Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
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Acting through Hurry, the Firm failed to implement its anti-money laundering (AML) procedures, as it did not adequately monitor for and/or investigate facts and circumstances present in certain customer accounts that constituted ďred flagsĒ in its written AML compliance program.

Neither Hurry, nor anyone else at her firm, took steps to monitor for disciplinary background or multiple account red flags or for transactions triggering the journal transfer, penny stock or wire transfer redflags.

Acting through Hurry, failed to implement its written AML compliance program by failing to file SAR-SF forms to report suspicious activity. The Firm failed to document red-flag investigations in accordance with its written AMLcompliance program and procedures because the firmís chief compliance officer (CCO) failed to create, or cause Hurry to create, a record of questionable backgroundreviews. The firmís AML procedures pertaining to the disciplinary background red flag were not sufficiently specific to provide any meaningful guidance as to where and how the firm would look for customers with questionable backgrounds. 

The Firm utilized a means of interstate commerce in connection with its sales of unregistered stock, and the transactions were not exempt from registration.In addition, acting through Hurry, the Firm failed to designate and specifically identify to FINRA at least one principal to establish, maintain and enforce a system of supervisory control policies and procedures. 

Acting through Hurry, the Firm also failed to establish, maintain and enforce written supervisory control policies and procedures concerning producing managers, designation of a principal to review theircustomer account activity, the limited size and resources exception, testing, updating and annual certification of firm written supervisory procedures (WSPs), and addressing the designated principalís annual report to senior management. Acting throughHurry, the Firm did not submit an annual report to firm management detailing the firmís system of supervisory controls, the summary of test results and significant exceptions, and any additional or amended supervisory procedures in response to the test results. Hurry failed to establish a supervisory system and WSPs reasonably designed to achieve compliance with applicable securities laws and regulations, and failed to enforce its WSPs. In addition,Hurry failed to prepare a report pertaining to its home-office inspection.
The Firm and Hurry filed SARs that contained inaccurate orincomplete information, and filed SARs that failed to provide adequate informationfor determining that the reported activity was suspicious. The firm and Hurry failed toestablish and implement policies and procedures reasonably expected to detect and cause the reporting of transactions required under 31 U.S.C. 5318(g) and the implementingregulations thereunder.Furthermore, the firm did not complete its 3013 report as required under IM-3013 for twoyears. The firmís WSPs and records of branch- and home-office inspections were inadequate; and the firm did not enforce its WSPís pertaining to letters of authorization (LOA)


Scottsdale Capital Advisors: Censured; Fined $125,000 (includes $18,000 disgorgement of commissions earned from violative sales)

Justine Hurry: Fined $7,500; Suspended 40 business days in Principal capacities other than FINOP
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David Charles Clayton
AWC/2008015620301

Clayton executed a transaction for a customer without the customerís authorization or consent.

The customer agreed to open an Individual Retirement Account (IRA) with Claytonís member firm, to transfer approximately $199,921 from an existing IRA account and to invest the funds in a mutual fund. The customer executed a new account form, a request to change investments form and other documents necessary to accomplish the transaction; Clayton was the broker responsible for the customerís account at the firm.

The transfer of funds from the customerís existing IRA account had not yet been completed before Clayton received an electronic mail message from the customer in which she requested that her 23  funds be placed in a money market account rather than in the mutual fund; the customer thereby withdrew her authorization for the purchase of shares in the mutual fund. Despite Claytonís knowledge that the customer no longer wished to purchase shares in the mutual fund, he did not take any steps to cancel the customerís order and executed the purchase of the mutual fund shares.

