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.
create and maintain adequate records of customer complaints,
report timely statistical and summary information concerning the complaints, and
timely report the settlement of one of the complaints.
timely update a registered person’s Uniform Application for Securities Industry Registration or Transfer (Form U4) upon learning of the facts and circumstances giving rise to the amendments.
implement its own heightened supervisory procedures with respect to registered representatives on heightened supervision.
When establishing its heightened supervision procedures, the firm decided to exclude brokers on heightened supervision from its monthly surveillance report; accordingly, the activities of the registered representatives under heightened supervision were not shown. The special supervisor designated to manually review all trades of registered representatives on heightened supervision for suitability and excessive trading relied on his manual review when determining which accounts should be reviewed and contacted “for cause,” rather than choosing clients at random and with cause based on trading activity. FINRA found that this was inadequate because the manual review failed to identify numerous accounts that had turnover ratios in excess of six times the average equity annualized.
A&F Financial Securities, Inc. : Censured; Fined $27,500
Dendunnen willfully failed to disclose a material fact on his Form U4. Dendunnen attended his member firm’s annual compliance meeting and indicated on an internal Registered Representative Disclosure form that his Form U4 was accurate. Six-to-eight weeks after the compliance meeting, Dendunnen informed the firm of the material fact he failed to disclose. Finally, Dendunnen failed to respond in a timely manner to FINRA requests for information and documents.
Leonard William Dendunnen : Fined $10,000; Suspended 6 months
The Firm inaccurately filed a New York Stock Exchange (NYSE) report on a customer’s complaint, and reported the complaint as part of its 351(d) quarterly report but inaccurately reported the complaint as firm-related instead of as a sales practice matter; as a result, it was not required to identify the broker or his assistant, or note the amount in dispute. The firm failed to timely report the complaint on the broker’s Uniform Termination Notice for Securities Industry Registration (Form U5) even though it was aware that the complaint involved the broker and possible sales practice violations. The firm failed to timely file an NYSE Form RE-3 reporting the customer’s complaint.
implement policies and procedures reasonably expected to detect and cause the reporting of transactions required under 31 USC 5318(g) and implementing regulations;
provide AML training for firm personnel, failed to adequately review customer activity for compliance with AML rules and to adequately review suspicious activity and file timely SARs where appropriate;
fulfill his responsibility to access the Financial Crimes Enforcement Network (FINCEN) of the United States Department of Treasury to review requests for information, under Section 314(A) of the USA Patriot Act, relating to possible money laundering or terrorist activity;
search firm records to determine whether the firm maintained, or had maintained, any account for, or had engaged in any transactions with, any individual, entity or organization named in FINCEN’s requests.
As a result of the firm’s inadequate AML program, the firm, acting through Kobin, failed to timely detect, investigate and report suspicious activity to achieve compliance with the Bank Secrecy Act.
Kobin failed to
identify red flags in connection with suspicious account activity, did not timely investigate or review the red flags, and caused his firm’s failure to timely report the suspicious activity;
implement the firm’s procedures for suspicious activity detection and reporting, monitor and investigate approximately $6 million in suspicious wires to and from one of its branches,
detect and timely report suspicious activity and maintain documentation evidencing a review for suspicious activity of securities transactions, money movements and securities transfers;
ensure that a designated principal review and approve all correspondence to and from branch offices, including electronic correspondence.
failed to properly create, maintain and timely file records and reports of customer complaints, and failed to timely update Forms U4 and Forms U5 relating to persons who were registered with FINRA through his firm in his capacity as his firm’s Chief Compliance Officer (CCO), .
take adequate steps to comply with the Firm Element of the Continuing Education Requirement and, as a result, his firm did not conduct the required annual needs analysis or develop a written training plan.
ensure that each registered person was clearly assigned to an appropriately registered representative and/or principal responsible for supervising that person’s activities,
conduct an annual compliance interview or meeting,
implement an adequate supervisory control system over the firm’s branch office managers, sales managers or any person performing a similar function; specifically, the firm’s written supervisory procedures failed to identify producing managers for purposes of review and supervision of their customer account activity; assign a person who was either senior to, or otherwise independent of, the producing manager to perform such supervisory reviews; and reasonably ensure that the firm calculate, on a rolling, twelve-month basis, whether heightened supervision requirements were triggered with any respect to any producing managers.
