Barred |
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Jeremy Tice Cundiff AWC/#20060054450-02/February 2008 Cundiff entered into a real estate business arrangement with a public customer and entered into a settlement agreement with the customer without being the customer's representative of record. Cundiff did not provide his member firm with a copy of the agreement before he signed it or before it became effective. Jeremy Tice Cundiff: Fined $5,000; Suspended 10 business days |
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Bill Singer's
Comment: If FINRA is going to qualify something by pointedly
noting that Cundiff was not "the customer's representative of
record," it would be a tad helpful to explain why that was
noteworthy. What's the deal with that? Was he pretending to be
the RR of record, but wasn't? Was he paying out of his own pocket
for some problem caused by another RR? Is there some more serious
issue about an RR at a given member firm entering into a business deal
with a client of the branch (but serviced by another RR)?
FINRA -- just too many damn questions that you should have answered! Get your act together. |
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Kenneth Richard Campbell III (Principal) AWC/2005001611002/February 2008 Campbell inadequately enforced his member firm 's written supervisory procedures regarding variable annuity exchanges, thereby failing to fulfill his responsibilities to reasonably supervise the firm 's variable annuity business. Kenneth Richard Campbell III: Fined $15,000;Suspended 6 months in Principal capacity; Required not to serve in a Chief Compliance Officer capacity during the suspension period and thereafter until he successfully requalifies by examination; Required to requalify as a general securities principal (Series 24) by examination. |
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| Bill Singer's Comment: I cite this case because I cannot recall a recent case in which an individual was specifically required NOT to serve as a CCO. As such, this may indicate a future sanction trend. One quibble -- assuming Campbell was simply suspended for sic months as a principal and required to requalify as a 24 (both the facts here), is it FINRA's position that such a dual sanction somehow kept the door open for him to serve as a CCO during his suspension and to similarly continue such service before he requalified as a 24? I'm not sure I understand how a suspended Principal could serve as a CCO, no how someone required to requalify as a 24 could continue in the CCO slot until requalified. | ||||||
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Money Concepts Capital Corp AWC/#2006003704001/February 2008 The Firm failed to report customer-related matters disclosable under NASD Rule 3070 in a timely manner . The Firm failed to amend Forms U4 and U5 for registered representatives to report customer-related matters in a timely manner. Money Concepts Capital Corp: Censured; Fined $13,500 |
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Legend Merchant Group, Inc. AWC/20060036818-01/February 2008 The Firm effected material and ongoing changes in its business operations by adding a branch office and expanding the number of associated persons with direct customer contact without FINRA's prior approval. The Firm failed to timely report statistical and summary information regarding customer complaints; and failed to report the most egregious problem as alleged in customer complaints as FINRA required. Legend Merchant Group, Inc.: Censured; Fined $22,500; Required to file an application with FINRA, consistent with NASD Rule 1017 for approval of the material changes referenced in the AWC concerning changes to its Membership Agreement, and the firm must comply fully and timely with related FINRA requests for additional information and documents. |
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| Bill Singer's Comment: As my readers know, I have long warned firms about materially changing the terms/limits of their Membership Agreements without prior notice and approval from FINRA -- hell, that's a "Developing Enforcement Trend" item at the top of this page! On the other hand, truly, I am mystified by FINRA's suggestion that there is some rule on its books that states it is a violation to fail "to report the most egregious problem as alleged in customer complaints." Frankly, regulation is far too serious an undertaking to be subject to such whim and whimsey as a self-regulator making things up as it goes along. Without question, NASD Conduct Rule 3070 sets forth numerous reporting obligations -- none of which I have any sincere dispute with. Nonetheless, I find NOTHING therein that obligates a member to report the "most egregious problem as alleged in customer complaints." If FINRA disagrees, I invite the regulator to communicate that dispute with me and I will publish the response. | ||||||
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H&R Block Financial Advisors, Inc. AWC/E8A2005010002/February 2008 The Firm failed to file Uniform Termination Notices for Securities Industry Registration (Forms U5) with FINRA in a timely manner. The Firm failed to establish and maintain a system to supervise the activities of each registered representative and associated person reasonably designed to achieve compliance with the requirements of Article V, Section 3 of FINRA's By-Laws to ensure timely filing of Forms U5. H&R Block Financial Advisors, Inc: Censured; Fined $150,000 |
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First Republic Group, LLC AWC/2006003717801/February 2008 The Firm failed to adequately supervise registered representatives, whom the firm designated for heightened supervision, to ensure their compliance with applicable securities laws, regulations and NASD rules. The Firm 's supervisory system with respect to the registered representatives requiring heightened scrutiny was inadequate to ensure against unauthorized trading and other misconduct based upon various red flags, including
The Firm failed to
First Republic Group, LLC: Censured; Fined $45,000 |
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| Bill Singer's Comment: To FINRA's credit, at least they are clearly setting forth the nature of the "red flags." Such guidance, while far too rare, is always helpful. As I have often discussed with clients, you should always have a sense of your baseline numbers/percentages of cancellations (and rebills), and carefully monitor any material deviations. Similarly, large numbers of "partial" account documents often indicate that RRs are not fully obtaining the know-your-customer information necessary to initiate trading and may indicate a pattern of opening accounts with debatable first orders (and trying to land the account by showing a profit on the unauthorized trade). | ||||||
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Ameriprise Financial Services, Inc. AWC/2005000682901/February 2008 The Firm awarded non-cash compensation, including stock options and restricted stock, to field leaders through sales incentive programs based, in part, on criteria that favored or gave additional weight to the sale of the firm 's proprietary investment company products rather than on the sale of all investment company products in violation of NASD rules. The Firm failed to establish and maintain procedures, including written procedures, reasonably designed to achieve compliance with SEC Rule 17a-4 regarding record retention obligations. Ameriprise Financial Services, Inc.: Censured; Fined $145,000 |
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N.I.S. Financial Services, Inc. and Carol Sharpe Boone
(Principal) AWC/20060039815-01/February 2008 In connection with the sale of joint investments in life insurance and Mutual funds, the Firm failed to forward customer funds promptly and to comply with the requirements set forth in SEC Rule 15c3-3(k)(1) under which it operated, including maintaining a Special Reserve Account for the Exclusive Benefit of Customers. Acting through Boone, the Firm failed to
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