NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings.
2010
August 2010
Alan David Marcus AWC/2007008239002/August 2010
Marcus sold unregistered shares of a thinly traded penny stock into the public markets on customers’ behalf, resulting in proceeds of almost $18,000 to the customers. Marcus acted as the registered representative for all of these sales and failed to perform adequate due diligence prior to executing these sales, notwithstanding his duty to do so and the red flags indicating potential violations of registration requirements of the Securities Act of 1933. Marcus failed to undertake adequate efforts to ascertain the information necessary to determine whether the customers’ unregistered shares could be sold in compliance with Section 5 of the Securities Act, and failed to determine how the customers came to obtain the stock or whether there was an applicable exemption to registration.
Alan David Marcus: Fined $10,000; Suspended 45 days
Anthony F. Lodati (Principal) AWC/2008011678302/August 2010
Lodati and another individual at his member firm failed to establish and maintain a supervisory system at the firm to address its responsibilities for determining whether customer securities were properly registered or exempt from registration. While registered through and acting on his firm’s behalf, he sold shares of a security to public investors using a private placement memorandum that omitted a convicted felon’s association with the issuer, which is a material fact. Lodati and the firm’s Chief Compliance Officer failed to clearly assign each registered person to an appropriately registered representative and/or principal responsible for supervising that person’s activities and designate principals with actual authority to carry out the supervisory responsibilities over the firm’s business.
Anthony F. Lodati (Principal): Fined $30,000; Suspended 2 months in Principal capacity only; Agreed to complete 16 hours of AML continuing education training within 120 days of acceptance of the AWC; Agreed to fully and promptly cooperate with FINRA in any and all investigations concerning conduct at and/or relating to a member firm
Buchanan filed a false insurance claim in regard to lithographs he owned that were purportedly stolen and overrepresented their value. Buchanan failed to appear for a FINRA on-the-record interview to provide testimony.
Bradley Derek Buchanan : Barred
Brookville Capital Partners LLC fka New Castle Financial Services LLC AWC/2008011678303/August 2010
Acting through its chief compliance officer (CCO), the firm:
failed to establish and implement an adequate AML program and related procedures; adequately identify, investigate and respond to red flags of suspicious activities;
timely file a Suspicious Activity Report (SAR); and
provide AML training for firm personnel for one year.
Acting through a registered representative, the firm
improperly facilitated the distribution of approximately 20 million shares of various unregistered securities;
operated an unregistered branch office, in violation of the restriction on business expansion contained in its membership agreement, and
engaged in improper telephone solicitations (from the unregistered office) by making materially false representations and omitting material facts in connection with the offer of securities and by using misleading telemarketing scripts that a registered principal had not approved.
Acting through the registered representative and CCO, the firm failed to perform adequate searching inquiries and take necessary steps to ensure that transactions did not involve distributions of unregistered and/or restricted securities.
Acting through a registered representative and firm principal, the firm sold securities to public investors using a private placement memorandum that omitted to disclose a convicted felon’s association with the issuer, a material fact to any reasonable investor.
Acting through various FINOPs, the firm
failed to maintain accurate financial books and records,
filed inaccurate FOCUS reports and
operated a securities business while under minimum net capital requirements.
Acting through the CCO and other compliance officers, the firm
failed to forward customer funds it received in connection with contingency offerings to an escrow agent by noon of the next business days after receipt of such fund;
adequately review and approve customer correspondence;
timely and accurately report customer complaints;
timely update Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5);
comply with the Firm Element of the Continuing Education Requirement for a year;
conduct an annual compliance meeting; and
establish an adequate business continuity plan, which consequently led to the loss of access to certain customer records upon termination of its relationship with a particular clearing firm.
The firm had additional supervisory deficiencies, including that
its written supervisory procedures failed to establish adequate procedures for review of producing managers’ customer account activities,
it failed to have written supervisory procedures for identifying producing managers that should be subject to heightened supervision, and
failed to place certain producing managers on heightened supervision, in that, acting through various individuals, the firm failed to clearly assign each registered person to an appropriately registered representative and/or principal responsible for supervising that person’s activities, and designate principals with actual authority to carry out the supervisory responsibilities over the firm’s business.
Acting through a supervising principal, the firm failed to reasonably supervise registered representatives working out of the unregistered branch office.
Acting through firm officers, the firm failed to establish and maintain a supervisory system reasonably designed to supervise the sales activities of firm personnel conducted outside of its registered offices, and failed to establish and maintain a supervisory system for determining whether customer securities were properly registered or exempt from registration.
Acting through its CCO, the firm failed to implement adequate procedures to ensure that the firm did not telephone persons who stated they did not wish to receive calls and/or who registered on the national do-not-call registry, and failed to adequately update and maintain a do-not-call list.
Acting through various supervisors, the firm failed to perform heightened supervision over numerous individuals.
Brookville Capital Partners LLC fka New Castle Financial Services LLC : Brookville Capital Partners LLC fka New Castle Financial Services LLC : Censured; FIned $200,00; Required to retain an independent consultant to conduct a review of the adequacy of its policies, systems, procedures and training regarding AML rules and regulations; compliance with Section 5 of the Securities Act of 1933; and rules and regulations relating to private placements, financial requirements, customer complaints and supervision. In addition, the firm was required to have its associated persons complete 16 hours of AML continuing education training and to fully and promptly cooperate with FINRA in any and all investigations.
Miller falsified customers’ signatures on account-related documents without their authorization, and submitted them to his member firm, thereby causing his firm’s books and records to be inaccurate.
Charles Wyman Shirey (Principal) AWC/2008015696301/August 2010
Shirey impersonated customers to expedite the transfer of their accounts from his former broker-dealer to his new broker-dealer. Shirey placed calls to his former broker-dealer, identified himself as the customer and proceeded to impersonate the customers. Although the customers had authorized the transfer of their accounts, they did not authorize the impersonations.
Charles Wyman Shirey (Principal): Fined $7,500; Suspended 30 business days
participated in securities related activities without employing a qualified municipal securities principal;
failed to timely file quarterly lists of issuers with which it engaged in a municipal securities business;
failed to adopt, maintain and enforce written supervisory procedures reasonably designed to ensure that the conduct of the broker and associated persons in municipal securities activities are in compliance with Municipal Securities and Rulemaking Board (MSRB) rules and that the procedures shall codify the broker’s supervisory system for ensuring compliance;
had an inadequate Anti-Money Laundering (AML) compliance program, in that it failed to
verify customer identification information,
conduct independent testing of its AML program,
designate a person to transmit contact information to FINRA and
to provide AML training for two years;
failed to timely create and maintain a business continuity plan and engaged in securities transactions without a qualified financial and operations principal (FINOP);
conducted a securities business while its net capital was below the required minimum;
failed to prepare an accurate general ledger, trial balances and books and records; and failed to file an annual audit report and a quarterly Financial and Operational Combined Uniform Single (FOCUS) report; and
failed to file an application for approval of a material change in its business operations even though it participated in an offering as an underwriter on a firm commitment basis, and disseminated sales literature that contained numerous inaccuracies and misrepresentations.
Also, the firm permitted Baldwin to engage in its securities business even though his registration was inactive because he had failed to complete a continuing education course.
FINRA's National Adjudicatory Council (NAC) imposed these sanctions following appeal of an Office of Hearing Officers (OHO) decision:
Danica Danialah King AWC/2009017881901/August 2010
King came into possession of counterfeit credit cards containing stolen consumers’ credit card information that had been electronically captured from credit cards the consumers used while dining. King used the phony credit cards to purchase gift cards and electronic items and then sold the cards and electronic items on an eBay account she controlled and operated, thereby engaging in money laundering. King failed to respond to FINRA requests for information.
Widmer altered firm variable annuity subaccount transfer selection forms by whiting-out dates on signature pages, handwriting a new date, and then attaching the pages that contained the altered dates. The firm discovered blank documents containing customer signatures in Widmer’s office files. Although the customers requested the transactions that were initiated by the altered forms, Widmer’s member firm strictly prohibited altering documents in any manner.
Daniel Lee Widmer: Fined $5,000; Suspended 3 months
Carrig participated in the sale of unregistered shares of a thinly traded penny stock into the public markets on customers’ behalf, resulting in proceeds of $106,320.89 to the customers. Carrig failed to
perform adequate due diligence prior to executing these sales, notwithstanding his duty to do so and the “red flags” indicating potential violation of the registration requirements of the Securities Act of 1933;
undertake adequate efforts to ascertain the information necessary to determine whether the customers’ unregistered shares could be sold in compliance with Section 5 of the Securities Act; and
determine how the customers came to obtain the stock or whether there was an applicable exemption to registration.
Donald Jay Carrig : FIned $15,000; Suspended 30 days
Without bank customers’ knowledge or authorization, Polage used their personal bank account information to generate and activate ATM cards linked to their savings accounts and withdrew funds totaling approximately $36,102 from the accounts. Polage has not returned any of the funds to the bank customers or reimbursed the bank after it reimbursed the funds to the customers. Polage failed to respond to FINRA requests for information.
Edward D. Jones & Co., L.P. AWC/2007010537701/August 2010
The Firm failed to establish, maintain and enforce a supervisory system, including written supervisory procedures that were reasonably designed to review and monitor all transmittals of funds from customer accounts to third-party accounts. The firm relied on a defective report to review and monitor third-party wires from customer accounts, and failed to properly test and verify that the system providing the report was functioning properly. The report failed to identify wires from accounts from which a registered representative of the firm was converting funds totaling over $3 million in customer funds.
Edward D. Jones & Co., L.P. : Censured; Fined $200,000
Erik Carl Peterson (Principal) AWC/2008014435301/August 2010
Peterson altered and falsified firm records pertaining to customer accounts and made changes to documents with white-out fluid after the customer had signed the forms. In other instances, clients signed blank transaction-related forms that Peterson later completed. Peterson affixed a customer’s signature to Change of Dealer Forms with the customer’s permission.
Erik Carl Peterson (Principal): Fined $5,000; Suspended 2 months
Associated Person Outten embezzled approximately $39,560 from her employer, an Office of Supervisory Jurisdiction of a member firm. Outten ordered personal items and billed them to her employer’s operating account. Outten made unauthorized wire transfers to herself from the operating account. Outten failed to respond to FINRA requests for information.
Frank Gerallimo Manziano OS/2009016956501/August 2010
Manziano willfully failed to disclose a material fact on his Form U4. Manziano engaged in outside business activities without providing prompt written notice to his member firm and contrary to his firm’s written supervisory procedures requiring written approval or disapproval from a supervisory principal of any outside business activity requests.
Frank Gerallimo Manziano : Fined $15,000; Suspended 4 months
George Ernest Reilly (Principal) 2007007329501/August 2010
Reilly failed to establish and maintain a supervisory system with written supervisory procedures reasonably designed to prevent excessive markups in CMO bond transactions, and failed to exercise his supervisory responsibilities to ensure that the firm’s CMO trader and other firm representatives complied with NASD Rules 2110 and 2440. Reilly made notations of his reviews of CMO trades for markups on a daily trade blotter but did not conduct reviews to ensure that the markups were fair, reasonable and consistent with market prices. Reilly had the authority to reverse or cancel CMO trades for unreasonable or excessive markups but did not do so, despite the fact that under his supervision, markups for CMO transactions were excessive.
An affiliated insurance company of Baldridge's member firm began an audit of her insurance files after receiving a customer complaint. The customer gave Baldridge a check as a payment for a premium for a new fire insurance policy and Baldridge admitted to auditors that she deposited the check into her personal checking account and used the money for her mortgage payment. As such, Baldridge converted the customer check for $1,340. Baldridge repaid the insurance company $1,340 on the day of the audit.
Bingham gave a member firm customer $4,421 to compensate her for tax consequences incurred as a result of his recommendation that the customer liquidate a variable annuity and purchase mutual funds with the proceeds. Bingham acted without his firm’s knowledge or authorization when sharing in the customer’s loss, and his firm’s procedures prohibited representatives from paying or offering to pay restitution to a customer. Bingham loaned customers approximately $1,050 because of delays in processing their withdrawal requests, which the firm’s procedures prohibited.
Jarem Barry Bingham : Fined $10,000; Suspended 15 business days
Jason Thomas Plunkett AWC/2009021029605/August 2010
Plunkett requested and/or received different answer keys for a state insurance LTC CE examination from firm employees who created them and Plunkett then distributed one of the answer keys to financial advisors outside of the firm.
Jason Thomas Plunkett : Fined $5,000; Suspended 1 month
John William Pena (Principal) OS/2007010533701/August 2010
Pena borrowed $20,000 from customers contrary to his member firm’s written procedures forbidding registered representatives from borrowing funds from firm customers except in cases where the customer was an immediate family member; neither customer was a member of Pena’s immediate or extended family. Pena failed to notify his firm of the loan, obtain the firm’s approval prior to accepting the loan or repay the loan. Pena failed to timely and completely respond to FINRA requests for information and documents.
Joshua T. Thatcher (Principal) AWC/2009018404901/August 2010
Thatcher willfully failed to timely amend his Form U4 to disclose material information, and did not amend his Form U4 to reflect the material information until after the firm became aware of the information and completed an internal investigation. Thatcher completed his member firm’s annual individual compliance review form, where one of the questions asked if he had complied with the responsibility for the prompt preparation and submission of Form U4 amendment as FINRA required; he checked the “YES” box.
Joshua T. Thatcher (Principal): Fined $5,000; Suspended 9 months
Kenneth Francis Jewell AWC/2009017425001/August 2010
While employed at a member firm, Jewell consented was also employed by, and accepted compensation from, an outside business for providing consulting support and investment platform coordination for participants in “professional employer organization” plans. Jewell’s business activities were outside the scope of his relationship with his firm, and he did not provide prompt written notice to his firm of his activities. Jewell inaccurately certified on an annual firm compliance questionnaire that he was not involved in any outside business activities.
Kenneth Francis Jewell: Fined $5,000; Suspended 2 months
Leo Timothy Buggy (Principal) OS/2008016455801/August 2010
Buggy misappropriated approximately $589,000 intended for investment by soliciting customers to withdraw funds from their existing firm variable annuity and/or brokerage accounts and invest the withdrawn amounts in what he represented to be safer, higher-yield investments with Buggy’s member firm’s affiliate. Buggy not only failed to invest the funds received from the customers in safer, higher-yield products with the affiliate, but failed to invest the funds at all.Buggy caused the funds to be deposited into an account he controlled and made improper use of the funds. Buggy failed to respond to FINRA requests for information and documents.
Marissa Miranda McDermott (Supervisor) AWC/2009017349601/August 2010
McDermott falsified customers’ signatures on her member firm’s internal documents, which are required to be completed when a foreign customer uses a U.S. mailing address, without the customers’ knowledge or authorization.
Marissa Miranda McDermott (Supervisor): Fined $5,000; Suspended 1 month
Mark Andrew Jamgochian AWC/2009018304601/August 2010
Jamgochian cut-and-pasted customers’ signatures on account-related documents without the customers’ authorization or consent. The documents were all variable annuity applications for transactions that the customers previously authorized.
Mark Andrew Jamgochian : Fiend $5,000; Suspended 3 months
Wright engaged in a private securities transaction without prior written notice to, or prior written approval from, her member firm. The customer agreed to provide start-up capital for a corporation Wright founded, and the customer loaned the corporation $150,000 and received a promissory note evidencing the loan. Wright borrowed $30,000 from a firm customer contrary to her firm’s procedures, which specifically prohibited registered representatives from borrowing money from customers; Wright did not inform the firm of this loan, which was repaid. Wright engaged in an outside business activity without providing prompt written notice to her firm; Wright failed to disclose her position as president of the corporation and her activities with that company.
Valente requested that another wholesaler send him an answer key for a state insurance LTC CE examination, and Valente improperly distributed the answer key to other firm employees.
Mathew Valente : Fined $5,000; Suspended 10 business days
Siegel recommended and effected sales of securities to customers without having reasonable grounds for believing that the recommendations and resultant sales were suitable for such customers, and participated in private securities transactions without prior written notice to, and approval from, his member firm.
Michael Frederick Siegel : Fined $30,000; Suspended for two consecutive 6 month terms
did not have a qualified individual to supervise the conduct of the firm’s head of research, who was a senior research analyst—but instead permitted senior principals to supervise the analyst when they were not qualified to do so;
reviewed and approved its research reports prior to use, but did not evidence such approval; as a result, the firm issued research reports that were not approved by a registered principal’s signature or initial;
failed to adopt or implement written supervisory procedures reasonably designed to achieve compliance with applicable rules regarding the supervision of research activity and the approval of research reports;
failed to attest annually (for two years) that it had adopted and implemented such procedures, and that the firm failed to make or obtain research analyst attestations in connection with their public appearances as Securities and Exchange Commission (SEC) Regulation AC required.
Jeffries-Hernandez caused referral bonuses to be credited to customer accounts for which the customers were not entitled. Jeffries-Hernandez issued ATM cards for the accounts and used the ATM cards to withdraw the funds for his personal use, without the customers’ or the bank’s knowledge or authorization. Jeffries-Hernandez failed to respond to FINRA requests for information and failed to appear for an on-the-record interview.
Raymond James Financial Services, Inc. AWC/2007010730701)/August 2010
The firm failed to enforce its written supervisory procedures to achieve compliance with suitability requirements as they relate to the sale of Internal Revenue Code Section 529 college savings plans (529 Plans). The firm’s written supervisory procedures required its registered representatives, including producing branch managers, to submit, at the time of a client purchase of a 529 Plan, a Form #1529 (529 Plan Account Client Disclosure Form) as well as the 529 plan application to an appropriately licensed principal to ensure, among other things, that all 529 plans offered outside of a client’s state of residence were suitable in light of state tax laws, fund performance, commissions and plan fees; and the firm’s compliance department relied on the branch to forward the forms to it for tracking. Some firm branch managers functioned as municipal securities principals, reviewing and approving 529 plan transactions, while failing to be registered and/or qualified in an appropriate municipal securities principal capacity.
Raymond James Financial Services, Inc. : Censured; Fined $150,000
Kortman willfully failed to disclose material information on her Form U4. Kortman engaged in outside business activities without prompt written notice to her member firm.
Rebecca Ann Kortman: Fined $15,000; Suspended 7 months
Richard Michael Bowers (Principal) 2006003916901/August 2010
As his firm’s Chief Compliance Officer, Bowers permitted an individual, the agent of the firm’s owner, to act as a firm principal without being registered to do so. Bowers failed to ensure the sufficiency of the firm’s written supervisory procedures and failed to enforce the firm’s requirement to document permission for outside business activities.
Richard Michael Bowers (Principal): Fined $5,000; Required to requalify in all principal capacities before resuming any principal activities; Suspended 2 months in Principal capacities only
Robert Michael Marcus AWC/2007008239003/August 2010
Marcus participated in the sale of unregistered shares of a thinly traded penny stock into the public markets on customers’ behalf, which resulted in proceeds of almost $18,000 to the customers. Marcus was not the designated registered representative on customer accounts but he assumed certain responsibilities for the accounts, including determining whether securities sold from the accounts were freely tradable. Marcus failed to perform adequate due diligence prior to executing these sales, notwithstanding his duty to do so and the red flags indicating potential violation of registration requirements of the Securities Act of 1933. Marcus failed to undertake adequate efforts to ascertain the information necessary to determine whether the customers’ unregistered shares could be sold in compliance with Section 5 of the Securities Act, and failed to determine how the customers came to obtain the stock or whether there was an applicable exemption to registration.