David Charles Clayton : Fined $5,000 which includes disgorgement of financial benefits received of $2,199.13; Suspended from association with any FINRA member in any capacity for 20 business days; Ordered to pay $2,560.14, plus interest, in restitution to a customer.
Tags: unauthorized transaction  IRA    
Gary Harrison Lane
AWC/2011027048601

Lane converted to his personal use a total of $4.93 million in checks from customers who Lane misled into believing they were investing in U.S. Treasury bonds and/or corporate bonds

Instead of investing the customersí money, Lane deposited checks drawn on the customersí accounts into his relativeís account to effectuate the conversion of the customersí funds without their authorization. In furtherance of his scheme and in an effort to disguise his conversion, Lane made a total of more than $736,000 in payments to some of the affected customers by cash payments or by transferring funds from his relativeís account to a bank account bearing the name of the United States from which cashierís checks were issued to the customers. Lane created and provided his customers with fictitious receipts and typed certifications purporting to confirm his customersí non-existent investments in U.S. Treasury bonds and/or corporate bonds.

Gary Harrison Lane: Barred
Bill Singer's Comment
What a waste of talent.  This guy manages to steal nearly $5 million but still got caught.  If only they could have sat him at a trader's desk and let him work a prop account.  Imagine how many billions in finagling he might have achieved!

The Firm underwrote a ďminimum-maximumĒ bond offering an entity conducted, according to the entityís prospectus, the offering would raise a minimum of $99,000 and a maximum of $2,500,000. The findings prospectus stated that investor funds would be deposited in an interest-bearing escrow account with an escrow agent until the minimum offering amount was raised, and further stated that if the minimum offering amount was not raised during the offering period, all funds would be returned to investors. In connection with the offering, the Firm entered into an escrow agreement with a bank, which did business as the escrow agent, and among other provisions, the escrow agreement provided that the escrow agent should hold the escrow property in trust, commingled with similar funds of other issuers, in contravention of the requirements of SEC Rule 15c2-4. Upon receipt of funds from the offering, the escrow agent deposited the funds into an account at an unaffiliated third-party bank that was not a party to the escrow agreement, and investor funds from the offering were commingled with investment funds from several other unrelated offerings for which it served as escrow agent. FINRA 

The firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules, and the firmís WSPs were deficient in that they did not have provisions regarding establishing and monitoring escrow accounts in connection with contingent securities offerings. In addition, in contravention of the terms of the prospectus, the firm accepted checks for the offering, totaling over $100,000, which were made payable to the firm instead of the escrow agent. Moreover, the firm was found to have willfully violated Section 15(c) of the Securities Exchange Act of 1934, SEC Rule 15c2-4 and NASD Rule 2110. (FINRA Case #)

Great Nation Investment Corporation : Censured; Fined $10,000

As his member firmís CCO, Mercier shared responsibility with the firmís president for conducting due diligence for private placements in which the firm acted as a selling agent only because the firm did not have WSPs addressing due diligence for private placements where the firm acted as the selling agent only. 

Mercier signed selling agreements for offerings and, consistent with the terms of the agreements, his firm received fees and/or commissions for soliciting investors, which included a specific fee related to due diligence purportedly performed in connection with each offering. Mercier did not perform any due diligence and did not seek or obtain due diligence reports for the offerings, which identified red flags with respect to the offerings. Mercier should have scrutinized each of the offerings given the high rates of return, but did not take the necessary steps to ensure that these rates of return were legitimate and not payable from proceeds of later offerings, in the manner of a Ponzi scheme. 

Mercier did not conduct meaningful due diligence for these offerings prior to approving them for sale to firm customers, and failed to have reasonable grounds for allowing firm representatives to continue selling the offerings despite the negative information and identified red flags. Acting on his firmís behalf, Mercier failed to maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations with respect to the offerings.

Mark Mather Mercier (Principal): Fined $5,000; Suspended 3 months
Tags: Due Diligence  
Steven Robert Carestia
AWC/2010025194901
Carestia borrowed a total of $200,000 from customers of his member firm without giving written notice or obtaining the written approvals of his firm manager or the firmís compliance department before obtaining the loans from the customers. Carestia has repaid one customer in full, and the other customer has executed an affidavit stating that Carestia partially repaid the loan and that the customer forgives the balance of the loan including any accrued interest.
Steven Robert Carestia: Fined $7,50; Suspended 60 days
Tags: Borrowing  
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