Stanley Mark Kobin (Principal): Suspended 9 months in Principal capacity only; Required to requalify as GSP/Series 24; Required to complete 16 hours of AML education training; Required to fully and promptly cooperate with FINRA in any and all investigations and/or disciplinary proceedings of any person or entity, concerning conduct at and/or relating to the firm at issue during the time period he was associated by promptly providing requested information and documents and to appear and testify fully, completely and truthfully at any FINRA interview and/or disciplinary hearing.
Bolinao willfully failed to disclose material information on his Form U4. Bolinao submitted Business Practice Questionnaires to his firm and each time falsely denied the existence of any liens or judgments against him. Bolinao did not acknowledge the existence of the undisclosed information until after his member firm learned of the information during its investigation of an unrelated customer complaint. Bolinao subsequently stated that he did not disclose the information because he believed that the firm would terminate him.
Antonio Gata Bolinao Sr.: Fined $5,000; Suspended 9 months
Biremis employed an individual as its controller and as controller for several of its affiliated companies who was arrested and charged with numerous criminal violations. The individual informed Beck that criminal charges had been filed against him and, although the individual misrepresented the nature of the charges, Beck failed to follow up or otherwise investigate the criminal allegations against the individual. Beck failed to instruct other firm employees to investigate the charges against the individual. The Firm's written supervisory procedures, which were Beck’s responsibility, did not require any such follow-up.
FINRA found that the individual was convicted, which made him statutorily disqualified from employment in the securities industry; and the firm, acting through Beck, failed to file a written application (Membership Continuance Form-400 (MC-400)) for relief from the statutory disqualification so that the individual could continue to associate with the firm, and the individual continued working as the firm’s Financial and Operations Principal (FINOP).
Acting through Beck, the Firm failed to establish, maintain and enforce a supervisory system and/or written supervisory procedures reasonably designed to investigate prospective employees’ backgrounds, follow up on any red flags and achieve compliance with its registration and Uniform Application for Securities Industry Registration or Transfer (Form U4) reporting obligations.
Biremis, Corp: Censured; Fined $50,000
Peter Beck: Fined $10,000; Suspended 6 weeks in Principal capacity only
Obersteller willfully failed to amend his Form U4 to disclose material information. Obersteller failed to respond to FINRA requests to provide testimony.
Rabinovici failed to disclose material facts on his Form U4 and/or keep his Form U4 current by making such disclosure on subsequent amendments. Rabinovici failed to timely respond to FINRA requests for a written statement or documents.
Steven Michael Rabinovici : Fined $10,000; Suspended 15 months
Freeman willfully failed to timely update her Form U4 with material information. Freeman signed an Associate Registered Representative Agreement in which she agreed to comply with FINRA’s rules and regulations, including keeping her Form U4 current.
Susan Leigh Freeman : Fined $5,000; Suspended 45 days
While registered with a member firm, Kossak directed his assistant to sign a customer’s name to a document related to a fixed insurance contract without the customer’s knowledge or authorization. Kossak had sold the fixed insurance contract to the customer while at a previous member firm and the customer was not a customer of his present firm. The assistant, acting at Kossak’s direction, forged and notarized required signatures on the document, which Kossak subsequently submitted as authentic. The customer complained of fraud and forgery to the insurance company, which notified Kossak of the complaint, but he failed to update his Form U4 within 30 days of learning of the complaint.
David Alan Kossak : Fined $15,000; Suspended 1 year
As his member firm’s president, Amico failed to adequately supervise the firm’s chief compliance officers (CCOs) and AML compliance officers (AMLCOs). Amico knew, or should have known, of substantive violations of FINRA rules and the potential inadequacy of firm compliance personnel through FINRA exit conference reports that the firm failed to
properly report customer complaints and other reportable matters,
make Form U4 or Form U5 amendments to report disclosable events, and
timely amend Forms U4 or U5.