Robert Michael Marcus: Fined $10,000; Suspended 1 year
Robert Norman Gest Jr. (Supervisor) OS/2007011348301/August 2010
Gest
recommended risky and illiquid CMO positions to his customers, and intentionally and/or recklessly made misrepresentations of material facts and omitted to disclose material facts to customers in connection with their CMO investments;
failed to provide his customers with material information concerning the bonds as contained in prospectuses, prospectus supplements or any offering circulars relating to the particular CMO tranches purchased that document various applicable risk factors that an investor should consider before investing;
recommended CMO positions to customers without investigating and understanding the products and without reasonable grounds to believe that CMO investments were suitable, as he lacked an understanding of the material characteristics of, and risks associated with, the CMOs offered;
lacked reasonable grounds to believe the CMO program and CMO investments were suitable for his customers based upon their disclosed investment experience, investment objectives, financial situation and needs, and he did not have reasonable grounds to believe that the use of margin was suitable for customer CMO purchases;
exercised discretionary authority in customer accounts without his customers’ prior written authorization and his member firm’s prior written acceptance of the accounts as discretionary; and
willfully failed to timely update his Form U4 with material facts.
Robert Norman Gest Jr. (Supervisor): No Fine in light of financial status; Suspended 18 months
Samuel Kenneth Johnson AWC/2009017292301/August 2010
Johnson entered into a settlement agreement with a customer, wherein he promised to pay the customer $4,700 to correct a trading error. Johnson entered into the settlement agreement without his member firm’s authorization.
Samuel Kenneth Johnson : Fined $5,000; Suspended 10 business days
Stephen Alan Jaffe AWC/2009018230901/August 2010
Jaffe was the broker of record for a customer’s nondiscretionary account at his member firm and exercised discretion in the customer’s account in multiple transactions without written authorization. Jaffe completed annual certifications for his firm, in which he attested that he had not exercised full or partial trading authorization over any client account without having obtained the required approvals.
Stephen Alan Jaffe : Fined $5,000; Suspended 1 month
Denton improperly distributed the answer key for a state insurance long-term care continuing education (LTC CE) examination to firm employees and financial advisors outside of the firm.
Associated Person Magouirk caused checks totaling $65,000 to be drawn on a customer’s account without the customer’s permission or authority, and used them for her own benefit. Magouirk forged the customer’s signature on Letters of Authorization to obtain the $65,000 that she converted from the customer’s account.
Thomas George Fullerton (Supervisor) AWC/2007011920701/2009018009501/August 2010
Fullerton intentionally or recklessly excessively traded customers’ accounts and recommended the transactions without having reasonable belief that such transactions were suitable in view of the size and frequency of the transactions, the nature of the accounts, and the customers’ financial situation, investment objectives and needs. Each of the customers was retired and elderly, and the accounts under Fullerton’s control represented a substantial percentage of the customers’ life savings and net worth, and each customer relied upon the account for income. Fullerton exercised discretionary power in each customer account without the customers’ prior written authorization and without obtaining his member firm’s written acceptance of the account as discretionary.
Acting with others, Satterfield participated in a fraudulent scheme to solicit investments in an unregistered hedge fund and its general partner and, in doing so, engaged in a variety of fraudulent and deceptive sales practices, disregarding his duties and obligations of fair dealing to his customers. Satterfield knew, or was reckless in not knowing, that the hedge fund was engaging in a highly speculative trading strategy involving futures contracts, and that information the hedge fund manager supplied and used to solicit customers contained materially false and misleading statements and omissions. Satterfield ignored many red flags, including those in the hedge fund’s private placement memorandum. Satterfield solicited customers without conducting a reasonable investigation to determine whether the hedge fund and its general partner were suitable investments, and without regard as to whether his customers were capable of evaluating and bearing the risks associated with the investments.
Allan J. Satterfield : No Fine in light of financial status; Suspended 6 months
Barcenas forged customers’ signatures without their authorization and affixed photocopied signatures on paperwork for customers. Barcenas’ conduct caused his member firm’s records to be inaccurate.
Andres Barcenas Jr. : Fined $5,000; Suspended 3 months
Halleen borrowed approximately $337,000 from customers without his member firm’s permission or knowledge and in violation of firm policy by telling customers that he would invest in unspecified products and in unspecified ways outside of their firm accounts, would repay them at interest rates between 5 percent and 12 percent, and provided promissory notes to some setting forth the terms. Halleen failed to repay more than $260,000 of the money he borrowed from customers. Halleen misappropriated $24,000 from a customer and refused to repay the customer when requested. Halleen failed to respond to FINRA requests for information and documents.
Baron Capital, Inc.permitted an employee to actively engage in the management of its securities business, a function requiring principal registration, while the employee was not registered with FINRA in that capacity.
Baron Capital, Inc.: Censured, Fined $10,000 and Required to submit written certification and documentation that appropriate principal registrations have been obtained for all employees acting in a principal capacity.
Charles Edward O’Hara IV (Principal) AWC/2010021348701/July 2010
O’Hara borrowed $8,000 from his member firm’s customers contrary to firm procedures prohibiting registered representatives from borrowing money from customers. O’Hara did not notify his firm of the loan, which he repaid.
Charles Edward O’Hara IV (Principal): Fined $5,000; Suspended 10 business days
Daniel took confidential customer information, including social security numbers, upon her departure from a member firm and used the information to solicit business at her new member firm. As a result of Daniel’s former firm findings, her new firm conducted a review of her files that revealed that she had retained copies of or originals of her former firm’s account documents.
Daniel responded falsely to a FINRA request for information pertaining to the matter, but later acknowledged to FINRA that she had provided false information after being confronted with copies of documents she had retained.
Laifer recommended and facilitated evasion of a bar that his member firm had imposed against further purchases of a thinly-traded pink sheet penny stock by matching up customers who were interested in buying and selling the shares, providing price quotes for the stock and processing instructions to transfer shares of the stock between customers' accounts. Laifer falsified documents that supported customer withdrawals or transfers by photocopying actual customer signatures from documents and taping the photocopied signatures on other forms and submitting the falsified documents to his member firm for processing. Laifer caused his member firm's books and records to be inaccurate by altering documents related to customer accounts, and executed discretionary and excessive trades in a customer's non-discretionary accounts without the customer’s written authorization and without his firm’s acceptance of the accounts as discretionary.
David Laifer : Fined $15,000; Suspended 15 months
Denver Arlene Kalkofen OS/2008015168701/July 2010
Kalkofen instructed customers to make checks payable to cash or in the name of a fictitious company, and deposited the checks into her personal checking account, using the funds to gamble and pay for personal expenses. Kalkofen pled no contest in the Circuit Court of Calhumet County in the State of Wisconsin to four felony counts of theft in a business setting in excess of $10,000, and two felony counts of issuing securities for improper purposes. Kalkofen failed to respond to FINRA requests for information.
Haas improperly borrowed $5,500 from member firm customers and memorialized the loan with a memorandum in which he promised to repay the loan. The loans were entered into after Haas affirmed his intent to abide by the firm’s code of conduct, which prohibited its representatives from borrowing money from customers with limited exceptions inapplicable here. Haas failed to repay the customers, or reimburse the firm for having done so. Haas confirmed his admission to his firm’s investigator that he had asked several other customers for loans, but had been refused.
Douglas Kyle Haas : Fined $15,000; Suspended 2 years
E*Trade introduced several new money market sweep funds and, when entering certain back-office processing instructions relating to some of the funds, the firm made an error that resulted in the system failing to recognize these fund positions and customers being erroneously charged margin interest for that day. When the firm became aware of this coding error and corrected the problem, it did not identify or reimburse affected customers until later in the year; the firm reimbursed affected customers a total of $43,938.57 in erroneous margin interest charges several months later.
The Firm acquired customer accounts through conversions from other firms, and it erroneously charged margin interest to conversion customers who traded options.
The Firm failed to designate an employee to review, reconcile and resolve fractional share differences between its Depository Trust Company (DTC) position and the actual quantity of securities on deposit at the DTC.
The Firm’s systems failed to accept delivery instructions if customers had pending dividends or unsettled positions in their accounts.
FINRA also found that the firm failed to establish a system reasonably designed to supervise and written procedures reasonably designed to prevent and/or correct erroneous margin interest accruals in customer accounts holding certain money market sweep funds, prevent and/or correct erroneous margin interest charges to converting customers who traded options at the time of the conversion and had available cash in their accounts, ensure the review and reconciliation of fractional share differences with the DTC, and ensure the prompt transfer of physical certificates to customers. In addition, the Firm failed to accurately mail account statements to customers, liquidated fractional shares in customer accounts without their authorization and failed to report customer complaints in an accurate and timely manner.
Moreover, in connection with its conversion to a new back office system, a functionality that impacted the segregation of long positions in suspense accounts was not activated as required and, as a result, the firm’s possession and control system failed to issue segregation instructions on long positions in suspense accounts.
E*Trade failed to adequately prepare for, and respond to, its acquisition of another member firm and, prior to the conversion, it identified approximately 88,000 converting customers whose login information was likely to be incompatible with the firm’s systems. The Firm communicated with those customers and provided them with temporary login IDs and instructions, but an additional number of conversion customers who the firm had not initially identified also had login information that was incompatible with the firm’s systems. The login problem led to higher-than-expected call volumes, which the firm was not equipped to handle, and the problem was not completely resolved for several months and the conversion customers continued to inquire about their passwords and access to their accounts. The Firm had over 17,000 unanswered emails from converting customers regarding conversion issues.
The Firm disclosed that a technological problem had prevented it from transmitting customer orders to various market centers on a particular day and, as a result, the firm’s customers were unable to enter orders online or log on to the firm’s website. The Firm's website experienced sporadic slowness and continued delays because requests had accumulated in excess of what the systems were normally able to process. In addition, the Firm failed to establish a system reasonably designed to supervise, and written procedures reasonably designed to ensure, customers’ ability to log in to their accounts and contact customer service for assistance, ensure customers’ ability to enter orders online on one particular day and to timely enter orders online.
Edward William Overdyke AWC/2008014701201/July 2010
Overdyke engaged in outside business activity and failed to give prompt written notice to his member firm. Overdyke received approximately $22,100 in compensation for selling equity indexed annuities through a life insurance company to public customers.
Edward William Overdyke : Fined $5,000; Suspended 3 months
Eric Spencer Cott (Supervisor) AWC/2009021029701/July 2010
Cott allowed another individual to improperly assist him in completing a Florida long-term care (LTC) continuing education (CE) requirement by taking the majority of an LTC CE exam for him. Cott obtained the Florida LTC CE requirement and then sold a universal life insurance policy with LTC benefits to a client.
Eric Spencer Cott (Supervisor): Fined $5,000; Suspended 1 month
Greg Scott Schaefer (Principal) 2008012034701/July 2010
Acting as his firm’s Anti-Money Laundering Compliance Officer (AMLCO), Schaefer failed to ensure the implementation of independent tests of the firm’s AML compliance programs. Schaefer did not use an independent third party to conduct the firm’s AML tests; rather, he drafted reports and presented them to an unqualified administrative assistant, who signed off on the reports without conducting any AML testing. Schaefer created and submitted inaccurate substitute compliance meeting attendance lists to FINRA staff during the course of FINRA’s examination of Schaefer’s firm and without telling FINRA staff that the sheets were recreations.
Schaefer failed to timely submit the administrative assistant’s fingerprints to CRD, even though the individual had access to the firm’s books and records, maintained the firm’s check book and possessed an ink stamp of Schaefer’s signature, which he used to sign firm checks. Schaefer failed to ensure that his firm established, maintained and enforced written supervisory control policies and procedures, and failed to ensure that an employee’s fingerprints were submitted to CRD, thereby causing his firm to violate Section 17(f)(2) of the Securities Exchange Act of 1934 and Rule 17f-2 thereunder.
Greg Scott Schaefer (Principal): Fined $42,500; Suspended 1 year
Harold Lee Glover Jr. ( AWC/2008015254101/July 2010
Glover engaged in private securities transactions without providing his member firm with prior written notice. Glover recommended that his customers invest in investment funds of an entity which was not approved by his firm and was exposed by federal authorities as a Ponzi scheme.
Glover did not receive any compensation and his customers lost approximately $470,000 by investing in the funds.
Harold Lee Glover Jr. (: Fined $5,000; Suspended 4 months
Investscape, Inc. and Richard Michael Lim (Principal) AWC/2008011737101/July 2010
Acting through Lim, the Firm failed to
preserve emails in nonrewritable, non-erasable format;
failed to provide FINRA with notifications of its use of electronic storage media;
provide FINRA with a letter from a third party describing the third party’s undertakings regarding the firm's electronic storage media as specified by Securities and Exchange Commission (SEC) Rule 17a-4; and
evidence the review of all incoming and outgoing email communications with customers.
inspect branch offices even though it had been previously warned in a Letter of Caution that branch offices needed to be inspected on a regular basis.
The firm's written procedures failed to identify locations that regularly conducted the business of effecting securities transactions by soliciting new accounts as branch offices, and failed to address the firm's requirement to conduct internal inspections of these offices.
Investscape, Inc.:Censured, Fined $7,000; and Fined $17,500, jointly and severally with Lim
Richard Michael Lim: Fined $17,500, jointly and severally with Investscape and Suspended 1 year in Supervisory capacity only
Porrazzo engaged in an unreported outside business activity with a customer of his member firm, which his firm prohibited. Porrazzo failed to disclose his participation in a horse racing venture on his firm's questionnaires, which requested the disclosure of any outside business activities, because he knew the firm would not approve. Porrazzo used his personal email address to communicate with the customer about the outside business activity, contrary to the firm’s written policies and procedures that required it to monitor incoming and outgoing correspondence to detect violations of firm policies.
James Michael Porrazzo : Fined $15,000; suspended for consecutive terms of 4 months and 15 business days
Bronsky used the bank ID and computer of the assistant branch manager at the bank where he was employed to create an automatic teller machine (ATM) card and personal identification number (PIN) for a bank customer without the customer’s knowledge. Bronsky used the ATM card and PIN to withdraw a total of $2,511 from the customer’s savings account for his own use and benefit.
In order to assist financial advisors taking their LTC CE state exams, Swisher created and distributed an answer key for one state exam, and received and distributed an answer key for another state exam .
Jill Meredith Swisher : Fined $5,000; Suspended 60 days
John Paul Coen (Principal) AWC/2008016448101/July 2010
Coen borrowed approximately $2,700,000 from a customer and used the loan to trade in his personal brokerage account and cover a margin call. Coen wired $300,000 that he borrowed from the customer to an account another firm customer controlled, claiming that the money was a loan to the customer.
Coen borrowed approximately $270,000 from another firm customer for whom he managed the brokerage accounts for entities the customer controlled.
Coen’s firm did not permit loans from or to customers, and Coen did not request or obtain his firm’s pre-approval (either verbally or in writing) prior to borrowing or lending monies from or to customers, nor did he otherwise inform his firm of the loans.
John Paul Coen (Principal): Fined $50,000; Suspended 18 months
Associated Person Bailey had responsibility for purchasing office supplies for her member firm’s branch office with access to the firm’s house account and charge card for an office supply store, which she used to purchase gift cards and office supplies for her own use and then submitted fabricated documents and invoices to the firm’s accounts payable department that made the personal charges appear as if they were branch expenses. Bailey had access to branch managers’ corporate credit cards, used the cards to purchase personal items and created fabricated receipts that made it appear as if the charges were branch office expenses. Bailey misappropriated approximately $50,000 from the firm in this manner. Bailey prepared and submitted fabricated documents in support of the expense reimbursement requests.
McPhee executed transactions in a customer’s account without the customer’s prior knowledge, authorization or consent. McPhee communicated with the customer via an outside email account without his member firm’s knowledge or consent.
Kevin John McPhee : Fined $7,500; Suspended 5 months; Ordered to pay $17, 654.44 plus interest restitution to customer
While sitting for the General Securities Representative qualification (Series 7) examination, Associated Person Leu was found to be in possession of unauthorized materials during a restroom break. Leu failed to timely respond to FINRA requests for information.
Kristen Kimberly Leu : Fined $10,000; Suspended 2 years.
Lori Elizabeth Simpson AWC/2009017046701/July 2010
Associated Person Simpson wrongfully obtained $1,120.64 from a member firm’s affiliated company, and then misused the funds for her own benefit. The firm and its affiliated company had established company guidelines wherein certain expenses were automatically approved if the expenses fell below a certain dollar threshold, and Simpson consistently submitted expenses below the firm’s established threshold for automatic approval without a supervisor reviewing them. Simpson failed to respond to FINRA requests for documents and information.
Luis Arguelles (Principal) 2009016608201/July 2010
Arguelles threatened an associated person of another member firm that he was going to take his firm's lucrative securities transactions business elsewhere unless the associated person gave him money. As a result of Arguelles' threat, the associated person paid approximately $18,000 to Arguelles and Arguelles' relative by providing Arguelles with cash and by depositing money into the bank account of Arguelles' relative. Arguelles failed to respond to FINRA requests to appear for testimony.
Luis Arguelles (Principal): Barred
Mark Steven Gardner (Principal) AWC/2008015914301/July 2010
Gardner executed equity securities purchase transactions to open an investment account on a corporation’s behalf without its knowledge or consent. Gardner accepted purchase orders from an individual who did not have authorization to act on the corporation’s behalf and, prior to executing the transactions, Gardner failed to verify whether the individual had been granted authorization by the corporation. The transactions' amounts totaled $2,203,020.
Mark Steven Gardner (Principal): Fined $5,000; Suspended 1 month
Marsco Investment Corporation and Mark E. Kadison (Principal) AWC2009016078101/July 2010
Acting through Kadison, the Firm failed to
maintain and preserve all business-related electronic communications;
establish and maintain a supervisory system,
establish, maintain and enforce written supervisory procedures, reasonably designed to achieve compliance with the rules and regulations applicable to the retention of electronic communications;
implement a customer identification program in compliance with its written anti-money laundering (AML) compliance procedures for verifying customer identity for accounts opened with the firm.
Marsco Investment Corporation: Censured; Fined $25,000; Within 90 days of the issuance of the AWC, the firm’s Chief Executive Officer must certify in writing to FINRA that the firm has systems and procedures in place that are reasonably designed to achieve compliance with the laws, regulations and rules concerning the preservation of electronic mail communications.
Mary Alice Siver-Walters AWC/2009017915701/July 2010
While serving as a Rotary Club’s treasurer,Siver-Walters misappropriated approximately $17,500 from the Rotary Club for her own personal use by converting cash on a weekly basis and writing checks on the club’s checking account payable to cash. Siver-Walters admitted to converting the funds due to financial hardship and later repaid the funds.
