NOTE: Stipulation of Facts and Consent to Penalty (SFC), Offers of Settlement (OS), and Letters of Acceptance, Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings.  

FINANCIAL INDUSTRY REGULATORY AUTHORITY
FINRA
2009
Research and Advertising

VISIT WALL STREET'S LEADING ONLINE COMMUNITY
BrokeAndBroker.com

NEWSLETTERS

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

SEMINARS

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• XXX used a script in presenting material at the seminars that was outdated and misleading. 

XXX: Fined $15,000; Suspended 6 months

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

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

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

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

Weitz 

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

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

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

Jamie Patrick Lake: Barred

Haggerty 

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

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

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

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

The Firm failed to

• inclued the required analyst certification regarding the analyst’s compensation in a research report, and 
• include in a clear and prominent manner the certification that the view expressed in the report accurately reflected the analyst’s personal views about the subject company; and
• enforce and maintain a supervisory system, including policies and procedures, reasonably designed to ensure compliance with SEC Regulation AC and NASD Rules 2210 and 2211. 

Wedge Securities, LLC: Censured; Fined $20,00

The Firm 

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

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

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

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

Robert Eugene Strong: Fined $10,000

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

Acting through Itzen, Choice 

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

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

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

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

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

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

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

James Stanley Gossett: Barred

The Firm permitted Marshall 

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

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

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

The Firm failed to 

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

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

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