Amico received FINRA exit conference reports regarding violations of the BSA and FINRA AML rules. Amico received SEC written findings identifying suspicious penny stock transactions, AML program issues and reporting deficiencies.
As the president and owner of the firm, Amico was responsible for the firm’s compliance with regulatory requirements imposed on the firm and knew, or should have known, that the firm’s CCOs and AMLCOs were not performing the compliance functions designated to them. Amico knew through FINRA exit conference reports and SEC written findings that the firm, through the CCOs and AMLCOs, was not in compliance with BSA requirements and NASD Rule 3011, was not making necessary filings under NASD Rule 3070 and Article V, Sections 2 and 3 of FINRA’s By-Laws, and that one of the CCOs/AMLCOs had a disciplinary history but failed to take affirmative steps to ensure that they were performing the AML and reporting functions delegated to them.
Guy Steven Amico (Principal): Fined $100,000; Suspended Principal capacity only 4 months; Required to complete 8 hours of AML Training; Required to register for AML training within 60 days of issuance of the AWC and provide evidence to FINRA of the registration within 10 days of registration; attend such training within six months of issuance of this AWC and provide FINRA with evidence of completion of training within 10 days of completion of the training program.
Acting in his capacity as the AMLCO, Brown failed to
implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations;
detect and investigate suspicious activities and/or other activities in which red flags of money laundering were present and filing a SAR, when appropriate; and
follow up on red flags indicating that a registered representative was selling unregistered shares of a stock on behalf of the CEO of the issuer, and did not follow up to ascertain what, if any, steps the representative took to inquire about the transactions.
Brown was notified by his member firm’s clearing firm that it was closing the CEO’s account and would allow only liquidating (sell) transactions, but although Brown responded to the clearing firm, he did not adequately follow up to ensure additional purchase transactions did not take place—which did occur. As his firm’s CCO, Brown failed to supervise firm personnel who had been delegated responsibility for reporting, and timely reporting, customer complaints under NASD Rule 3070(c), and to make Forms U4 and U5 amendments with FINRA to report disclosable events.
Kenneth Brown (Principal): Fined $5,000; Suspended Principal capacity only 1 year; Required to complete eight hours of AML training. The fine must be paid either immediately upon Brown’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier.
Newbridge facilitated the manipulative trading of the stock of a company created as the result of a reverse merger.
A group of control persons and promoters used accounts at the firm to execute pre-arranged in-house agency cross and wash transactions that were intended to generate volume and support or increase the price of the stock. The firm permitted control persons to sell unregistered securities through firm accounts, and the sales were not made in compliance with any applicable exemption from registration. The firm failed to
adequately supervise the registered representatives who participated in the sales of unregistered securities;
take adequate measures to ensure that the registered representatives assigned to the accounts did not engage in the sale of unregistered securities;
take steps to ensure that the registered representative ascertained
whether the securities being sold were registered
how and from whom the customers had obtained their shares,
whether and when the shares were paid for, and
whether the transactions were subject to any exemption from registration.
Further, the Firm failed to adequately supervise registered representatives who participated in the manipulative trading.
The firm did not have adequate systems or controls to implement and enforce its policies, particularly adequate systems to detect improper cross, wash and other manipulative trading. The firm’s AML procedures required the firm to investigate red flags indicating suspicious activity or trading, and to investigate and take appropriate steps, including limiting account activity, contacting a government agency or filing a SAR, but the firm failed to follow its AML program in regard to the manipulative trading, unregistered distributions and other suspicious activities.
The firm failed to report, or timely report, customer complaints reportable under NASD Rule 3070(c). In addition, firm failed to file Forms U4 or U5 to report disclosable events and failed to timely amend a Form U4 to report a disclosable event.