Mary Alice Siver-Walters : Barred
Matthew James Ferber Sr. AWC/2009017295301/July 2010
Ferber executed a promissory note in which he agreed to reimburse a firm customer $64,000 for losses in the customer’s account. The settlement was without his firm’s knowledge or authorization and violated firm policy that prohibited registered representatives from guaranteeing (through implication or statement) any profit or absorbing any loss for a client and settling customer complaints.
Matthew James Ferber Sr. : Fined $5,000; Suspended 30 business days
Calhoun participated in a private securities transaction outside the regular course of his employment with his member firm by introducing the firm’s customer to an issuer, a private bank offering an investment in a managed foreign currency trading program, and acting as a liaison between the issuer and the customer. The customer lost the $30,000 invested in the foreign currency trading program. Calhoun failed to provide prior notice to his firm and failed to receive his firm’s written acknowledgment concerning his participation in the private securities transaction.
Trenham structured cash deposits for a customer in order to evade federal reporting requirements by obtaining cashier’s checks for under $10,000. Trenham functioned in a principal capacity with his member firm while being suspended in that capacity. Trenham willfully failed to update his Form U4 with material information.
Amirali placed customer initials and signatures, and inserted dates on account documents for customers, without the customers’ prior knowledge or authorization. Amirali submitted the altered documents to his member firm as authentic. Although the customers approved the various actions, the customers did not authorize Amirali to sign their initials or signatures, insert dates or alter the documents, and, by conducting these acts, Amirali caused his member firm’s books and records to be inaccurate.
Noor Siraj Amirali: Fined $5,000; Suspended 3 months
Richard Aaron Paul AWC/2008013523101/July 2010
Paul engaged in private securities transactions without prior written notice to, or prior written approval from, his member firm. Paul's sale of convertible balloon promissory notes totaling approximately $545,000 was done outside the scope of his employment with his firm and without prior written notice to his firm.
Richard Aaron Paul : Fined $50,000; Suspended 9 months
Richard Elmer Gilbert (Principal) AWC/2008014574101/July 2010
Gilbert borrowed money from investors, including firm customers, to raise funds for a residential real estate development company he owned and controlled, and in connection with the borrowing, Gilbert participated in securities transactions when he issued promissory notes totaling approximately $1,095,072, which he signed on his company’s behalf. Gilbert’s member firm prohibited borrowing from customers, and Gilbert failed to provide his firm with written notice of his intention to engage in private securities transactions and failed to receive his firm’s written permission.
Richard Elmer Gilbert (Principal): No Fine in light of financial status: Suspended 1 year (After consideration of sanctions previously imposed by the State of Michigan of six months for the same conduct, FINRA determined to give Gilbert credit for serving six months of the suspension, but he is required to serve six months of the suspension.)
Robert Edward Groux Sr. AWC/2008012755301/July 2010
Groux recommended to elderly customers that they invest approximately $300,000, which was 90 percent of their liquid net worth and 100 percent of their account value, in a basket of illiquid, risky alternate investments, including real estate investment trusts and equipment leasing partnerships. Groux did not have reasonable grounds for believing that the recommendation was suitable based upon the facts the customers disclosed as to their financial situation and needs.
Robert Edward Groux Sr.: No Fine in light of financial status; Suspended 15 business days
Robert Martin Martinez AWC/2009018362902/July 2010
Martinez received checks totaling $20,000 from a non-customer, intended for investment, and improperly used the funds for his personal use. Martinez willfully failed to amend his Form U4 to disclose material information and failed to timely respond to FINRA requests for information and documents.
Hancock obtained access to funds an elderly bank customer held in one or more bank accounts and caused the withdrawal of approximately $11,320 from the accounts. Hancock obtained a portion of the funds by causing early withdrawals from a time deposit account and used the funds for his personal benefit. Hancock returned the misappropriated funds by causing the deposit of $11,320 into the accounts from which the funds were taken.
Brookstone Securities, Inc. AWC/2008011675701/June 2010
Brookstone Securities failed to ensure that each of its registered representatives and registered principals participated in an annual compliance meeting. The Firm failed to timely update a registered representative’s Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose required information and failed to timely disclose customers’ complaints pursuant to NASD Rule 3070.
The Firm failed to report quarterly statistical customer complaints; failed, in some instances, to create and maintain a record of customers’ complaints and related records that included the complainant’s information; and, alternatively, failed to maintain a separate file that contained complainant’s information.
The Firm failed to report transactions to the Trade Reporting and Compliance Engine (TRACE) and failed to evidence the creation and maintenance of order tickets for sell transactions in corporate bond transactions.
Brookstone Securities, Inc. : Censured; Fined $17,500
Budvitis misappropriated a total of $26,500 from a customer’s account by completing Client Verbal Instructions Forms requesting that a check be issued to his family member, and funds transferred from the customer’s account to his family member’s account without the customer’s permission or authority. Budvitis misappropriated an additional $40,000 but later issued a stop payment on a check and deposited a cashier’s check for the withdrawn funds back in the customer’s account.
Budvitis failed to respond to FINRA requests for information and to testify at an on-the-record interview.
Colleen Marie McMahon-Hill 2008016040401/June 2010
McMahon-Hill applied by telephone for bank-issued credit cards in the names of bank customers, without the customers’ authorization or consent, and used the cards to make unauthorized transactions totaling approximately $5,642.97.McMahon-Hill acknowledged that she used the cards without the customers’ permission and did not reimburse the bank for its losses. McMahon-Hill failed to provide FINRA with requested information.
Conrad Michael Lawrence OS/2009019042201/June 2010
In connection with the sale of an installment plan contract offered by an alleged charitable organization issued to a customer, Lawrence negligently misrepresented to the customer that he would receive a tax deduction. Lawrence recommended the installment plan contract without having a reasonable basis for the recommendation, and did not perform a reasonable investigation concerning the propriety of the alleged charitable organization or the installment plan contracts it offered. Lawrence engaged in a private securities transaction without providing prior written notice to, and receiving prior written approval from, his member firm.
Conrad Michael Lawrence : Fined $25,000 (includes $4,000.32 commission disgorgement); Ordered to pay $21,280 plus interest in restitution; Suspended 4 months
Donald Edwin Derieg AWC/2007009070901/June 2010
Derieg served as an elderly customer’s attorney-in-fact pursuant to a power of attorney (POA) designation, and became a co-successor trustee and a beneficiary of the customer’s living trust. Derieg’s member firm generally prohibited representatives from accepting fiduciary appointments, except in connection with family. Derieg completed his firm’s associate annual attestations, in which he failed to disclose that he was named as a co-successor trustee of the elderly customer’s restated trust, that he was a beneficiary of her trust and life insurance policy, or that he was designated as an attorney-in-fact under the power of attorney should the customer become incapacitated.
Derieg improperly borrowed money from the customer when his firm’s written procedures prohibited registered representatives from borrowing money from customers, other than family members, and only then with management approval, and Dereig did not notify the firm of the loans or obtain its prior approval.
Derieg engaged in unauthorized transactions in the customer’s investment portfolio that were unsuitable in light of the customer’s deteriorating medical condition, her resulting financial situation and need for preservation of principal.
EDI Financial acted as the sole placement agent for contingency offerings, and entered into agreements with an independent attorney to act as the independent administrator for the offerings rather than contracting directly with a bank to act as the firm’s escrow agent. The title of the first offering escrow account, which the attorney opened, did not change even after the offering had been closed and the new offering was instituted, and the firm never broke escrow before meeting the contingency for both offerings. The firm established a bank account to hold funds related to the offerings separately, and the account was administered by an independent party. The Firm failed to timely deposit customers’ check into the escrow account after receipt.
EKN Financial Services Inc. 2005002259501/June 2010
EKN effected transactions with retail customers at prices that were not fair and not reasonably related to the current market price of the security. The Firm failed to preserve the order tickets for bond transactions at issue regarding the excessive markups, thereby failing to preserve required books and records. The Firm failed to exercise reasonable diligence to ascertain the best available price for its customers under the prevailing market conditions.
EKN Financial Services Inc. : Fined 32,500; Ordered to pay $4,092.30 plus interest in customer restitution
Garden State Securities, Inc. AWC/2008011696501/June 2010
Garden State
offered and sold unregistered securities that were not exempt from registration to customers;
made commission payments to representatives in branch offices through nonregistered entities; and
failed to make proper use of the Federal Trade Commission’s national do-not-call registry, permitting its registered representatives to cold-call persons on that list;
Acting through a registered principal, the Firm prepared and used a telemarketing script and issued research reports in the form of newsletters that contained exaggerated, misleading or unwarranted statements and failed to disclose required information. The script contained statements regarding the purported aggregate performance of the firm’s individual stock recommendations, but failed to include past years’ performance information and a description of the risks associated with an investment in stock, including the risk of loss, and the script touted the successful performance of one of its stock recommendations and suggested that similar opportunities would be available in the future.
The Firm’s newsletters constituted research reports, which, among other things, made oversimplified, exaggerated, unwarranted and misleading statements regarding its stock recommendations. In addition, The research reports contained or referenced performance charts that provided oversimplified and incomplete presentations of the firm’s performance track record. Moreover, the research reports did not adequately disclose any ownership interests and material conflicts of interest concerning its recommendations, and did not adequately disclose the meaning of the firm’s “buy,” “hold” and “sell” ratings. Furthermore, the research reports contained ratings and price targets for securities without including a line graph of the securities’ daily closing prices for the required period and without disclosing the risks that could impede achievement of the price targets.
Garden State Securities, Inc.: Censured; Fined $55,000
Ray misappropriated approximately $368,657 from customers by opening bank accounts, for which he was the signatory, in firm customers’ names. Through false representations, including false letters of authorization, Ray, without the customers’ knowledge or consent, wired funds from the customers’ firm accounts into the bank accounts that he had opened and used the funds for his personal use.
McKelvain engaged in private securities transactions without providing prior written notice to, and receiving prior written approval from, his member firm. In connection with the sale of installment plan contracts offered by an alleged charitable organization, McKelvain presented sales materials to customers that contained misleading and oversimplified product descriptions that had not previously been provided to a firm registered principal for review and approval. McKelvain negligently misrepresented to the customers that they would receive a tax deduction in connection with their investments. McKelvain engaged in the sale of these installment plan contracts, which were securities, without being properly registered with FINRA as a general securities representative.
James Carter McKelvain : Fined $35,000; Ordered to pay $128,177.16 disgorgement (less any amount paid to date);Suspended 8 months
James Harold Opheim AWC/2009018820201/June 2010
Opheim wrongfully converted funds totaling approximately $105,516.54 from customers, and attempted to wrongfully convert funds totaling approximately $60,000 from another customer. Opheim converted, or attempted to convert, the funds by endorsing the checks that customers provided him without permission or authority and depositing the funds into his own personal account for his use and benefit.
Jennifer Evelyn Cheeseman AWC/2009017334901/June 2010
Cheeseman altered term life insurance policies in order to falsely represent that a husband and wife applying for insurance had life insurance coverage as set forth in the invalid policy contracts. Cheeseman sent the customers a policy that belonged to other customers, after falsifying the applicants’ names and dates of the policy. When the customers brought discrepancies to her attention, she provided them with another altered policy, and accepted a check from the customers for premium payments.
While exercising control over the trust account for the benefit of an elderly customer, and while acting with the requisite scienter, Perlman excessively traded the account in a manner that was inconsistent with the customer’s investment objectives, financial situation and needs. Perlman recommended transactions to the customer without having reasonable grounds for believing that such transactions were suitable in light of the frequency of such transactions, the level of margin used in the account, and the customer’s financial situation, investment objectives and needs. Perlman’s trading, for the life of the account, resulted in losses of approximately $551,000 and generated gross commissions of approximately $118,000 and margin interest of approximately $9,300.
Without a bank customer’s knowledge or authorization, Barrett
signed the customer’s name on a check withdrawal form requesting a $25,000 check from the customer’s account made payable to Barrett’s friend, and the funds were later deposited into the friend’s checking account; and
activated and linked an ATM card to the bank customer’s savings account and used the card to withdraw $3,500 from the account for his own personal use and benefit.
Barrett failed to respond to FINRA requests for information and to appear and testify at an on-the-record interview.
Polychronis engaged in outside business activities without giving prompt written notice of those activities to his member firm. Polychronis wrote annuity business away from his firm, including sales of fixed annuities and an equity-indexed annuity. When his firm questioned Polychronis on various occasions, he initially failed to disclose his outside activities and then later under-reported its scope by falsely claiming that it had been limited to a single transaction.
John Andrew Polychronis : Fined $5,000; Suspended 6 months
Boyer engaged in outside business activities by participating in the sale of equity-indexed annuities while registered with his member firm, and received approximately $7,622.25 in commissions as a result of the sales. Boyer failed to provide prompt written notice to the firm regarding the outside business activities and signed an attestation form acknowledging that he was required to submit sales of equity-indexed annuities to be processed by the firm.
Associated Person Bailey acted as his member firm’s chief compliance officer even though he was not qualified by examination in the required capacities of general securities representative, limited representative corporate securities or general securities principal.
Joseph Arthur Bailey: Censured; Fined $10,000; Suspended 10 business days
Kevin Michael John O’Connor (Principal) AWC/2007011308803/June 2010
O’Connor failed to establish, maintain and enforce an adequate supervisory system and written supervisory procedures related to the issuance, receipt and transmittal of checks payable to customers. In addition, the written supervisory procedures and supervisory system were inadequate because they did not provide for managerial review or supervision of the process. O’Connor failed to establish, maintain and enforce adequate written supervisory control procedures relating to NASD Rule 3012(a)(2)(B) and its requirement that members establish, maintain and enforce procedures reasonably designed to review and monitor transmittals of funds or securities between customers and registered representatives. O’Connor failed to adequately enforce his member firm’s procedures concerning penny stock transactions.
Kevin Michael John O’Connor (Principal): Fined $17,500; Suspended 30 days in Principal capacity only
Salerno exercised discretion in a customer’s account without the customer’s written authorization and his member firm’s acceptance of the account as discretionary.
Salerno sent electronic mail to a firm customer from a personal, unapproved email address and failed to seek or obtain his firm’s permission prior to doing so. Salerno’s private email account, his firm was unable to review his emails to the customer and Salerno was able to shield his discretionary trading activity from his firm.
Salerno failed to appear to provide testimony at FINRA on-the-record interviews.
McEwen converted $32,528.56 from a customer by falsely informing her that a check McEwen’s member firm sent to her pursuant to a consent order with the Missouri Securities Division for unsuitable variable annuity sales to the elderly was sent to her by mistake and actually represented commissions the firm owed him. McEwen instructed the customer to deposit the check into her bank account and then make a check payable to him in the same amount; after the customer followed these instructions, McEwen cashed the check and deposited the funds into his personal bank account. McEwen converted an additional $11,000 from the customer by depositing checks intended for investment into his personal bank account and failed to purchase investments on the customer’s behalf.
McEwen failed to appear for FINRA on-the-record testimony.
Tick forged customer signatures on insurance forms and maintained a blank medical history questionnaire in a customer file that a customer had pre-signed, in violation of his member firm’s policies. Instead of having a customer complete and sign a correct application form after the customer had completed and signed the wrong form, Tick “cut and pasted” the customer’s signature to the correct application form. Tick forged customers’ signatures on policy delivery acknowledgment forms and a “not taken” form.
Maser liquidated funds in the customers’ securities accounts with the customers’ understanding that he would use the funds to purchase fixed annuities on their behalf. Without the customers’ knowledge, permission or authority, Maser deposited the funds into bank accounts he opened in each of their names. He created passwords for the accounts which he used to instruct the bank to issue a $23,800 check payable to himself at his home address and to have the bank make monthly payments to each of the customers that were equivalent to the payments they would have received had he purchased the annuities for them.
Michael Phillip Dunham (Principal) AWC/2008016130001/June 2010
Dunham exercised discretion in customers’ account, without written authorization from the customers and his member firm’s acceptance of the accounts as discretionary.
Dunham attempted to settle a customer’s anticipated complaint without notifying the firm of the customer’s concerns or the fact that he had paid her a total of $20,000 to settle, even though he did not have his firm’s permission to settle customer complaints. The customer did not cash the checks Dunham gave her and subsequently filed a complaint with the firm regarding the margin balance in her account.
Michael Phillip Dunham (Principal): Fined $10,000; suspended 20 business days
Paul Arnold Nilssen (Principal) AWC/2007011308802/June 2010
Nilssen failed to reasonably supervise his member firm’s operations staff in connection with the issuance and hand delivery of checks to customers. Nilssen was aware of deficiencies but took inadequate steps to address them. Nilssen failed to review the operations staff’s practices or files to ensure that they always obtained forms that brokers completed to request that checks be issued from customer accounts, and receipts customers signed to acknowledge their receipt of hand-delivered checks.
Paul Arnold Nilssen (Principal): Fined $7,500; Suspended 10 business days
PlanMember Securities failed to have in place any system or procedures for supervising a third-party vendor’s breakpoint determinations. The Firm outsourced its breakpoint determination to a third-party vendor and, due to a software programming error, the vendor failed to take certain B shares into consideration when determining the firm’s customers’ breakpoints, so customers were overcharged approximately $4,000 for their mutual fund purchases. ALL customers were later reimbursed. The Firm's decision to outsource its breakpoint determinations to a third party did not relieve the firm of its ultimate responsibility for the outsourced activity. The Firm failed to have adequate policies and procedures in place to monitor the outside vendor’s compliance with the terms of its agreement with the firm, and to assess its continued fitness and ability to perform the outsourced activities.
Pond Equities, Stephen Joshua Greenberg (Principal) and Shaye Hirsch (Principal) OS/2007007360201/June 2010
Acting through its Anti-Money Laundering Compliance Officers (AMLCOs) Greenberg and Hirsch, Pond failed to implement policies and procedures that could be reasonably expected to detect and cause the reporting of suspicious activities and transactions required under 31 U.S.C. 5318(g) and implementing regulations thereunder. Greenberg and Hirsch, failed to implement the Firm's written anti-money laundering (AML) policies and procedures by conducting any meaningful AML-related review of customer activity and by adequately reviewing suspicious activity and filing Suspicious Activity Reports (SARs) where appropriate. As a result, the Firm failed to timely detect, investigate and report suspicious activity occurring in accounts, and the firm failed to develop and implement a written AML program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act. The Firm's written supervisory procedures did not contain relevant provisions addressing its AML compliance program.
Acting through Greenberg, the Firm failed to conduct heightened supervision of its producing managers’ activities pursuant to the supervisory control system requirements of NASD Rule 3012, and failed to prepare an adequate annual report reporting suspicious activity relating to penny stock liquidations pursuant to the supervisory control system requirements of NASD Rule 3012.
Pond Equities: Censured; Fined $100,000 jt/severally with Greenberg and Hirsch
Stephen Joshua Greenberg : Fined $100,000 jt/severally with Pond and Hirsch; Suspended 30 days in Principal capacity only
Shaye Hirsch: Fined $100,000 jt/severally with Pond and Greenberg; Suspended 30 days in Principal capacity only
Ralph Charles Johnson (Principal) AWC/2008013469901/June 2010
Johnson effected discretionary transactions in a customer’s securities account. Johnson had a verbal agreement with the customer to exercise discretion in the account, but he did not obtain prior written authorization from the customer and his member firm’s acceptance of the account as discretionary.
