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.

Tags: AML  SAR    Unregistered Securities  Unregistered Office  Telemarketing  Private Placement  Felony  Annual Compliance Meeting  Contingency Offering  Producing Manager  

Christopher John Looney (Principal)
OS/2008013531001/August 2010

 Looney engaged in outside business activities without providing notice, in writing or otherwise, of such activities to his member firm.

Christopher John Looney (Principal): Fined $10,000; Suspended 10 business days

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

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

Tags: Annual Compliance Certification  

Marshalle Adine Wright
AWC/2009017320301/August 2010

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.

Marshalle Adine Wright : Fined $15,000; Suspended 6 months

Tags: Borrowing  

Rebecca Ann Kortman
AWC/2009016790401/August 2010

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

Tags: Unregistered Principal  WSP  

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

Tags: EIA  

James Michael Porrazzo
2007009436401/July 2010

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

Tags: Email  

Willie James Brice Jr. (Supervisor)
AWC/2008013831902/July 2010

Brice failed to timely respond to FINRA requests for documents and information concerning alleged participation in an undisclosed business activity.

Willie James Brice Jr. (Supervisor): Fined $5,000; Suspended 6 months

Carl A. Page
AWC/2009016909201/June 2010

Page participated in private securities transactions, without prior written notice to, and authorization from, his member firm. Page failed to provide his firm with prompt written notice of his outside business activity.

Carl A. Page : Fined $5,000; Suspended 6 months

John Andrew Polychronis
2009018386601/June 2010

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

Tags: EIA  

John Roy Boyer
AWC/2008016202501/June 2010

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.

John Roy Boyer : Fined $5,000; Suspended 2 months

Tags: EIA  

Tiffany Leigh Zachary
AWC/2008015839101/June 2010

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.

Tiffany Leigh Zachary : Fined $10,000; Suspended 6 months

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

Tags: Commodity Futures  

David Bigelow Crocker
OS/2007011151502/May 2010

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

Tags: EIA  

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

Tags: EIA  

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

Tags: EIA  

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

Tags: EIA  

Leonard Charles Brown
OS/2007009081801/April 2010

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

Lily Korine Engelhardt (Principal)
AWC/2007011151503/April 2010

Engelhardt engaged in outside business activities by referring a customer to a relative who was a registered representative at another firm and who received compensation from the referral. The findings stated that Engelhardt failed to provide written notice of the outside business activities to her member firm.

Lily Korine Engelhardt (Principal): Fined $10,000; Suspended 20 business days

Richard Albert Snyder Jr.
AWC/2008012517601/April 2010

Snyder engaged in an undisclosed outside business activity as a limited liability company’s registered agent and manager. Snyder engaged in private securities transactions without prior written notice to, or written approval from his member firm by facilitating investments in working interests in oil and gas wells.

Richard Albert Snyder Jr. : Fined $10,000; Suspended 1 year

Ronald Urban Schulze (Principal)
AWC/2008015277401/April 2010

Schulze engaged in outside business activities, failed to inform his member firm of his intention to offer fixed annuities to customers and failed to provide written notice of the transactions to his firm after they were completed. Schulze’s firm required all registered representatives to submit an outside business activity disclosure form and receive supervisor’s written approval prior to engaging in any outside business activity.

Ronald Urban Schulze (Principal): Fined $10,000; Suspended 3 months

Steven Howard Delott
AWC/2007011393901/April 2010

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

Tags: EIA    

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

Tags: EIA  

Brett Sterling Kleese (Principal)
AWC/2008013575101/February 2010

Kleese participated in private securities transactions outside the scope of his employment with his member firm, for compensation, and failed to provide prior written notice to, or receive approval, from his firm. Also, Kleese engaged in outside business activity and failed to provide his firm with prompt written notice.

Brett Sterling Kleese (Principal): Barred

Gerald David Morales
OS/2007011089301/February 2010

Morales participated in business activity outside the scope of his relationship with his member firm, and failed to provide prompt written notice to his firm. Morales failed to completely respond to FINRA requests for information and documents.

Gerald David Morales: Fined $12,500; Suspended 2 years

Douglas Milton Lounsbury
AWC/2007009655101/January 2010

Lounsbury accepted compensation from an outside business activity without providing written notice of such compensation to his firm, and completed and submitted questionnaires to his firm in which he falsely indicated that he was not receiving outside compensation without prior approval. Lounsbury thereafter disclosed to his manager that he had been receiving compensation as trustee for the customer’s trust and repaid the trust the entire amount he had received as payment, plus interest.

Douglas Milton Lounsbury: Fined $5,000; Suspended 4 months

James Scott Stanley
AWC/2007009216001/January 2010

Stanley engaged in outside business activities, for compensation, without providing written notice to his member firm . Stanley did not execute the transactions through his member firm ’s affiliated insurance company as the firm’s compliance procedures required.

James Scott Stanley: Fined $5,000; Suspended 6 months