Newbridge Securities Corporation : Censured; Fined $600,000;
Required to have its president and Chief Executive Officer (CEO) each register for eight hours of AML training within 60 days of issuance of the AWC, provide FINRA with evidence of registrations within 10 days of registration, have the individuals attend and complete the training within six months of issuance of the AWC and provide FINRA with evidence of completion of training within 10 days of completion.
The firm is prohibited from effecting any purchase transactions in penny stocks for either proprietary or customer accounts, and shall not engage in market making of such stocks, for one year following acceptance of the AWC.
The firm shall hire an independent consultant to review the firm’s systems relating to timely and accurate filing of Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5), disclosure events and customer complaints under NASD Rule 3070 and, within 60 days after delivery of a written report, adopt and implement the consultant’s recommendations or propose alternative procedures in writing to the consultant and FINRA. Within 30 days after issuance of the consultant’s final written report, the firm shall provide FINRA with a written implementation report certified by a firm officer.
Acting in her capacity as her member firm’s AMLCO, Bush failed to implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations thereunder.Bush failed to ensure her firm’s overall compliance with NASD Rule 3011 by detecting and investigating suspicious activities or other activities in which red flags of money laundering were present and, when appropriate, filing SARs.
As her firm’s CCO, Bush failed to adequately supervise firm AMLCOs and ensure they were performing their functions pursuant to the firm’s AML program and written procedures, and failed to ensure they were properly investigating suspicious activities, recommending and filing SARs or documenting the rationale for concluding that a SAR was unnecessary.
Bush failed to adequately supervise the firm’s DSCO to ensure he was taking adequate investigative steps to ascertain whether certain customer transactions were part of a manipulative or fraudulent scheme, conducting adequate criminal or securities disciplinary background checks, and conducting adequate due diligence to ascertain whether customers engaging in significant designated securities transactions had any affiliations with the issuers; in fact, many customers had criminal or securities disciplinary backgrounds or had close ties to issuers whose shares they were trading.
As her firm’s CCO, Bush failed to ensure her firm reported, and timely reported, customer complaints to FINRA. FINRA also found that Bush failed to ensure her firm filed, and timely filed, Forms U4 and U5 with FINRA to report disclosable events.
Robin Fran Bush (Principal): Fined $10,000; Suspended 1 year in Principal capacity only; Required to complete eight hours of AML training prior to reassociation with a member firm or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier.
As his member firm’s CEO, Goldstein knew, or should have known of substantive violations of FINRA rules and the potential inadequacy of firm compliance personnel. The firm’s AML compliance program, as its CCOs and AMLCOs administered, did not fully comply with the requirements of the BSA and regulations thereunder, and therefore violated NASD Rule 3011. Goldstein knew through FINRA exit conference reports, firm responses to the reports and the SEC’s written findings, that the firm, through its CCOs and AMLCOs, was not in compliance, and FINRA expressly identified firm customers who had problematic backgrounds and/or engaged in suspicious transactions but Goldstein did not take affirmative steps to ensure that the CCOs/AMLCOs were performing the AML functions delegated to them. Goldstein knew that one of the CCOs/AMLCOs had a FINRA disciplinary history and had engaged in supervisory deficiencies. FINRA found that the firm, through its CCOs/AMLCOs, failed to report numerous customer complaints reportable under NASD Rule 3070(c) and other reportable events under 3070(b), failed to make Forms U4 or U5 amendments to report disclosable events in numerous instances, and failed to timely amend a Form U4 or U5 in numerous other instances. Goldstein knew through FINRA exit conference reports, firm responses to the reports and SEC written findings that the firm, through the CCOs/AMLCOs, was not making the necessary filings but did not take any affirmative steps to ensure that they were performing reporting functions.
Scott Howard Goldstein (Principal): Fined $100,000; Suspended 1 year in Principal capacity only; Required to complete eight hours of AML training. Goldstein must register within 60 days of issuance of the AWC for the AML training and provide FINRA with proof of evidence of registration within 10 days of registration, attend such training within six months of issuance of the AWC and provide FINRA with evidence of completion of training within 10 days of completion.