Ralph Charles Johnson (Principal): Fined $5,000; Suspended 10 business days
Robert Franklin Hockensmith Jr. OS/2008013190801/June 2010
Hockensmith participated in transactions involving investment in a purported foreign currency exchange (FOREX) trading program and did not seek his member firm’s written authorization to participate, and the firm was unaware of and did not authorize his participation. The purported FOREX trading program was not a firm-approved product and the firm did not have a selling agreement with the purported trading program.
The firm’s written procedures advised representatives that prior to engaging in a private securities transaction, representatives must submit a written request to the compliance department describing the proposed transactions and that written authorization from the compliance department must be received before a representative could engage in such conduct. Hockensmith completed and executed his firm’s representative affirmations addressing the firm’s policies and procedures regarding selling away/private securities transactions, and the firm addressed the topic at multiple annual compliance meetings, as well as issuing compliance bulletins/notices to its representatives regarding selling away/private securities transactions.
Hockensmith borrowed $200,000 from a client without his firm’s knowledge or consent and contrary to the firm’s written procedures prohibiting representatives from borrowing from a customer. Hockensmith executed representative affirmations agreeing to his firm’s procedures manual regarding prohibited activities, which included borrowing from customers.
Hockensmith failed to respond to FINRA Rule 8210 requests for information.
Rogers made an unsuitable recommendation to customers to each purchase $1,000,000 variable life insurance policies, using $30,000 that they had intended to use as a down payment for a home. Rogers’ recommendation to the customers was unsuitable in light of their young age and lack of a need for $1,000,000 in life insurance coverage. Rogers received commissions totaling $6,841.22.
Ronald Douglas Rogers : Fined $15,000 (includes commissions disgorgement); Suspended 1 month
Scott Anthony Harwell (Supervisor) AWC/2008014617801/June 2010
Harwell engaged in private securities transactions without prior written notice to, or prior written approval from, his member firm. Harwell offered for sale and sold unregistered shares of stock to individuals for which he collected funds totaling approximately $130,950.
Harwell failed to respond to FINRA requests for information.
Casuccio made material misrepresentations to induce customers to invest approximately $723,000 in fictitious investments. Rather than investing the money, Casuccio deposited approximately $667,000 in his personal bank account for his own use and benefit. Casuccio made payments totaling approximately $56,000 to customers, telling them that these payments were either interest earned or a return on their investments.
Shawn Patrick Casuccio: Barred
Stephen Paul Krauss AWC/2009017313901/June 2010
Krauss effected discretionary transactions in a customer’s securities account. Krauss had a verbal agreement with the customer to exercise discretion in the account, but he did not obtain prior written authorization from the customer and his member firm’s acceptance of the account as discretionary.
Stephen Paul Krauss : Fined $10,000; Suspended 30 business days
Zachary participated in a private securities transaction by introducing her member firm’s client to an issuer offering a line of credit promissory note through an entity, received a $50,000 commission for the transaction, and failed to provide her firm with prior notice of her participation in the transaction. Zachary engaged in an outside business activity by establishing a separate entity to receive the sales commission for the private transaction, but failed to provide her firm with prompt written notice of her participation in this outside business activity.
Olivo engaged in trading on customers’ behalf in his member firm’s suspense account without his member firm’s authorization. Olivo did not record these transactions, leaving his firm unaware of them and causing the firm to experience significant losses. Olivo failed to appear for FINRA on-the-record interviews.
Wall Street Money Center Corp. AWC/2008011725601/June 2010
The Firm failed to preserve emails exchanged between the firm and one of its clearing firms. Prior to employing electronic storage media, the firm failed to notify FINRA of its decision to use such media. The Firm failed to establish, maintain and enforce written procedures that addressed the use and retention of electronic communication.
Wall Street Money Center Corp.: Censured; Fined $20,000
Walter Allen Ellis (Principal) 2007007873101/June 2010
Ellis engaged in outside business activities without providing prompt written notice to his member firm. Ellis managed customers’ accounts and effected trades in commodity futures contracts and commodity futures options through commodity trading firms and earned commissions from the firms. Ellis completed quarterly compliance questionnaires for his firm that inquired if he had engaged in an outside business activity while associated with the firm, and he answered “no” to this question, thereby knowingly providing false information to his firm, which caused its firm’s books and records to be inaccurate.
Ellis willfully failed to timely amend his Form U4 with material information.
Walter Allen Ellis (Principal): Fined $22,500; Suspended 1 year
A.B. Watley Direct, Inc. OS/2005001121401/May 2010
Acting through its Compliance Officer and Anti-Money Laundering Compliance Officer, the FIRM failed to establish and enforce an adequate and reasonable AML program, in that it failed to detect and investigate red flags of possible suspicious activity in customer accounts and failed to timely report such activity. Acting through the registered principal, the Firm failed to perform independent testing of the AML program during two years, performed an inadequate independent AML test in another year, and failed to establish and implement policies, procedures and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and implementing regulations thereunder.
Acting through individuals, the Firm conducted a securities business while it failed to maintain its minimum required net capital and, as a result ofits net capital calculation errors, it filed inaccurate quarterly Financial Operational &Combined Uniform Single (FOCUS) reports. The Firm failed to preserve and maintain copies of all of its internal and external emails asrequired.
A.B. Watley Direct, Inc.: Censured; Fined $125,000; Required to retain an Independent Consultant to conduct a review of the adequacy of its policies, systems and procedures, and training relating to its anti-money laundering (AML) compliance program; the firm was required to have its general securities principals register for eight hours of AML training and provide FINRA with evidence of completion of training.
Dobric day-traded futures contracts in his personal futures account with his member firm when, for the day-trading he effected, he needed to have approximately $3,200 in his account in order to meet his member firm’s internal day-trading margin requirements. Without authorization, Dobric made false entries in the firm’s computer system, manually increased his account balance, and placed trades for his own account that he otherwise would not have been able to make, causing the firm’s books and records to be false and inaccurate.
Alexander Dobric: Fined $5,000; Suspended 1 year
Alvin Charles Ramsey AWC/2008015421501/May 2010
Ramsey served as a registered representative for an elderly customer who executed a power of attorney, giving Ramsey broad authority over her financial affairs. The customer asked Ramsey to invest $600,000 in a variable annuity, and then, without the customer’s knowledge or authorization, Ramsey used the power of attorney to obtain approximately $482,000 in withdrawals from the annuity, which, after taxes were deducted, totaled approximately $373,750. Checks for $373,750 were issued in the customer’s name and sent to Ramsey’s office. Ramsey deposited some of the money into the customer’s checking account, but converted some of the funds for his personal use without the customer’s knowledge or authorization.
Separately, Ramsey borrowed $275,000 from the customer and, in total, owes the customer approximately $500,000.
From about February 2005 through March 2009, Ruby stole blank personal checks and stock certificates from customers and forged their signatures. Ruby filled in the blank checks, inserting dollar amounts that totaled approximately $128,275, forged the customers’ signatures and then deposited the checks into an account under his control. Ruby sold the stock certificates and kept the proceeds. Ruby used the funds from the checks and stock certificates for personal expenses.
Pena knowingly submitted false documentation to his member firm’s affiliate bank in order to open customer accounts, thereby circumventing the bank’s requirement that its customers provide written verification of residential address. The customers were non-U.S. citizens and, without written verification of address, the bank would not have opened accounts for these customers. Pena’s tax accountant, who he had a referral relationship with, created false address verification letters for the customers on her company’s letterhead upon Pena’s request, and provided the letters to Pena, who used these letters to open bank accounts for the customers and received at least $800 in commissions. Pena was responsible for ensuring that accurate documentation was presented to his employer and intentionally presented the false address verification letters to his employer in an attempt to avoid supervisory guidelines.
Christopher William Shanahan AWC/2008014404801/May 2010
Shanahan misappropriated more than $30,000 from his member firm. Shanahan was issued a corporate credit card to pay for his business travel and other business-related expenses and, while use of the corporate credit card for personal expenses was prohibited by his member firm, Shanahan sought and received reimbursements for more than $30,000 of personal expenses to which he was not entitled. Shanahan submitted falsified expense reimbursement reports, causing his firm’s books and records to be inaccurate.
Daniel Glenn Carlen (Principal) AWC/2009016529101/May 2010
Carlen was associated with a member firm and was also employed as a supervisor of payroll for a non-registered third-party administration company related to the firm. Carlen systematically directed unauthorized payments from the administration company’s payroll to a business entity under his sole control and converted the funds to his personal use. When Carlen was confronted with actual falsified checks and tampered bank statements, he signed a written statement in which he confessed to embezzling $235,000 and misappropriating the funds for his personal use.
Walsh took an online state continuing education (CE) examination for financial advisors working for another FINRA member firm. The financial advisors provided their driver’s license and social security numbers to Walsh, who used the information to log onto the examination Web site and take the exam for them. Walsh assisted other financial advisors to take the CE examination by sitting with them in their offices and providing assistance to complete the examination. Walsh possessed and distributed an answer key to a financial advisor and permitted the answer key to be distributed to other financial advisors. Walsh did not report his conduct to his member firm.
Daniel Walsh: Censured; Fined $5,000; Suspended 90 days
While contemplating his resignation from his member firm to work at another member firm, Current altered customer telephone records at his member firm without authorization. Current made inaccurate electronic changes to customer telephone records that were recorded on a firm electronic database in order to slow down other registered representatives who he believed would be assigned to call his customers after he resigned. By changing customer telephone numbers, Current caused his member firm to create and maintain inaccurate books and records.
Darrell Steven Current : Fined $5,000; Suspended 1 month
Crocker engaged in outside business activities for compensation and failed to provide prompt written notice to his member firm, but eventually notified his supervisor of the transactions a number of years later. Crocker participated in referring a customer to another firm’s registered representative for the purpose of purchasing equity-indexed annuities and received compensation for the transactions.
David Bigelow Crocker : Censured; Fined $10,000 (includes $3,500 disgorgement); Susendped 20 business days
Dedric Hillery Gill III AWC/2009017234001/May 2010
Gill engaged in private securities transactions by referring public customers to invest $266,600 in privately held companies without prior written notice to his member firm. Gill borrowed from and loaned firm customers a total of $115,000 contrary to his firm’s procedures prohibiting its registered persons from lending money to, or borrowing money from, its customers. Gill failed to respond to a FINRA request for documents and to appear for an on-the-record interview.
Shortly before resigning from his member firm to work at another member firm, Land caused telephone records at his firm to be altered without authorization, in that Land made inaccurate changes to customer telephone records electronically stored in his broker workstation in order to slow down other registered representatives who would be assigned to call his customers after he resigned. By changing customer telephone numbers, Land caused his member firm’s books and records to be inaccurate.
Douglas Seth Land: Fined $5,000; Suspended 1 month
Minksy sold, on an unsolicited basis, unregistered stock that was not exempt from registration on a customer’s behalf. The sales netted the customer approximately $6 million, which he wired to offshore accounts. Minsky failed to conduct a reasonable inquiry or due diligence to determine, among other things, if the shares being sold were in fact exempt from registration.
Harold Sheldon Minsky: Fined $10,000; Suspended 30 days
Goode failed to execute a customer’s instructions to liquidate positions in the customer’s account, and the value of securities in the account declined precipitously with the customer incurring losses exceeding more than $1 million dollars.
Henry Thomas Goode II : Fined $5,000; Suspended 60 days
Jason Allen Groth AWC/2007007981002/May 2010
Groth sold equity-indexed annuities, with a face-value of $4,800,000, issued by carriers that were not approved by the firm for sales by its registered representatives, and earned approximately $524,142 in connection with the sales. This compensation was outside the scope of Groth’s relationship with the firm, and he accepted it without providing prompt written notice to the firm in a form the firm required. Groth completed firm documentation requesting information concerning any outside business activity and did not disclose that he was selling annuities issued by carriers that did not have selling agreements with the firm.
Jason Allen Groth: Fined $5,000; Suspended 90 days
Stellick completed an online application to open a brokerage account for a customer at a FINRA member firm with which he was not associated and completed the application by obtaining the customer’s signature on a separate page and submitting it to the executing member firm.
Stellick effected options transactions in the customer’s account at the executing member firm, but in light of the customer’s stated risk tolerance, Stellick did not have reasonable grounds for believing that the transactions were either qualitatively or quantitatively suitable for the customer. Stellick exercised discretion with respect to the options transactions effected in the customer’s account and never received written authorization from the customer, nor did he receive the executing member firm’s written approval. Stellick never notified his member firm, either orally or in writing, about the account he opened for the customer, or about any transactions he effected in that account. Stellick never informed the executing member firm about his control over the customer’s account and his status as an associated person of his firm.
Stellick borrowed $326,000 from his customers in violation of the written procedures of the firms with which he was associated.
DeCastro effected electronic wire transfers from a customer account upon a third party’s verbal instructions and based upon receipt of written instructions that he received by facsimile, which were purportedly from the account’s beneficial owner. DeCastro never asked the third party for written authorization confirming his authority to issue instructions on the customer’s behalf or obtained the customer’s actual authorization.
Jose Cecilio DeCastro: Fined $10,000; Suspended 1 year
MacDonald converted $1,100 in customers’ financial planning fees due and owing to his member firm by instructing customers to make their checks payable to him personally. Without permission or authority, MacDonald wrongfully cashed the checks and used the funds for his own uses and purposes.
Tiongson misappropriated $4,000 from an individual, who gave her the funds to trade in a commodities futures trading account that she held away from, and was approved by, her member firm which she had subsequently closed. Tiongson never used the individual’s funds to trade commodities futures, but instead used the funds for her personal benefit without the individual’s knowledge or consent.
Tiongson made full restitution to the customer.
Maria-Ysabelle Marinas Tiongson: Barred
Mark Francis Harper 2007011333401/May 2010
Harper engaged in a pattern of mutual fund switching in customers’ accounts without having reasonable grounds for believing that the transactions were suitable for the customers. Harper placed buy and sell orders of mutual funds in customers’ accounts without the customers’ prior written authorization and his member firm’s prior written acceptance of the accounts as discretionary. Harper failed to timely amend his Form U4 to disclose a settlement with a customer for $23,041.02 in connection with his mutual fund switching.
Batstone participated in the sale by another registered representative to Batstone’s customers at the firm, of equity indexed annuities issued by companies with which Batstone was not an appointed agent. Batstone's customers were not aware that the firm did not have selling agreements with the issuing companies and did not approve its representatives’ sale of the subject products, or that the registered representative was acting as the authorized agent of record. Batstone participated in the sales by discussing general features and benefits of the equity indexed annuities, facilitating the transactions, and by either introducing the customers to the representative or providing their contact and financial information to the representative to complete the transactions.
Martin David Batstone: Fined $5,000; Suspended 10 business days
Michael John Rukujzo (Principal) AWC/2007009609202/May 2010
Rukujzo participated in the negotiation and consummation of an Asset Purchase Agreement transaction, involving
another FINRA member,
a non broker-dealer entity, and
an entity which was a customer of his member firm.
The transaction resulted in the transfer from the other FINRA member of multiple customer mutual fund positions for which Rukujzo’s firm had become the dealer of record to the dominion and control of his firm’s customer (the entity), which exposed customers’ accounts to losses as a result of the entity’s speculative margin trading. Rukujzo’s firm facilitated the transfer of certain positions held directly at mutual fund companies to an omnibus margin account held and maintained at the firm’s clearing firm in the name of the entity, for which the firm was the broker-dealer of record. The Firm advised its clearing firm that the customers had authorized the use of their mutual fund assets as collateral when in fact, the customers did not sign any margin authorization forms, and information sent to the customers did not mention a margin account, the use of margin in investment strategies, or the use of the customer’s assets as collateral to support margin trading in the omnibus account.
Rukujzo allowed an unregistered person to function as a representative and the firm’s principal without being registered. Under Rukujzo’s direction and control, his firm engaged in the change of dealer of record designation without the customer’s authorization, and allowed his firm to participate in a transaction that he knew, or should have known, required approval from FINRA, and that approval was neither requested nor obtained.
Michael John Rukujzo (Principal): In light of of Rukujzo’s financial status, no fine imponsed; Barred in Principal capacity only
Mission Securities Corporation and Craig Michael Biddick (Principal) 2006003738501/May 2010
Following appeal of a FINRA Office of Hearing Officers (OHO) decision in which the Firm was Expelled and Biddick was Barred, FINRA's National Adjudicatory Council (NAC) additionally ordered that Mission and Biddick disgorge $38,946.06 in ill-gotten gains stemming from their misconduct and pay such proceeds, plus interest, to 13 Mission customers.sanctions based on findings that the firm and Biddick converted and misused customer securities. The firm and Biddick intentionally caused the transfer, without any prior customer authorization or notification, of securities from customers’ accounts to the firm’s account, sold a portion of the shares and used some of the proceeds for the firm’s operating expenses.
This decision has been appealed to the Securities and Exchange Commission (SEC) but the bar and expulsion are in effect pending consideration of the appeal.
Mission Securities Corporation: Expelled; Ordered to pay, jointly and severally, $38,946.06, plus interest, to customers.
Craig Michael Biddick: Barred ; Ordered to pay, jointly and severally, $38,946.06, plus
interest, to customers.
NAME DELETED PER BROKEANDBROKER.COM AWC/2009020780101/May 2010
RESPONDENT'S NAME DELETED PER SOLE DISCRETION OF BROKEANDBROKER.COM processed options trades in his member firm’s average price account that its clearing firm then executed, but credited customers with inferior prices to the actual street execution price. Respondent created fictitious transactions to journal a portion of the difference between the street price and the inferior price booked to client accounts from the average price account to personal accounts he held at the firm, thereby depriving customers of best execution for their securities transactions. By using fictitious transactions, Respondent misappropriated from the firm’s average price account to his personal accounts $1,305 of the total $2,280 that represented the difference between the prices booked to the customer accounts and the street price to which the customers were entitled, thereby converting the $1,305.
Respondent used his firm’s inventory accounts to place trades that were ultimately allocated to his personal accounts and accounts his relatives held by creating fictitious trades as a means to move the gains he obtained by trading in the inventory accounts to his personal accounts his relatives held. Respondent used the firm’s inventory accounts rather than his personal accounts because he lacked the buying power in his personal accounts to place the trades.
The Firm verbally warned Respondent that he was not permitted to use inventory accounts for personal trading and distributed a written memorandum to all employees telling them that this practice was prohibited, but Respondent ignored the warning and, to avoid detection, stopped using his own accounts and began allocating trades to accounts his relatives held. Respondent ’s firm warned him in writing to stop using firm inventory accounts for personal trading or he would be terminated.
In addition, Respondent effected transactions in his relatives’ accounts to move profits generated by day trading in the firm’s accounts to his family members’ accounts without his family members’ prior written authorization to exercise discretion. Moreover, after effecting trades in the firm account and moving the proceeds to family members’ accounts, Respondent forged relatives’ signatures on wire transfer forms to move the funds he obtained to bank accounts in which he had an interest. Furthermore, Respondent caused his firm to maintain inaccurate books and records by creating fictitious trades in the firm’s inventory accounts to journal proceeds from day-trading activities and from the customer trades books at prices inferior to the prices executed with the street and by forging signatures on wire transfer forms.
Associated Person Kuykendall signed or photocopied customer signatures onto account documents and submitted the documents to her member firm for processing without the customers’ authorization, knowledge or consent. Kuykendall copied a customer’s signature onto a form and then notarized the document herself. Kuykendall’s conduct caused the firm’s books and records to be inaccurate.
Register Financial Associates, Inc.and George Robert Register (Principal) OS/2007011496203/May 2010
The Firm allowed an individual to function as a research analyst without having the required licenses. The Firm
shared a draft of a section of a research report that contained a research summary, rating and price target with a subject company before it was published, and the draft was not provided to legal or compliance personnel at the firm;
did not monitor or place restrictions on the trading of stock picks by research analysts, who placed trades in violation of the limits placed on analysts by NASD Rule 2711(g) and failed to retain records showing the dates that newsletters were published prior to 2005;
failed to disclose the valuation methods it used to determine
the price target and the risks to achieving the price target in the
stock pick sections of its research report;
failed to have a principal review, initial and date its published
research reports before the earlier of its use or filing with FINRA’s
Advertising Regulation Department;
failed to adopt and implement written supervisory procedures to
cover research reports distributed to the public and ignored red flags
regarding stock pick sections qualifying as research reports; and
failed to establish, maintain and enforce
written supervisory procedures for its newsletter, in that the firm had
no written supervisory procedures that governed research reports
distributed to the public.
The Firm's research analysts failed to disclose their financial interests in stock picks and omitted material facts that rendered the stock pick section of research reports misleading.
The Firm and Register filed false attestations regarding compliance with NASD Rule 2711, and the Firm failed to make the certifications required by SEC Regulation AC for its stock pick sections that the views expressed accurately reflected the research analysts’ personal views. Furthermore, Register failed to adequately discharge his supervisory responsibilities and never took effective action to ensure that his firm was meeting its obligation to comply with FINRA rules, in that he never monitored the trading or ownership of stock picks by the firm’s research analysts, imposed no restrictions on whether the analysts could trade or own securities when they were profiled as stock picks, and allowed research analysts to publish research reports unsupervised.
Englander engaged in proprietary firm options trading when he was not properly licensed to do so. Englander engaged in his member firm’s investment banking or securities business and failed to register in the registration category that was appropriate to the function to be performed as specified in NASD Rule 1032.
Richard Alan Englander: Censured; Fined $15,000
Richard Albert Seefried (Principal) OS/2007008443101/May 2010
Seefried exercised discretion in a customer’s account without the customer’s prior written authorization or his member firm’s acceptance of the account as discretionary. Seefried knowingly provided false information to the firm when he completed Registered Representative Compliance Summaries and did not provide affirmative answers regarding exercising discretion, causing the firm’s books and records to become inaccurate.
Seefried knew that a customer’s signature on a New Issue Certification was not genuine, but he submitted it, or caused it to be submitted, to the firm so that the customer could purchase securities in an initial public offering, where it became part of the firm’s books and records; thereby falsifying the firm’s records.
Seefried recommended and effected transactions in a customer’s account without having reasonable grounds for believing that the transactions were suitable based upon the facts the customer disclosed as to her other security holdings, financial situation and needs.
Richard Albert Seefried (Principal): In light of Seefried’s financial status, no fine was imposed; Suspended 3 months
Rob William Friemoth Jr. AWC/2007010328201/May 2010
Friemoth engaged in outside business activities, for compensation, and failed to give his member firm prompt written notice.Friemoth sold equity-indexed annuities on an insurance company’s behalf after his firm had discovered that he had sold an equity indexed annuity that was not on the firm’s approved list and after it had requested that he not proceed with any additional such sales.
Rob William Friemoth Jr.: Fined $5,000; Suspended 2 months
Shortly before resigning from her member firm to work at another member firm, Bixby caused customer records to be altered without authorization. Bixby made inaccurate updates to customer telephone numbers and deleted customer email addresses in order to slow down other registered representatives whom she believed would be assigned to call her customers after she resigned. By changing customer telephone numbers and email addresses, Bixby caused her firm to create and maintain inaccurate books and records.
Associated Person Pierce conspired with others to steal $16,000 from a casino by engaging in a scheme with a blackjack dealer to cheat at a game of blackjack by, among other methods, being allowed to keep chips on what should have been losing hands.
Donato distributed the answer key to a state long-term care continuing education exam, and provided part of his social security number to an individual so that the individual could satisfy a continuing education exam online requirement of having someone proctor the exam, even though Donato was not present when the individual signed on to take tine exam. Donato failed to respond to a FINRA request to provide testimony.
William Edward Herlihy (Principal) AWC/2008013490901/May 2010
Herlihy participated in the sale of unregistered securities by a control person of the issuer. Herlihy ignored red flags and failed to conduct an adequate inquiry and follow-up on suspicious trading activity by customers who engaged in numerous pre-arranged cross and wash transactions for purposes of manipulating a company’s stock.
William Edward Herlihy (Principal) : Censured; Fined $30,000; Suspended 90 days
William Frederick Brahe Jr. 2008014231001/May 2010
Without permission or authority, Brahe withdrew approximately $1,078,400 from customers’ accounts and deposited the money into his own accounts for his own use and benefit.
White borrowed $100,000 from a customer on an unsecured basis, when his member firm’s policies prohibited representatives from borrowing money from a customer. Moreover, the borrowing arrangement did not meet the conditions set forth in NASD Rule 2370(a)(2). White did not disclose to his firm that he had borrowed money from a customer.
Benjamin Yost White: Fined $15,000; Suspended 60 days
Bentley-Lawrence Securities, Inc. and Richard Lawrence Coskey (Principal) OS/2007011333401/April 2010
Bentley-Lawrence and an unnamed registered representative settled a claim in connection with the representative’s mutual fund switching in a customer’s account. Acting through Coskey, the Firm failed to
report that settlement to FINRA;
adequately and properly supervise the registered representative who engaged in mutual fund switching activities in customers’ account, which generated in excess of $178,000 in gross commissions, representing more than 50 percent of the firm’s mutual fund commission revenue for all registered representatives; and
adequately supervise to ensure the timely reporting of the settlement with the customer.
Bentley-Lawrence Securities, Inc.: Fined $50,000; Ordered to pay $117,623.68 restitution to customers, jointly and severally with Coskey.
Richard Lawrence Coskey: Fined $20,000; Ordered to pay $117,623.68 restitution to customers, jointly and severally with Bentley-Lawrence Securities; Suspended in Principal capacity only for 9 months.
Daryl Gene Bank (Principal) and Gregory Dean Bodoh OS/2008012955301)/April 2010
Bank and Bodoh and misappropriated approximately $161,000 in commissions and other payments from Bank’s member firm for their own use. Bank directed his member firm to wire money from a subsidiary to an account Bodoh controlled; Bodah, in turn, transmitted the majority of the funds to an entity Bank controlled and kept a portion for himself. Bank entered false information concerning securities transactions on his firm’s business records, willfully causing his firm to maintain inaccurate books and records. Bank and Bodoh provided false information in response to FINRA requests for information, and provided false and misleading testimony under oath in a FINRA on-the-record interview.
Bodoh participated in private securities transactions without notifying his member firm or obtaining its approval.
Daryl Gene Bank and Gregory Dean Bodoh: Barred
David Warren Polifroni Sr. AWC/2006007102501/April 2010
Polifroni loaned $805 to a customer by making a series of deposits directly into the customer’s bank account without his member firm’s approval.
David Warren Polifroni Sr. : Fined $5,000; Suspended 10 business days
Denis William Kraemer Jr. 2006006192901/April 2010
The NAC imposed the sanctions following appeal of an Office of Hearing Officers (OHO) decision. The sanctions were based on findings that Kraemer willfully failed to disclose material information on his Forms U4.
Denis William Kraemer Jr.: Fined $5,000; Suspended 9 months
Douglas Richard Smith (Principal) OS/2008012211601/April 2010
Smith effected, without the customer’s knowledge, authorization and consent, the surrender and liquidation of a variable annuity in the customer’s account, and used the proceeds to purchase a variable annuity issued by another insurance company for the customer’s account. To effect the unauthorized transactions for the customer, Smith, without the customer’s knowledge, authorization and consent, affixed, or caused to be affixed, the customer’s signature and/or initials on five documents. Smith stamped a document with the firm’s medallion signature guarantee stamp and placed his signature on the stamp signature line, which had the effect of guaranteeing the customer’s signature as genuine.
Douglas Richard Smith (Principal): Fined $5,000; Suspended 18 months in all capacities
Meyer withdrew approximately $553,000 from a customer’s bank account by presenting withdrawal slips to bank tellers on which he wrote “at the customer’s request” and deposited the funds into his personal brokerage account for his own use. In addition, Meyer misappropriated approximately $85,000 from another bank customer by depositing the proceeds of the sale of the customer’s annuity into his personal accounts for his own use. Meyer exercised discretionary authority over a customer’s securities account without her written authorization, did not speak with the customer in connection with every transaction, and did not obtain approval from his member firm to engage in discretionary trading. Meyer engaged in private securities transactions, for compensation, without prior written notice to, or prior written approval from, his member firm. The findings also included that Meyer failed to respond to FINRA requests for information and to appear for a FINRA on-the-record interview.
Healthcare Community Securities Corporation AWC/2008011702001/April 2010
From 2004 through 2008, the firm did not maintain and preserve all electronic communications relating to the firm’s business and did not establish, maintain and enforce a supervisory system and/or written supervisory procedures that were reasonably designed to achieve compliance with the rules and regulations applicable to the retention of such communications.
Healthcare Community Securities Corporation : Censured; Fined $35,000; Required to review its supervisory system and procedures concerning preservation of electronic communications for compliance with FINRA rules and the federal securities laws and regulations and to certify the review.
Artiga engaged in private securities transactions by selling approximately $2.5 million of promissory notes to individuals, for which he received commissions of approximately $157,000. Artiga invested the sale proceeds into a company that was promising purportedly risk-free, high yield investment programs. He engaged in this activity without providing prior written notice, or any notice, to his member firm. His investors ultimately lost more than $2.2 million of the $2.5 million that they had invested.
Brown engaged in a private securities transaction outside the scope of his employment with his member firm. Brown recommended that a customer invest about $200,000 in a security in the form of a note or convertible debenture. Brown promised that the customer would receive a 10 percent return on her investment within ten months, but instead, the company defaulted and the customer lost her entire investment. Brown did not provide the firm with prior written notice of his participation in this transaction, did not obtain approval from the firm to participate in this transaction, did not give the firm the opportunity to record this transaction on its books and records or to supervise his participation in the transaction. Also, Brown failed to respond to FINRA requests for information and documents, and failed to appear for FINRA onthe- record testimony.
Horus River Brown : Barred
Jennifer Birrell Young 2008012237901/April 2010
Young made approximately $94,000 in unauthorized personal charges on credit cards that her employer firm issued to her and another registered individual for business use. Young failed to appear for a FINRA on-the-record interview.
Joseph Peter Stephens AWC/2007011815501/April 2010
Stephens accepted a $210,000 loan from a customer without his member firm’s knowledge and consent, and in contravention of his firm’s written supervisory procedures that generally prohibited associated persons from borrowing money from, or loaning money to, any firm customer.
Joseph Peter Stephens: Fined $5,000; Suspended 60 days
Kenneth Ray Prevett Jr. AWC/2008014399401/April 2010
Prevett engaged in an outside business activity by selling EIAs to his member firm’s customers without giving prompt written notice of the sales to his firm. Prevett received approximately $77,700 in compensation for selling the EIAs.
Kenneth Ray Prevett Jr. : Fined $5,000; Suspended 3 months
Kirlin Securities, Inc., Andrew Joseph Israel (Principal) and Anthony Joseph Kirincic (Principal) EAF0400300001/April 2010
The sanctions were based on findings that acting on the firm’s behalf, Israel and Kirincic used deceptive techniques to manipulate the stock price of the firm’s publicly-traded parent company. Kirincic forged public customers’ signatures on stock certificates and authorization letters. Acting through Israel and another individual, Kirlin Securities failed to comply with best execution requirements for a customer order.
Kirincic has appealed this decision to the United States Court of Appeals for the Second Circuit. The bar is in effect pending consideration of the appeal.
Kirlin Securities, Inc.: Expelled
Andrew Joseph Israel: Barred with right to apply after 5 years
Potts used her access as a private banking associate to embezzle approximately $1,452,158 from customers’ checking and certificate of deposit (CD) accounts. Potts fraudulently completed debit tickets, ranging from $800 to $68,000, to withdraw funds from customers’ checking and CD accounts, falsely indicating that the customers requested the withdrawal: The customers neither authorized nor had knowledge of the withdrawals. Potts presented the debit tickets to bank tellers at her local bank branch and received cash back, which she used for her own personal use.
Registered Supervisor Brown misused customer funds totaling $20,000, which he received from the customer to be invested in a real estate project, but instead deposited the funds in a bank checking account in the name of a business he owned and used the funds to pay personal expenses without the customer’s authorization. Brown electronically submitted an Outside Business Activities questionnaire to his member firm on which he informed the firm of his ownership of the business, but stated that the business was “cattle ranching” and that his duties did not involve raising capital or issuing debt. Brown failed to return the funds to the customer.
Leonard Charles Brown: Barred
Merrill Lynch, Pierce, Fenner & Smith Incorporated AWC/2008012391401/April 2010
Through several of its employees at the branch office level and employees of an affiliate in the Office of General Counsel, the Firm made material misstatements to NYSE Regulation examiners relating to an on-site branch office examination relating to non-registered cold callers by
providing the NYSE with inaccurate and deceptive information in response to various regulatory examination requests,
instructing staff that an unapproved facsimile machine be hidden or removed, and
by providing an inaccurate written statement in response to requests for information during an ongoing investigation.
Unlicensed Attorney
The Firm failed to properly supervise a registered person with the firm who held himself out as an attorney on firm stationery and business cards even though he was not licensed or admitted to practice before any state or federal bar.
Away Accounts
The Firm failed to
provide letters from outside broker dealers, whose employees maintained accounts at the firm, confirming that they were aware of such accounts;
receive and review duplicate confirmations and monthly account statements for accounts that employees maintained outside the firm;
evidence the approval of such accounts; and
send duplicate statement and confirmations to other firms whose employees had accounts at the firm.
Communications and Computers
The Firm failed to
evidence review and supervision of incoming or outgoing written communications and facsimiles at certain branches;
evidence the approval for certain employees to maintain computers and software; and
review, supervise and/or evidence supervisory review of communications that employees sent and received with non-firm issued computers.
The Firm failed to place certain accounts on 90-day restrictions; evidence the review, approval and/or supervision of order errors and account designation changes; and date or properly date corrections for order errors and account designation changes. Also, the Firm failed to evidence the review, approval and/or supervision of certain personal computer forms that had been backdated at a branch; failed to approve and/or timely approve seminars that firm employees conducted, and maintain certain seminar-related materials; failed to review, approve and/or retain certain facsimiles, including Fax-2-Mail correspondence and/or evidence its review and approval; and failed to maintain its "control" fax machine in a secure location in one branch.
Heslap engaged in an email marketing campaign through which he distributed correspondence and/or sales literature to prospective customers via unsolicited emails. Many of the emails failed to provide a sound basis for evaluating the facts, provided exaggerated or unwarranted claims that are prohibited and/or contained performance claims that imply that past performance will recur.
Michael Scott Heslep: Censured; Suspended 10 business days
The Firm lacked supervisory systems and written procedures reasonably designed to prevent and detect improper use of, and payment to, finders used in stock loan transactions. The Firm failed to download instant messages and emails the firm’s employees sent or received via Bloomberg into its internal systems; therefore, the firm did not archive them.
Bradley borrowed approximately $480,000 from customers generally involving real estate investment, without his member firm’s knowledge. Bradley promised customers returns of 20 to 25 percent and repayment within a month or two. He told the customers that he was using the funds for various purposes, but ultimately did not use the funds for the stated purposes, and used funds borrowed from customers to repay other customers. Bradley repaid only some customers a total of more than $155,000.
Roger Odell Hudspeth II OS/2008012955302/April 2010
Hudspeth sold Real Estate Investment Trusts (REITs) to customers without being registered as a Series 7 General Securities Representative. Another representative served as the registered representative of record and executed the REIT application, notwithstanding the fact that Hudspeth, and not the representative, recommended and sold the REITs to the customers.
Roger Odell Hudspeth II: Fined $5,000; Suspended 30 days
Nestor converted $760,000 from elderly customers by forging the customer’s or trustee’s signatures on wire transfer forms without their consent or authorization, and causing the unauthorized withdrawal of funds from the customers’ accounts to a third-party account. Nestor failed to respond to FINRA requests for information.
Bloom failed to obtain the necessary signatures on forms relating to a variable annuity that customers had authorized. Instead, Bloom took a copy of each of the customer’s signatures from an earlier signed document and then cut-and-pasted them onto the necessary form. The findings also stated that Bloom inserted the purported signature date on each forms.
Sherman Marc Bloom : Fined $10,000; Suspended 2 years
Stephen George Condos and Chuck A. Roberts AWC/2007010398801/April 2010
Condos and Roberts had knowledge that a sales assistant and possibly others replaced customer email addresses with the sales assistant’s firm email address to facilitate the opening of online accounts and to lessen the amount of communications the customers received; therefore, trade confirmations were sent to the sales assistant rather than the customers, although the customers continued to receive their monthly account statements, prospectuses and 1099 federal tax forms by mail.
Roberts’ relative opened several accounts at his member firm; Roberts serviced those accounts but failed to disclose to the firm that the individual who owned the accounts was a relative. Had Roberts made such disclosure, the account numbers assigned to the accounts would contain a prefix identifying them as being employee-related.
Stephen George Condos: Censured; Fined $15,000; Suspended 3 weeks in all capacities
Chuck A. Roberts: Censured; Fined $40,000 and Suspended 4 weeks in all capacities
Delott engaged in improper seminar, training and sales activities in retirement planning workshops, fact finders meetings, annuity training and a breakout session at an insurance industry expo. Delott failed to disclose that he received commissions for the sale of EIAs and falsely created the appearance that people were signing up for a fact finders meeting by asking existing customers to come to the front room at the conclusion of a workshop.
Delott recommended and instructed attendees at annuity training sessions and an expo breakout session to make false, misleading, unwarranted or exaggerated statements in the sale of EIAs and other financial products; to omit material facts; to present information concerning EIAs that is not fair and balanced; and to use improper and high-pressure sales strategies. Delott made exaggerated, unwarranted and misleading statements, and statements that were not fair and balanced and did not provide a sound basis for the evaluation of facts during his workshops, fact finders meetings and annuity training classes.
In connection with his marketing of EIAs, securities and insurance and annuity training, Delott used materials that his member firm had not approved. FINRA found that Delott did not disclose his member firm’s name on invitations, or failed to disclose it in a prominent manner, and engaged in outside business activities without disclosing the activities to his firm or seeking its approval.
Steven Howard Delott: Fined $35,000; Suspended 6 months
Valores Finamex International, Inc. and Vincent Anthony Buchanan (Principal) AWC/2009016196001/April 2010
Acting through Buchanan, Valores Finamex failed to produce evidence of Buchanan’s review of a registered representative’s correspondence. The Firm’s written supervisory procedures failed to
identify the registered representative as a producing manager,
contain procedures reasonably designed to provide heightened supervision over the activities of each producing manager who is responsible for generating 20 percent or more of the revenue of the business units supervised by the producing manager’s supervisor, and
assign a qualified supervisor to supervise the registered representative.
The Firm permitted Buchanan to conduct a securities business while he was “Continuing Education Inactive.” Also, the Firm failed to
send an annual privacy notice to its customers;
provide an explanation to its customers of their right to opt out of disclosure of nonpublic personal information to nonaffiliated third parties; and
establish policies and procedures that address and review administrative, technical and physical safeguards for the protection of customer records and information involved in the outsourcing of compliance and operations functions to nonaffiliated third parties.
The Firm effected Trade Reporting and Compliance Engine-eligible securities trades and failed to report, or properly report, those transactions.
Valores Finamex International, Inc.: Censured; Fined $27,500 ($10,000 of which was jointly and severally with Buchanan).
Vincent Anthony Buchanan: Fined $10,000 jointly and severally with Valores Finamex; Suspended in Principal capacity only for 20 business days.
Victor Craig Campbell (Principal) AWC/2009019015201/April 2010
Campbell created fictitious life insurance policies and forged clients’ signatures on the applications for the policies. Campbell created the false policies to help qualify for an annual insurance sales conference and subsequently canceled the policies.
William Frederick Nord AWC/2008012826101/April 2010
Nord settled a customer’s complaint by paying the customer and agreeing to lower commission rates on the customer’s future stock purchases without his member firm’s knowledge or approval.
William Frederick Nord: Fined $2,500; Suspended 10 business days
William Paul Pecoriello AWC/2007011193302/April 2010
Pecoriello selectively disseminated material non-public information regarding a company, which caused a spike in trading volume and price of the company’s shares. Pecoriello’s member firm’s policies and procedures prohibited the selective dissemination of material nonpublic information.
William Paul Pecoriello: Fined $50,000; Suspended 30 business days
William Robert Colston (Principal) AWC/2008012057401/April 2010
William Robert Colston engaged in outside business activities in that he acted on behalf of insurance companies not affiliated with his member firm and engaged in sales of equity-indexed annuities (EIAs) to customers for compensation of approximately $111,000, and failed to provide prompt written notice to his member firm. Colston engaged in these transactions after his firm specifically instructed him that he was prohibited from selling EIAs, verified that he understood that his firm did not allow the sale of EIAs and agreed he would not sell them going forward.
William Robert Colston (Principal): Fined $10,000; Suspended 3 months in all capacities
A.B.Watley Direct, Inc. OS/2005003391301/March 2010
The Firm's website and television advertisements contained statements and claims that were misleading, exaggerated or unwarranted, and failed to provide a sound basis for evaluating the facts in regard tothe services offered. The firm claimed in public communications that it offered low commission rates, but failed to clearly disclose that the rates were only available to customers who placed a certain amount of trades the previous month, and the claim was misleading in light of the actual commission rates and fees it charged the majority of its customers. FINRA advised the firm that its television advertisements included misleading commission rate information, but nevertheless, the firm ran the TV advertisements without altering the material. The TV advertisements did not disclose any limitations or restrictions related to the stated commission rates. The website made various misleading claims regarding the speed of execution and level of market access the firm provided to clients. The homepage included a ranking by Barron’s, but failed to provide sufficient information to evaluate the rating or criteria on which it was based.
A.B.Watley Direct, Inc. : Censured; Fined $20,000; Required to file all sales literature and advertisements with FINRA’s Advertising Regulation Department at least 10 days prior to their first use for one year from the date of this order.
On his member firm’s behalf, O’Fee verbally confirmed a sell order with another member firm for U.S. Treasury to be announced (TBA) securities, entered the trade into his firm’s trading systems via Bloomberg and cancelled the trade shortly thereafter, despite agreeing to the trade without properly entering the trade or honoring his commitment. O’Fee did this multiple times. O’Fee’s firm honored his trade, closing out his short position at a loss to the firm of $152,751.97.
Once O’Fee realized the trade he failed to enter had gone against him, he engaged in a series of additional trades to conceal his conduct and, in an attempt to make up losses in his trading book, he entered buy orders with another member firm into his firm’s trading system via Bloomberg, but his firm’s clearing firm attempted to send a wire to the firm notifying it that there was no comparison.
O’Fee sold the securities to another member firm without the other firm’s authorization to effect the sales; therefore, he was short on the sale to the second firm. O’Fee’s firm covered the short position, and these transactions caused his firm to lose an additional $130,000, less a fail float of $15,000. In addition, when O’Fee effected the trades and cancellations, he only entered them into the firm’s trading system via Bloomberg and did not create handwritten tickets as firm policy required, thus permitting O’Fee to avoid supervisory review or detection and causing his firm’s books and records to be inaccurate.
Andrew Kevin O’Fee : Fined $25,000; Suspended 18 months
Arthur Braden Diggs Jr. AWC/2008013992501/March 2010
Biggs misappropriated at least $255,000 in customers’ insurance premiums by requesting that the customers submit their checks to him, and then depositing some of them into his personal bank account for his own use and benefit. In order to conceal his misappropriation, Diggs changed the addresses of record for the customers to a post office box he controlled, without their permission or knowledge, and periodically sent them altered insurance statements and told them that the policies were in good standing. Diggs misrepresented on firm compliance surveys that he did not receive funds directly from his customers.
Brockington Securities, Inc. AWC/2008011660901/March 2010
The Firm failed to develop and implement an AML program reasonably designed to achieve and monitor compliance with Bank Secrecy Act (BSA) requirements. The firm’s AML program had inadequate procedures regarding the detection and reporting of suspicious activity, and the firm did not receive Financial Crimes Enforcement Network (FinCEN) requests pursuant to the BSA. The firm failed to timely detect, investigate and report multiple instances of suspicious activity in customer accounts. The Firm failed to conduct an independent AML test one year, failed to satisfy its supervisory control system requirements under NASD Rule 3012 and failed to prepare an adequate NASD Rule 3012 report detailing its system of supervisory controls and the summary of test results, which made its statement that “no other modification of the written supervisory procedure (WSP) was deemed necessary” baseless. The firm failed to properly supervise the transmittal of customer funds and/or securities.
The firm’s employees utilized their personal email accounts to conduct business contrary to firm policy, but the firm did not have a system in place to review the emails.
Brockington Securities, Inc. : Censured; Fined $24,000; Required to conduct eight hours of Anti-Money Laundering (AML) training for all employees within six months after issuance of this AWC.
The firm failed to adequately respond to “red flags”generated by its exception report systems to review trading by its brokers to identify potentially improper trades or potentially inappropriate sales practices, including potential excessive trading or other potentially unsuitable transactions in retail customers accounts. The firm failed to establish, maintain and enforce adequate written supervisory procedures to provide guidance to supervisors and compliance personnel for review of transactions for suitability and excessive trading.
Duff caused customer orders to be executed in, and facilitated the distribution of, approximately 20 million shares of unregistered securities in stocks, and failed to perform thorough searching inquiries to ensure that the securities or transactions were exempt from registration, freely-tradable and unrestricted.
Charles Jesse Duff: Fined $50,000 including partial disgorgement of $25,000 in commission; Suspended 30 business days
Prior to the issuance of his research reports, Chow wrongfully shared earnings estimates, projected price targets and buy recommendations with institutional clients and member firm employees in contravention of his firm’s written policies regarding the disclosure of potentially market sensitive information.
The Firm failed to timely report customer complaints to FINRA, and to accurately report information regarding the complaints.The firm failed to timely and accurately report statistical and summary information for written customer complaints to FINRA.
E*Trade Securities LLC: Censured; Fined $110,000
Edgar Davis Mock III AWC/2009016258201/March 2010
Registered Principal Mock prepared false documents relating to his member firm’s annual reports of its supervisory control system and annual certification of its compliance and supervisory processes for several years, which he later provided to FINRA. Mock backdated the documents to make them appear that they were prepared and executed on earlier dates.
Edgar Davis Mock III : Fined $5,000; Suspended 1 year in Principal capacity only
Fifth Third Securities, Inc. AWC/2008011703401/March 2010
The Firm failed to timely
amend Uniform Applications for Securities Industry Registration or Transfer (Forms U4) to disclose registered representatives’ liens and bankruptcies,
submit amended Uniform Termination Notices for Securities Industry Registration (Forms U5) to report investment-related complaints against registered representatives, and
file FINRA Rule 3070 reports with FINRA.
Fifth Third Securities, Inc.: Censured; Fined $25,000
Foreside Distribution Services, L.P. AWC/2008011737901/March 2010
The Firm failed to maintain and preserve all of its business-related electronic communications. The Firm did not have custody or control over records of business-related electronic communications that its investment adviser clients sent or received, and could not easily access them without first requesting them from, and having such records subject to review by, each investment adviser client. The Firm did not have an adequate system or agreement in place to ensure that the business-related electronic communications were retained and made easily accessible to the firm. The Firm failed to establish and maintain a supervisory system and failed to establish, maintain and enforce written supervisory procedures (WSPs) reasonably designed to maintain and preserve all business-related electronic communications, including emails, in an easily accessible place, in that the firm’s WSPs did not address the retention of electronic communications that non-firm employed registered representatives send and receive. The Firm amended itsWSPs to specifically address the retention of these records, but they were deficient because they relied on the firm’s investment adviser clients to retain the communications on their systems and did not ensure that the firm had easy access to the records.
Foreside Distribution Services, L.P. : Censured; Fined $100,000; Required to certify in writing to FINRA within 90 days of issuance of this AWC that it has in place systems and procedures reasonably designed to achieve compliance with laws,regulations and rules concerning the preservation of electronic mail communications.
Registered Principal Purcell participated in the distribution of unregistered shares by offering and selling, through the means of interstate commerce, over 14 billion unregistered shares without an exemption in violation of Section 5 of the Securities Act of 1933. Purcell failed to ensure that each IB Equity Form he obtained from corporate customers was complete when he submitted them to the clearing firm, and should have performed a more thorough due diligence inquiry to ascertain whether the shares of a security were registered or exempt from registration, particularly since most of the trades occurred after the grant of summary judgment to the SEC was made public.
Gary Ira Purcell: Censured; Fined $2,500; Suspended 20 business days
Registered representatives at Registered Principal Montes' member firm who used options strategies in their customer accounts, repeatedly became subject to active account surveillance and appeared on compliance department spreadsheets when their customer accounts sustained losses from voluminous stock and options transactions. Despite being made aware of “red flags” indicating that unsuitable and excessive trading was occurring in customer accounts, Montes failed to take reasonable supervisory steps to respond to the “red flags” with a view toward preventing the unsuitable and excessive trading and did not adequately investigate the representatives’ options trading.
George Albert Montes: Fined $15,000; Suspended 1 year in Principal capacity only; Required to requalify by examination before acting in any principal capacity with a FINRA member.
Gielau altered documents in connection with transactions that customers requested. The customers requested the transactions that were effected by the altered forms, but did not authorize Gielau to alter the documents, and Gielau’s member firm prohibited altering documents in any manner. To alter the documents, Gielau either cut a copy of an authentic signature from a prior document and pasted the signature to a new document or affixed a prior signature page and applied white out over the date and wrote in a new date.
Jeffrey Alan Gielau: Fined $5,000; Suspended 3 months
Jeffrey Allen Davis OS/2008015704401/March 2010
Davis failed to obtain a customer’s signature on an investment account application form; instead of contacting the customer, Davis falsified the customer’s signature on the application and submitted it to his member firm as authentic, causing the firm’s books and records to be false and inaccurate. The customer filed a complaint with the firm concerning the fees charged in his managed account and the firm responded denying that any compensation was due to the customer. Davis acknowledged to the customer that he had falsified his signature on the application, and reimbursed the customer $7,772.31 for losses in his account without disclosing such payments to his firm. Davis failed to appear and testify as FINRA requested.
Davis assisted a third party in structuring deposits to evade the currency transaction reporting requirements of 31 U.S.C. 5313(a). Davis made deposits of U.S. currency, in the total amount of approximately $304,900, into the account; the majority of the deposits were just under $10,000.
Registered Principal Busacca failed to reasonably supervise the firm's operations and failed to diligently address numerous problems at the firm, including, but not limited to, inaccurate box counts, accurate securities position records, violations of section 220.8 of Regulation T of the Federal Reserve Board, failing to maintain margin requirements, failing to report data pursuant to NASD Rule 3150 and problems with transfers of customers’ accounts. As the firm’s President, Busacca permitted a non-registered person to act in a principal capacity as the firm’s chief compliance officer.
The FINRA Hearing Panel (OHO) suspended Busacca for six months in all principal capacities and fined him $25,000 for failing to reasonably supervise the operations of North American Clearing, Inc., f/k/a Advantage Trading Group, Inc. (hereinafler, “North American” or the “Firm”), in violation ofNASD Rules 3010 and 2110. The OHO Panel also fined Busacca $5,000 for permitting North American, as its president, to employ an unregistered chief compliance officer, in violation of NASD Rules 1022 and 2110. On appeal, FINRA's National Adjudicatory Council (NAC) sustained the OHO's findings and sanctions.
This decision has been appealed to the SEC and the sanctions are not in effect pending consideration of the appeal.
John Brian Busacca III : Fined $30,000; Suspended 6 months in Principal Capacity only
Jose Ricardo Santillan AWC/2008016181501/March 2010
Santillan removed information regarding a FINRA qualification examination from a testing site. He made handwritten notes, which included examination questions and potential answers, and removed them from the testing site. Santillan electronically confirmed his agreement to the rules of conduct and agreed to maintain the confidentiality of the examination materials, including the examination questions.
Registered Principal Fence was responsible for the supervision of a representative and failed to take appropriate action to supervise the activities of the representative who was engaged in excessive and unsuitable trading in bonds and mutual funds in elderly customers’ accounts. The representative made these recommendations without having a reasonable basis for believing that they were suitable based on the customers’ investment objectives, financial situation and needs. Fence failed to take appropriate action to supervise the representative that was reasonably designed to prevent his violations and to achieve compliance with applicable rules.
Karen L. Fence : Fined $5,000; Suspended 6 months in Principal capacity only
Registered Principal Sylla violated his firm’s written procedures by borrowing $100,000 from a firm customer through an entity that Sylla and other individuals had established. Sylla’s firm specifically prohibited such loans.
Kevin Joseph Sylla: Fined $10,000; Suspended 1 year
Registered Principal Kahn sold preferred stock shares of a company to investors, in the approximate amount of $127,000, without prior written notice to, and written approval from, his member firm. One investor was an elderly individual who invested $96,000 that she borrowed from a variable annuity that she had purchased through Kahn several years earlier. The company had paid her approximately $11,000 in annual interest when her Individual Retirement Account (IRA) custodian informed her that the company’s preferred shares had no value and were worthless. Kahn executed and submitted his firm’s Private Securities Transactions Certification, in which he falsely certified that he had not participated in any manner in private securities transactions since his employment with the firm.
Registered Principal Allen's Office of Supervisory Jurisdiction (OSJ) manager was absent from the OSJ for extended periods, but during these extended absences, he signed Delegation Letters that were submitted to and approved by the member firm to delegate his supervisory responsibilities to Allen, who was also registered as a Principal. Allen signed the manager’s name on the firm’s internal documents with her manager’s authorization, with both of them believing that the Delegation Letters were intended to provide her with authorization to act and sign as the manager in his absence from the OSJ. Allen’s firm knew that her manager had delegated principal responsibilities to her, but the firm did not know that she had signed his name to firm documents. Allen never attempted to replicate her manager’s signature, but signed his name in her own handwriting to firm documents, thereby causing the firm to maintain inaccurate books and records.
Linda Marie Allen: Fined $5,000; Suspended 3 months
Acting through Registered Principal Asensio, a member firm
issued research reports that failed to define the meaning of each rating and that failed to disclose the distribution of the firm’s ratings; and
made statements in research reports that were unwarranted or misleading.
Also, Asensio failed to fully respond to FINRA requests for information.
This decision has been appealed to the Securities and Exchange Commission (SEC) and the bar is in effect pending consideration of the appeal.
Manuel Peter Asensio: Fined $20,000; Barred
Melissa Dawn Curry AWC/2009017865401/March 2010
Associated Person Curry misappropriated $42,600 from a registered representative of her member firm. Curry took checks from the desk of another employee, who maintained the registered representative’s checks, placed her name on the checks as payee, filled in amounts ranging from $200 to $3,500, forged the registered representative’s signature, and deposited the checks into her personal bank account.
Registered Principal Peterson was responsible for contacting representatives at his member firm whose accounts appeared on the active account surveillance reports to investigate the activity and contact the customers, if necessary. Despite being made aware of frequent transactions in customers’ accounts, Peterson failed to reasonably respond to “red flags” indicating unsuitable and excessive trading by not contacting the customers nor restricting activity in the accounts. Peterson relied on the representatives’ unsubstantiated and false claims and order entry records.
Melvin Lee Peterson: Fined $15,000; Suspended 1 year in Principal capacity only; Required to requalify by examination before acting in any principal capacity with any FINRA member.
Registered Supervisor Harrison defrauded customers of approximately $85,000 by soliciting funds for investment but instead used the funds for personal use. Harrison pled guilty to mail fraud in June 2009 and acknowledged that he knowingly participated in a fraudulent investment scheme. Harrison failed to respond to FINRA requests for information and documentation.
Neil Rolla Harrison: Barred
Nomura Securities International, Inc. AWC/2007011877901/March 2010
The Firm failed to reasonably supervise or control certain of its business activities, provide for appropriate procedures of supervision and control, and establish a separate system of follow-up and review to determine that delegated authority and responsibility was being properly exercised. The Firm failed to follow certain of its written supervisory procedures for the domestic securities lending desk, failed to create and maintain adequate evidence of its compliance with its supervisory procedures for the domestic securities lending desk, failed to detect and prevent a securities lending supervisor from engaging in self-supervision, and permitted a person who was not registered with, qualified by or found acceptable to the New York Stock Exchange (NYSE) to regularly perform the duties customarily performed by a securities lending representative, for a brief period of time.
Nomura Securities International, Inc. : Censured; Fined $75,000
Registered Principal Jarkas recommended or, in the exercise of discretion, executed securities transactions in a customer’s account at his member firm without having a reasonable basis for believing that the volume of trading he recommended was suitable for the customer in light of information he knew about the customer’s financial circumstances, needs, other security holdings and investment objectives. Jarkas caused the execution of approximately 2,400 transactions in the customer’s account and received commissions of approximately $240,000.
Raymond James & Associates, Inc. AWC/2008015756901/March 2010
The Firm did not cause the exercise of time and price discretion to be reflected on an order ticket for applicable orders entered into its electronic Order Management System (OMS), or another firm’s OMS, causing the firm to violate FINRA recordkeeping provisions. The Firm implemented a change to its electronic OMS, satisfying the specificity requirements of NASD Rule 2510(d)(1), but did not implement a similar change to another OMS that its financial advisors used for larger orders. By not conducting adequate supervisory reviews of data relating to the exercise of time and price discretion, and by not having a system or procedure in place to produce certain order ticket data in connection with regulatory requests for order tickets, the firm failed to exercise reasonable supervisionby not having adequate systems or procedures in place to cause it to be in compliance with the order ticket
Raymond James & Associates, Inc. : Censured; Fined $100,000; Required to review its practices and procedures concerning its compliance with NASD Rule 2510(d)(1) to include a determination of
* whether any order entry system the firm uses permits a registered representative or other associated person to exercise discretion as to the price at which or the time when an order given by a customer for the purchase or sale of a definite amount of a specified security shall be executed, and
* whether it has systems and procedures in place that are reasonably designed to cause an exercise of time and price discretion in that security to be reflected on the order ticket.
The firm shall develop written policies and procedures and cause changes to be made to its (or its agents) operational systems reasonably designed to cause the firm to be in compliance with NASD Rule 2510(d)(1).
Hackett borrowed $9,000 from a customer in contravention of his member firm’s written procedures forbidding registered representatives from borrowing funds from customers, except in certain limited circumstances, which did not apply to the loan from this customer. Hackett failed to repay the loan and the customer was forced to file a civil action in the county court to enforce the terms of the loan agreement.Hackett failed to respond to FINRA requests for information, documents and to appear for on-the-record testimony.
Sauer's compensation arrangement with his member firm included a split of all investment advisor (IA) fees received, for which Sauer received 90% and the firm received the remaining 10%. Further, the firm’s procedures required that all customer checks for payment of such fees be made payable to the firm. Sauer received checks totaling $51,500 in IA fees from customers made payable to him. Sauer deposited the checks into his personal and business checking accounts, did not timely inform his firm of these payments, but later confessed that he had improperly withheld the firm’s portion of those payments, and repaid the firm $5,150.
Pelloth made alterations to the customer telephone number data in her member firm’s computer system by deleting their telephone numbers or replacing them with incorrect numbers, causing her firm’s records to contain false information.
Susan Mary Pelloth : Fined $5,000; Suspended 30 business days
Thomas James Sinclair AWC/2008016123101/March 2010
Registered Principal Sinclair misappropriated $17,500 from a former customer’s account by fabricating Letters of Authorization (LOAs) without the customer’s consent or authorization, and submitted the LOAs to his former firm and requested that the funds be wired from the former customer’s account to the accounts of a current customer and friends.
Acting through a registered principal, the Firm it failed to
conduct inspections of its main office,
reduce inspections and reviews to a written report, and
conduct annual compliance meetings.
For one year, the firm failed to
document that it had administered a continuing education program in accordance with its evaluation of its training needs and written training plan for its covered registered personnel, and
conduct a needs analysis and prepare a written training plan or administer a continuing education program for its covered registered personnel.
Aurora Capital LLC AWC/2008011646701/February 2010
Without notifying FINRA, the Firm participated in firm commitment offerings while operating pursuant to a membership agreement that allowed it to engage in underwriting or selling group participant of public offerings of corporate securities, other than mutual funds, on a best efforts basis only, and that required prompt notification if the firm engaged in any underwriting or selling group activity of firm commitment offerings. As a result of the firm’s participation in the firm commitment offerings, the firm conducted a securities business while failing to maintain its minimum net capital requirements.
Bradley Adam Sustrin (Supervisor) AWC/2009016760902/February 2010
Sustrin borrowed $5,000 from a customer without his member firm’s prior approval. When the loan was made, Sustrin’s firm did not have written procedures that allowed its representatives to borrow money from customers.
Bradley Adam Sustrin (Supervisor): No Fine in light of financial status; Suspended 10 business days in all capacities
Bruce Edward Hammonds OS/2008013990501/February 2010
Hammonds fraudulently induced his member firm’s customers and other investors to liquidate their positions or withdraw funds from their accounts and invest in excess of $1 million in a Ponzi scheme he orchestrated. Hammonds formed a partnership, and opened a partnership account that firm supervisors approved, but Hammond never disclosed the firm account on the firm’s electronic compliance disclosure system as an account in which he had an interest.
Hammonds told his customers and investors that his member firm would manage their investments, and he misrepresented the investment returns and the type of products (indexed funds, futures contracts or securities) the partnership would invest in. He misappropriated the funds, using them to pay for personal expenses as well as to pay investor returns typical of Ponzi scheme. Hammonds provided customers and investors with fictitious account statements reporting growth in their investments.
Christopher Michael Minor AWC/2008012469101/February 2010
After his member firm instructed him not to trade options in his personal account at the firm, Minor opened an options account with another member firm. Minor failed to provide notice to his firm of his options account at another firm or disclose it on a compliance questionnaire that he submitted electronically. Minor failed to provide written notice to the other firm of his association with a member firm or disclose it on a new account form that he submitted electronically.
Christopher Michael Minor: No Fine inh light of financial status; Suspended 2 months
In order to receive employee credit, Garcia completed and submitted false documents to enroll his member firm bank’s customers in an online bill payment program without their authorization. Garcia failed to respond to FINRA requests for information.
David Steven Forman OS/2007007989901/February 2010
Forman participated in the sale of a $5 million life insurance policy to a trust and took control of the policy. Forman informed the trustee that the trust might obtain more money by selling the policy than by redeeming it for its cash value after notification was received that the policy would lapse for failure to pay premiums. Forman participated in sending premium payments to avoid a lapse in the policy without the trustee’s knowledge or consent, facilitated the sale of the policy with forged and falsified documents, and retained the entire amount of the sale proceeds, approximately $942,000, for himself and another individual. No portion of the sale proceeds was paid to the customers or the trust.
Dennis Ray Thompson Sr. (Principal) and Dennis Ray Thompson Jr. AWC/2005001398604/ #2005001398603/February 2010
The Thompsons offered and sold investments in an unregistered hedge fund and its general partner using representations and sales materials that contained materially misleading statements and omissions of fact. The information that was supplied by the hedge fund manager and used recklessly by the Thompsons to solicit investors contained materially false and misleading statements and omissions concerning, among other facts:
a pending Commodity Futures Trading Commission (CFTC) securities fraud action against the hedge fund manager,
the fund’s theoretical and unproven performance figures,
the speculative nature of the fund’s trading strategy, and
the significant risks associated with an investment in the hedge fund and its general partner.
The Thompsons solicited investors without conducting a reasonable investigation to determine whether the hedge fund and its general partner were suitable investments and without regard as to whether certain investors were capable of evaluating and bearing the risks associated with such investments. The Thompsons failed to disclose to their member firm that they were engaged in private securities transactions for compensation. Thompson Sr. failed to disclose to his firm, in writing, that he received override commissions from the hedge fund and general partner for sales that other firm salesmen made.
Dennis Ray Thompson Sr.: Barred
Dennis Ray Thompson Jr.: No Fine in light of financial status; Suspended 2 years
Dome Securities Corp. AWC/2009016131601/February 2010
The Firm contracted with a third-party vendor for purposes of email retention, but did not implement an audit system regarding email storage and was therefore unaware that the vendor did not adequately retain certain emails. As a result, the firm failed to retain emails during that period.
Bekirovik converted $240 from her member firm’s affiliate bank by taking $240 out of a cash bag without authorization and using the funds for personal use. Bekirovik failed to respond to FINRA requests for information.
Ema Bekirovik : Barred
Eric Lowell Small (Principal) AWC/2007007345601/February 2010
While associated with his former member firm as a registered principal but not registered as a research analyst or a research principal, Small supervised the conduct of the firm’s research analysts, including approving research reports they prepared and that his firm issued.
Small failed to establish and maintain adequate supervisory procedures concerning the review of
email correspondence,
incoming and outgoing hard copy correspondence at the firm’s branch offices that he was in charge of, and
outside investment activity of registered representatives at the firm.
The Firm's procedures indicated that a supervisory principal must review all correspondence, but these procedures were not reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules. The procedures were inadequate in that they contained insufficient detail concerning how and when such reviews were to occur, and the firm had no written supervisory procedures addressing the review of outside brokerage accounts. Small failed to establish, maintain and enforce adequate written supervisory control procedures relating to
NASD Rule 3012(a)(2)(B) and its requirement that members establish, maintain and enforce procedures reasonably designed to review and monitor transmittals of funds or securities between customers and registered representatives, and
NASD Rule 3012(a)(2)(C) and its requirement of an analysis and determination of whether producing branch office managers should have been subjected to heightened supervision.
Eric Lowell Small (Principal): Fined $17,500; Suspended 10 business days in Principal capacity only
George Ernest Reilly (Principal) 2006006518904/February 2010
Reilly failed to establish, maintain and enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules for market making and for supervising market making activities and the activities of registered representatives.
Reilly failed to develop and implement an AML compliance program, as required by the Bank Secrecy Act, reasonably designed to detect suspicious money movements and trading activities in corporate customers’ account, investigate the activity and make the appropriate Suspicious Activity Report (SAR) filing. The firm’s AML program lacked procedures on monitoring and preventing money laundering and did not explain what follow-up would be required if a money laundering “red flag”was detected or when a SAR must be filed. Reilly failed to detect and investigate the suspicious nature of transactions in a representative’s corporate customer’s account.
George Ernest Reilly (Principal): Fined $50,000; Suspended 2 years in Principal capacity only.
Gina Marie Crawford Sims 2008012948801/February 2010
Sims misappropriated
a customer’s $928.78 automobile insurance policy check by depositing the check into her personal bank account instead of forwarding it to her member firm (later reimbursint the funds to the customer); and
$5,148.51 in variable life insurance premiums by depositing customers’ checks into her personal bank account.
Sims failed to appear for FINRA on-the-record interviews.
Grant Thomas Weiss AWC/2008013690301/February 2010
Weiss signed or placed customers’ names or initials on documents needed to transfer the customers’ accounts from his previous member firm to a more recent member firm. Weiss knew that these customers wanted to transfer their accounts to his firm, as evidenced by their signatures and initials on other documents needed to accomplish the transfers.
Grant Thomas Weiss: Fined $5,000; Suspended 1 year
Hilda Asencio 2008014573101/February 2010
Associated Person Asencio, converted $335,250 from a customer’s account by making withdrawals from the customer’s variable annuity without his knowledge or consent. Asencio arranged to have the funds sent to a friend, who cashed the checks and forwarded the proceeds to Asencio, who then deposited the funds into her own bank account and used the money for personal expenses. Asencio failed to respond to FINRA requests for information.
Hilda Asencio: Ordered to pay $335,250, plus interest, in restitution to a customer; Barred
Etienne misrepresented facts to an elderly customer who gave him $100,000 to invest in a Real Estate Investment Trust Investment Account purportedly through Etienne’s personal business, when no such security investment existed. Etienne used the customer’s funds for his personal expenses while providing the customer with monthly account statements that falsely indicated that her funds had been invested. Etienne provided the customer with a one-time payment of $22,000, purportedly representing interest earned on the investment. Etienne willfully failed to disclose material facts on his Form U4.
Investment Distributors, Inc. AWC/2009016117101/February 2010
The Firm permitted its registered representatives to use email to conduct business without having in place an effective system or procedure for email surveillance and archiving. Specifically, the firm relied on its registered representatives to electronically forward their emails to the firm’s chief compliance officer for supervisory review and archiving, while lacking any means to ensure that registered representatives were actually doing so. As such, the firm’s system and procedures for email surveillance and archiving were not reasonably designed to achieve compliance with SEC Rule 17a-4, and NASD Rules 3010(d)(2) and 3110. The Firm failed to preserve and maintain numerous securities-related and/or firm related emails that registered representatives had not forwarded to its chiefcompliance officer.
Investment Distributors, Inc. : Censured; Fined $80,000; Must certify in writing to FINRA that the firm has implemented a supervisory system, including written procedures, reasonably designed to achieve compliance with SEC Rule 17a-4 and NASD Rule 3110 with respect to the preservation and maintenance of email communications, and with NASD Rule 3010(d)(2) with respect to the supervisory review of email correspondence of registered representatives with the public.
James Jonathon Fraser Buchanan 2008013001701/February 2010
Buchanan misused more than $1,523,000 in customer and non-customer funds when he failed to invest the funds in investor certificates, warrants or any other investment. Buchanan provided investors with documents falsely representing confirmation of purchases. Buchanan participated in private securities transactions without prior written notice to his member firms. Buchanan failed to respond to FINRA requests for information.
James Jonathon Fraser Buchanan: Barred
James Thomas Farrell III AWC/2008014827101/February 2010
Farrell withdrew more than $900,000 from a pension plan he administered, including nearly $245,000 he was required to segregate pursuant to a qualified domestic relations order. In false and misleading filingswith the Department of Labor, the Internal Revenue Service and account statements distributed to plan participants, Farrell indicated that the plan’s assets were invested in a money market fund, when in fact Farrell had transferred the funds to his bank account for his own use.
Fox improperly refunded a member firm’s bank affiliate service fees to customer bank accounts where such fees were never actually charged, and converted at least $52,000 of the refunded fees after first moving them to other bank accounts. The converted monies were repaid.
Jeannette J. Martens AWC/2008015946101/February 2010
Martens contacted a mutual fund company and misrepresented herself as an assistant to the customer’s former registered representative at another member firm in an attempt to obtain confidential information about the customer’s account, which the customer had authorized Martens in writing and orally to obtain. At the time of the misrepresentation, Martens had been authorized to act as the customer’s broker of record at her firm, but the mutual fund company had not yet processed the change of broker form received from the firm. The mutual fund company would not have provided this information to Martens had she correctly identified herself and her broker-dealer affiliation.
Jeannette J. Martens : Fined $5,000; Suspended 30 business days
John Bradley Carter (Principal) 2008012796701/February 2010
Carter misused approximately $18,480 of investors’ funds intended to be contributed to their 403(b) retirement plans. Carter failed to respond to FINRA requests for information and to provide testimony.
John Bradley Carter (Principal): Barred
John Richard Noble AWC/2008012721301/February 2010
Noble borrowed $300,000 from customers when his member firm prohibited its personnel from borrowing funds from customers.
John Richard Noble: No FIne in light of financial status; Suspended 3 months
Ellis signed Employee Acknowledgements and Municipal Finance Professional Acknowledgements on behalf of firm registered representatives without their permission; and then provided the forms to FINRA staff during her firm’s bi-annual routine cycle examination without informing FINRA staff that she had signed the representatives’ names without their permission.
Robey prepared and submitted an Internal Rollover Withdrawal Request form authorizing the funding of a variable annuity that she mistakenly thought she failed to complete when, in fact, the customer had postponed the variable annuity purchase. Without the customer’s approval or instructions or without speaking to the registered representativefor whom she was assisting, Robey, in an effort to correct her perceived error, filled out and affixed the customer’s signature to the form, in violation of her member firm’s policy prohibiting associated persons from signing a customer’s signature to any paperwork, and submitted the paperwork for processing.
Leslie Klaserner Robey: Fined $5,000; Suspended 60 days
Max Jack Safdie (Principal) OS/2007009440601/February 2010
Safdie made misrepresentations to a third-party lending institution in order to assist a family member in obtaining a loan.
Max Jack Safdie (Principal): No Fine in light of financial status; Suspended 30 business days in all capacities
Michael James Jorgensen (Principal) 2008014433601/February 2010
Jorgensen posted comments regarding a competitor insurance company’s stock on an Internet message board without written approval from a principal of his member firm. Jorgensen made a recommendation to sell the insurance company’s stock
in his advertisement on the Internet board without disclosing that he
had a financial interest in the securities. His posts omitted material information, which caused the communications to be misleading, and failed to disclose that he owned puts on the company.
Michael James Jorgensen (Principal): Fined $25,000; Suspended 60 days in all capacities
Michael Thomas DiPuppo (Supervisor) and Robert Michael DiPuppo AWC/2008013742101/February 2010
The DiPuppos member firm had in place a supervisory system for the firm’s variable annuity transactions specifying that variable annuity transactions that exceeded 50 percent of the lower end of the customer’s net worth bracket required additional supervisory review concerning potential liquidity issues. The DiPuppos disagreed with the firm’s policy and, to circumvent the system, they altered the net worth of customers to a higher bracket to avoid the 50 percent threshold that would have flagged them on a report and required additional review. By altering customer net worth information, the DiPuppos caused their firm’s books and records to be false. Michael DiPuppo failed to carry out supervisory responsibilities to ensure that new account forms and annuity applications documents that Robert DiPuppo and other registered representatives in his branch submitted were accurate
Michael DiPuppo: Fined $15,000; Suspended 90 days in all capacities
Robert DiPuppo: Fined $10,000; Suspended 30 days in all capacities
Name Redacted by RRBDLAW 2008012102601/February 2010
Associated Person [name redacted] misappropriated $5,834.14 from his member firm by submitting inaccurate travel and expense reports, which caused his firm’s books and records to be inaccurate. [name redacted] failed to appear for FINRA requestedon-the-record testimony.
Paul Ernest Yankie (Principal) AWC/2008012237201/February 2010
Yankie participated in a private securities transaction and failed to give prior written notice to, and receive prior written approval from, his member firm to engage in the transaction. Also, Yankie borrowed $60,000 from a public customer contrary to his member firm’s general prohibition from borrowing money from customers (the firm permitted borrowing from an immediate family member, which this customer was not).Yankie failed to respond to FINRA requests for documentsand to appear for an on-the-record interview.
Richard Louis Galterio (Principal) AWC/2008011736102/February 2010
Acting through Galterio, his firm failed to retain all business-related electronic communications. Galterio used and permitted at least one of the firm’s registered representatives to use an electronic instant messaging service in conducting the firm’s business, although the firm did not maintain and preserve instant messaging communications.
Richard Louis Galterio (Principal): Fined $5,000; Suspended 45 business days in Principal capacity only
Richard Walter Bohlinger Jr. AWC/2008014832801/February 2010
Bohlinger falsified customer signatures on prospectus delivery receipts without any of the customers’ authorization to sign their names to such documents.
Richard Walter Bohlinger Jr.: Fined $5,000; Suspended 3 months
Robin Emily Katz AWC/2009019057101/February 2010
While employed as a personal banker at her member firm’s affiliate bank, Katz improperly obtained an automatic teller machine (ATM) card for a customer’s account without authorization and misappropriated approximately $100,000 from the customer’s account.
Rogelio A. Villa Jr. AWC/2009019029201/February 2010
Villa obtained a deceased customer’s credit card number during the course of assisting the customer’s widow with her banking needs and, without authorization, charged approximately $3,800 to the customer’s credit card account. Pretending to be the deceased customer, Villa contacted the credit card’s customer service and requested that the address on the credit card be changed to his home address. Villa added himself as an authorized user on the credit card and requested that a new card be sent to his home address.
Gray borrowed $230,000 from firm customers contrary to her member firm’s written procedures forbidding registered representatives from borrowing fundsfrom customers except in limited instances not applicable to Gray’s loans, and without her member firm’s written approval, which she did not request nor receive. Gray failed to respond to FINRA requests for information.
Sally Jean Gray: Barred; Ordered to pay $205,000 plus interest in customer restitution
In an attempt to conceal a margin call and avoid the sale of stock, Guay transferred $2,100 of her own funds into a customers’ joint account to satisfy the margin call (the customers were unaware of the call). Prior to the margin call, one of the customers had expressed concerns to Guay about the account’s declining value.
A week later, Guay withdrew the $2,100 by completing an Authorization to Transfer Securities or Money form on the customers’ behalf by executing the joint account holders’ signatures without their consent or authority.When one of the customers questioned Guay about these transactions, she falsely claimed that there had been an “error” and failed to disclose her actions. Guay exercised discretion in the joint account without the customers’ prior written authorization and her member firm’s written acceptance of the account as discretionary. Guay executed numerous discretionary trades resulting in approximately $60,000 in losses.
Stoever, Glass & Company, Inc. and Michael Francis Carrigg (Principal) AWC/2007007247301/February 2010
Acting through Carrigg, the Firm failed to track customer checks that were outstanding and uncashed for more than one year and, as a result, failed to make attempts to
reissue checks,
recredit customer accounts,
contact the customers regarding unclaimed funds, and/or
comply with state laws concerning unclaimed property.
The Firm essentially had the benefit of the unclaimed funds in its account that was used for operating expenses. While the firm’s bank balance remained positive, acting through Carrigg, the Firm failed to detect that the operating account was overdrawn, in that the firm did not have sufficient funds in the account to pay for all of the outstanding checks.
Acting through Carrigg, the Firm failed to prepare an accurate Reserve Formula computation and therefore failed to make required deposits to its Special Reserve Bank Account that it was required to maintain pursuant to Securities and Exchange Commission (SEC) Rule15c3-3. While the firm’s operating account balance remained positive, acting through Carrigg, the Firm failed to account for the uncashed, outstanding checks.
Stoever, Glass & Company, Inc.: Censured; Fined $90,000 ($15,000 joint/several with Carrigg); and Required to retain an independent consultant to review the adequacy of its policies, systems, procedures (written and otherwise) and training relating to its financial and operations systems, and to ensure the proper disposition of outstanding, uncashed checks at the firm).
Michael Francis Carrigg: Fined $10,000; Fined $15,000 joint/several with Firm; Suspended in Principal capacity only for 6 months.
Thomas H. Collop Jr. AWC/2008016441801/February 2010
In his capacity as a bank employee, Collop converted a total of approximately $10,900 in bank funds by removing money from his cash box without the authority to do so. Collop processed a false buy/sell transaction in the bank’s teller system in an effort to conceal that he had taken bank funds.
Westrock Advisors, Inc. AWC/2007008162201/February 2010
The Firm failed to file required attestations that it adopted and implemented written supervisory procedures reasonably designed to ensure that the firm and its employees complied with provisions of NASD Rule 2711(i) governing research analysts and research reports. The Firm failed to adequately supervise its research analysts, including supervising communications between the research analysts and subject companies, and documenting its monitoring of trading in research analysts’ brokerage accounts. The Firm issued research reports that failed to accurately disclose material facts.
The Firm allowed its research analysts to use third-party email systems but did not reasonably enforce a system to audit or review their email correspondence.
The Firm permitted an individual registered as a General Securities Principal and General Securities Representative to supervise the conduct of its research analysts without passing either the Series 16 Supervisory Analyst or the Series 87 Research Analyst exams as FINRA rules required.
The Firm failed to develop and implement an AML program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act and the implementing regulations thereunder; the firm’s AML program had inadequate procedures governing the testing of its AML program; and the firm’s testing of its AML procedures was inadequate and not independent one year, and not tested another year.
The Firm failed to timely report statistical and summary information regarding customer complaints and failed to amend, timely amend or ensure the amendment of Uniform Applications for Securities Industry Registration or Transfer (Forms U4) or Uniform Termination Notices for Securities Industry Registration (Forms U5) to disclose customer complaints and their resolution.
The Firm failed to retain originals of certain incoming and outgoing written correspondence relating to its business, received by mail and by fax,or copies of such correspondence and failed to adequately enforce written supervisory procedures prohibiting firm personnel from using third-party, non-firm email accounts for firm business.
William Robert Young AWC/2008014271201/February 2010
Young maintained personal securities accounts at another broker-dealer without notifying his member firm in writing of the accounts. Also, Young failed to disclose to the executing broker-dealer that he was associated with a member firm. Young falsely stated on anannual compliance questionnaire that he had disclosed all outside brokerage accounts.
William Robert Young: Fined $5,000; Suspended 30 days
Willis Scudder Georgia III 2008014358201/February 2010
Georgia misappropriated funds totaling $7,500 from a charity for which he served as treasurer by writing and cashing checks made payable to himself. Georgia failed to respond to FINRA requeststo provide on-the-record testimony.
Benjamin Gideon Geller AWC/2007011920901/January 2010
Registered Supervisor Geller exercised discretion and effected numerous transactions in a customer’s account without obtaining written authority. When Geller placed the trades, he designated them as “unsolicited” although the trades were “solicited,” causing his member firm ’s books and records to be inaccurate.
Benjamin Gideon Geller: Fined $5,000; Suspended 90 days
Registered Principal Havens falsified the dates on account opening documents and bank checks without the customers’ knowledge or consent. The customers gave Havens checks totaling $23,190.24 to purchase shares in mutual funds, and he failed to execute the customers’ orders on a timely basis. The customers complained to Havens about his failure to invest their funds and Havens settled the customers’ complaints by paying the customers but failed to report the complaints to his member firm or seek its approval to settle the matters.
Brian Havens: Fined $12,500; Suspended 18 months in all capacities
Carlos Daniel Rivera 2007010600101/January 2010
Rivera failed to disclose to his member firm an outside brokerage account that he opened after his firm expressly told him that he could not maintain outside brokerage accounts that he opened prior to his employment with the firm . Rivera forged a letter that purported to be from an employee of his firm, instructing the firm where he maintained an outside brokerage account to lift trading restrictions on his newly opened, undisclosed account.
Associated Person Easley misappropriated approximately $6,500 in funds from her member firm by ordering approximately $6,500 in gift checks, which were used by her member firm to reward employees, and converting the gift checks she ordered without authorization for her own use and benefit.
Daphne Michelle Easley: Barred
David Alan Tucker AWC/2008014583501/January 2010
Tucker engaged in radio broadcasts during which he made statements which were misleading and omitted material information, failed to provide a balanced presentation, and/or were exaggerated, unwarranted and promissory. Tucker placed a print advertisement in a local newspaper that failed to provide a sound basis for certain claims. Tucker engaged in the public radio broadcasts and placed the print advertisement without a firm registered principal’s approval.
David Alan Tucker: Fined $5,000; Suspended 20 days
David Nelson Cherry AWC/2009016709003/January 2010
Cherry participated in the sale of Universal Lease Programs (ULPs) to public customers, received $32,495.76 in commissions, and failed to provide written notice to his member firms and obtain written approval from the firms to participate in private securities transactions. Cherry submitted an annual regulatory questionnaire to one of his member firm s that contained a statement that he had not sold or solicited any investment products or non-securities investment products, which was false.
David Nelson Cherry: Fined $37,500 (includes $32,495.76 in disgorgement of commissions); Suspended 7 months in all capacities
The Firm failed to have an adequate supervisory system, including written supervisory procedures and a supervisory control system, to properly and timely identify customer checks deposited at affiliated bank branches and ensure that all customer check deposits were duly credited to the appropriate customer accounts. The Firm escheated approximately $133,616.65 in funds to the Commonwealth of Kentucky when it was unable to identify the proper customer accounts. As a result of the unidentified customer check deposits, the firm failed to make and keep accurate daily records of all receipts and disbursements of cash and other debits and credits in its books and records, including entries to an Escheatment Account. The Firm understated its net capital charges and incorrectly calculated its Customer Reserve Formula. In addition, the Firm produced inaccurate month-end customer account statements, incorrectly liquidated certain customer fully paid securities, and failed to segregate some customers’ fully paid securities, resulting in intra-day possession or control deficits. The Firm did not prepare required inter-company account reconciliations, failed to properly record certain aged unfavorable reconciliation differences and failed to conduct supervisory reviews of certain reconciliations and accounts.
The Firm ’s supervisory procedures did not adequately ensure that its research analysts obtained the required approval for public appearances and provided proper disclosures during such public appearances. In addition, the Firm issued certain research reports that
contained indefinite “may” language regarding future investment banking services that the firm expected to provide,
did not include analyst certifications on the front page,
contained front pages that did not specify the page or pages in the research report on which the analyst certifications were to be found, and
incorrectly included the analyst certification information as part of the important disclosures.
J.J.B. Hilliard,W.L. Lyons, LLC: Censured, Fined $200,000; Required to place $133,817 into a segregated, interest-bearing account for a period of five years to reimburse customers who can reasonably demonstrate that they made deposits to their firm accounts at a bank branch and that the firm failed to properly credit the deposits to their accounts.
Jeffrey Paul Dungan AWC/2008015824001/January 2010
Dungan created and disseminated a false proof of insurance document and inserted a false policy number on the document in order to assist a customer, whose commercial insurance application was never filed or submitted due to an administrative error at Dungan’s member firm. Dungan should have known that the customer and its bank would rely on the representations in the document.
Jeffrey Paul Dungan: Fined $5,000; Suspended 1 month
Despite its addition of a business activity that required a higher minimum net capital requirement under SEC Rule 15c3-1, the Firm failed to file an application with FINRA for approval of a material change in its business operations. On a single date, the firm conducted a securities business while it maintained insufficient net capital, in that the firm failed to take an open contractual commitment charge for its participation in a firm commitment underwriting.
John Michael Campbell AWC/2008011565202/January 2010
As the Chief Compliance Officer of his member firm, Registered Principal Campbell failed to establish, maintain and enforce an adequate supervisory system and adequate written supervisory procedures (WSP) to detect and prevent excessive trading in customer accounts by the firm ’s registered representatives. The Firm's WSP required Campbell to conduct quarterly account reviews and determine the turnover ratios for the accounts, but Campbell failed to follow these procedures. The WSP were unreasonable because they failed to require the firm to take any specific action when a customer’s account exceeded a specified turnover ratio. Campbell failed to reasonably supervise registered representatives who excessively traded in customer accounts and failed to respond to red flags presented by their excessive trading, exposing customers to losses that occurred as a result of excessive and unsuitable trading, improper use of discretion or other sales practice violations.
John Michael Campbell: In light of Campbell's financial status, no Fine; Suspended 90 days in Principal capacity only
Sidaway accessed the systems of a bank affiliate of his member firm to obtain information regarding a customer and his retail bank account and, without the customer’s knowledge or authorization, used the customer’s personal account information to forge the customer’s signature and complete withdrawals totaling $11,500 for his personal use, thereby converting the funds. Sidaway failed to respond to FINRA requests for information.
Kevin Patrick Brennan AWC/2007007358604/January 2010
Registered Principal Brennan failed to reasonably supervise and respond to warning signs that registered representatives were conducting and operating a securities business from an unregistered branch office without supervision. The representatives
improperly solicited potential customers by telephone in connection with the offer of securities,
made false representations, including unwarranted price predictions,
omitted material facts, and
used misleading telemarketing scripts that a registered principal had not approved.
Brennan failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose material information.
Kevin Patrick Brennan: Fined $15,000; Suspended 6 months in Principal capacity only; Undertakes to cooperate with any and all FINRA investigations
Laidlaw & Company (UK) LTD. AWC/2007007315501/January 2010
The Firm failed to retain email communications related to its business that were sent to and from non-firm email accounts that firm registered representatives working from one of its branch offices used, and failed to establish and maintain a system for supervisory review of those outside emails.
Acting through a registered principal, the Firm failed to develop a privacy policy or disseminate privacy notices required by SEC Regulation S-P to its customers. censured, fined $5,000, jointly and severally, and fined an additional $60,000
The Firm failed to maintain new account documents for some accounts and failed to maintain complete new account documents for other accounts that lacked customer information. The Firm failed to enforce its written supervisory procedures concerning the dissemination of a privacy policy and the collection and maintenance of complete new account forms.
Laidlaw & Company (UK) LTD.: censured, Fined $5,000 (jointly and severally with unidentified party); Fined an additional $60,000
Lawrence Lathan Powell Jr. AWC/2008012476501/January 2010
Powell misappropriated $48,780 from elderly customers’ accounts. While employed with his member firm’s affiliate bank as a personal banker, Powell caused the bank to issue debit cards in the customers’ names without their knowledge or authorization, accessed their accounts using the fraudulently obtained debit cards and withdrew funds, and facilitated the withdrawal of funds by others, from the customers’ accounts, Powell failed to appear for FINRA on-the-record interviews.
Michael Gerald Delano III AWC/2008013543001/January 2010
Delano was given the power of attorney over a deceased friend’s estate by the deceased’s brother and was requested to handle the $50,000 in life insurance proceeds. Delano deposited the funds into his personal bank account and used the majority of the funds for his personal expenses without the brother’s consent. Delano represented to the brother that he had invested the life insurance proceeds into an annuity on the brother’s behalf.
Axel misappropriated at least $624,000 from customers of his member firm. Without the customers’ knowledge, authorization or consent, Axel initiated the issuance of checks from the customers’ accounts, obtaining the checks ostensibly so that he could deliver them to the customers, and then forged the customers’ signatures and cashed the checks or deposited the checks into his personal bank account. Axel effected unauthorized transactions in customers’ accounts without their knowledge, authorization or consent. He failed to appear for a FINRA on-the-record interview.
Registered Principal Shino failed to file, or timely file, NASD Rule 3070 reports and amendments to Forms U4 and U5. Shino permitted a branch office with more than three representatives to transact an options business without having a registered options principal or limited principal–general securities sales supervisor as the principal office supervisor.
Ralph Matthew Shino: Suspended 9 months in Principal capacity only for late filing and failing to file NASD Rule 3070 reports and amendments to Forms U4 and Uniform Termination Notices for Securities Industry Registration (Forms U5); Suspended an additional suspension 3 months in Principal capacity only for permitting a branch office to operate without a principal. Suspensions to run consecutively.
Rene Francisco Palacios 2007011375301/January 2010
Palacios misused $62,750 in customer’s funds by opening a new bank account in a customer’s name, funding the new account with a deposit of $62,750 from the customer’s brokerage account maintained at Palacios’member firm , and forging the customer’s signature on new account documents and checks drawn from the fraudulent account. Palacios admitted to his firm that he misused the customer’s funds and forged the customer’s signature. Palacios failed to appear for FINRA on-the-record interviews.
Iavecchia failed to inform his member firm of brokerage accounts, in which he had a financial interest, that were opened in his wife’s name at other firms. Rather than disclose the existence of those accounts, as he was required, Iavecchia falsely answered “not applicable” to questions pertaining to the outside brokerage accounts on his firm’s compliance questionnaires. Also, Iavecchia failed to inform the executing firms of his association with his member firm and made material misrepresentations on a new account document that he filled out for one of his wife’s outside accounts.
Richard John Iavecchia: Fined $3,500; Suspended 60 days
Tischler borrowed $67,000 from a public customer contrary to his member firm’s prohibition of registered representatives borrowing money from customers. Tischler completed, signed and submitted annual firm compliance questionnaires in which he failed to disclose the loans from the customer.
Tischler withdrew his appeal to the NAC.
Scott Ryan Tischler: Fined $5,000; Suspended 1 year
White converted $1,800 from a customer by creating a temporary ATM card in the customer’s name without the customer’s permission or consent, and used the unauthorized ATM card to withdraw $1,800 from the customer’s bank account for her own use and benefit. White failed to respond to FINRA requests for information and documents and to appear for a FINRA on-the-record interview.
Registered Supervisor Newton used her position as an operations manager to misappropriate more than $10,000 from her member firm. Newton
entered false deposit amounts into her brokerage account at her firm, thereby creating artificial balances in the account,
transferred money from the brokerage account to her personal checking account, and
used the funds for personal purposes.
In an attempt to conceal the false deposits, Newton deposited checks into her brokerage account and made an online transfer knowing at the time that her checking account lacked funds to cover the checks, and used an ATM to intentionally enter an amount to be deposited that was greater than the check included with the deposit. By knowingly entering fictitious deposit amounts into her brokerage account at her firm, Newton created artificial balances in it and caused her firm’s books and records to be false.
Baron converted approximately $8,530 from a relative. Baron forged the relative’s name on documents without her knowledge, permission or authorization in order to open a joint checking account and then signed her name on transfer forms without the relative’s permission or authorization and transferred approximately $8,530 from her Individual Retirement Account (IRA) to the joint account, using the funds for his personal use.
Registered Principal Tucker misappropriated approximately $847,188.87 from customers’ accounts at her member firm and used the funds for her own use and benefit. To facilitate her improper use and misappropriation of customer funds, Tucker
caused international customers’ accounts to be removed from an abandoned status,
caused the addresses for the accounts to be changed to addresses that she controlled,
effected unauthorized sales of securities in the customers’ accounts,
forged Letters of Authorization (LOAs) and Wire Transfer Agreements (WTAs) to transfer funds out of the customers’ accounts, and
approved and processed the fraudulent LOAs andWTAs.
Tucker’s conduct caused her firm to maintain inaccurate books and records. To make cash available, Tucker sold securities in several accounts without the customers’ knowledge or authorization, then transferred the proceeds to herself through relatives by wire or check. Tucker failed to respond to FINRA requests for information and failed to appear for an on-the-record interview.
report quarterly statistical and summary information to FINRA regarding a substantial number of customer complaints;
establish,maintain and enforce a supervisory system reasonably designed to identify, capture, analyze and report customer complaints that are required to be reported pursuant to NASD Rule 3070(c);
put adequate systems and procedures in place to ensure that all customer complaints were identified and forwarded to the appropriate firm personnel,
adequately train all personnel who might potentially receive customer complaints regarding proper handling of complaints, and
ensure that sufficient guidance was given to personnel who were responsible for reviewing complaints to determine which complaints were reportable.
Nenoff wrote checks from his checking account totaling $660 even though he knew that he had inadequate funds in the account to clear the checks, deposited the checks into his savings account, and withdrew most of the funds by ATM. Nenoff admitted to FINRA in writing that he engaged in check kiting, but he failed to respond to FINRA requests for information.
Registered Supervisor Clifford borrowed $150,000 from customers in violation of his member firm’s policy and without disclosing his activities to the firm . Clifford’s member firm settled with the clients for $156,611.24. Clifford failed to respond to FINRA requests for documents and information.