Kilpatrick signed his member firm’s customers’ names to various documents when the firm’s procedures prohibited him from signing customers’ names on the documents regardless of whether the customers had authorized Kilpatrick to sign their names. Kilpatrick failed to amend his Form U4 to disclose a material fact.
Mike Robert Kilpatrick (Principal): Fined $7,500; Suspended 6 months
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.
Citigroup submitted inaccurate Form U5 filings for registered representatives who were terminated or voluntarily resigned following allegations of theft, fraud, violations of investment-related rules or failure to supervise investment-related rules. In its required regulatory filings for most of those terminations, the firm inaccurately answered “no” to the termination disclosure question on the Form U5 that inquired about such allegations. The firm failed to establish, maintain and implement an adequate supervisory system and written procedures that were reasonably designed to achieve compliance with its obligation to complete and submit accurate Form U5 filings.
Citigroup Global Markets Inc: Censured; Fined $150,000
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
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
Ferraro willfully failed to timely update his Form U4 with material information, and also failed to timely update his Form U4 with additional material information.
Michael John Ferraro(Principal): Fined $5,000; Suspended 3 months
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
Campbell failed to timely disclose material information on his Uniform Application for Securities Industry Registration or Transfer (Form U4) and failed to respond to FINRA requests for information.
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.
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.
Kelly failed to amend his Form U4 to disclose material facts. The omissions caused his member firm to associate a person subject to a statutory disqualification for over six months. Kelly failed to appear for a FINRA on-the-record interview.
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
Card falsely completed his member firm’s annual compliance checklist certification and willfully failed to disclose material information on his Form U4.
Lawrence Bruce Card (Principal): Fined $5,000; Suspended 6 months
Tangco willfully failed to disclose material facts on his Form U4; failed to timely and to completely respond to FINRA requests for information and documents.
Nicholas Jose Tangco : Fined $10,000; Suspended 2 consecutive terms of 9 months and 2 years.
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
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
The Firm failed to timely file amendments to Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and failed to timely file Uniform Termination Notices for Securities Industry Registration (Forms U5).
Morgan Keegan & Company, Inc. : Censured; Fined $75,000
The Office of Hearing Officers (OHO) imposed the sanctions following a remand of the Default Decision. The sanctions were based on findings that Heatley failed to disclose material information on his Form U4.
Patrick John Heatley: Fined $5,000; Suspended 3 months
Wall willfully filed a false, inaccurate and misleading Form U5 regarding a registered representative’s termination.
Warren William Wall (Principal): Fined $15,000; Suspended 3 months in all capacities; Suspended 9 months in Principal capacity only; Ordered to requalify by examination before he re-enters the securities industry in any principal capacity.
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.
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
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.
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.
Cutler Group L.P., an NYSE Arca Options trading permit holder, failed to
preserve certain electronic communications in the required format;
maintain a complete and accurate list of accounts in which its employees had a direct or indirect financial interest;
obtain, maintain and review monthly account statements for accounts in which its employees had a direct or indirect financial interest;
file a complete and accurate annual acknowledgment attestation with the exchange;
appropriately conduct background checks of its associated persons; and
establish, maintain, and/or enforce appropriate written policies and procedures for supervision and control, including a separate system of follow-up and review, with respect to certain of the foregoing areas.
The NYSE found the following violations:
Section 17(a)(1) of Exchange Act, and Rules 17a-4(b)(4) and 17a-4(f) thereunder, and NYSE Arca Options Rule 11.16(a) by failing to preserve business-related e-mail and instant messages in non-rewriteable, non-erasable format, and by failing to preserve business-related fax communications
NYSE Arca Options Rule 11.3—Commentary .03 by failing to maintain complete and accurate list of accounts in which employees had direct or indirect financial interest, and by failing to obtain, maintain and review monthly account statements for accounts in which employees had direct or indirect financial interest;
NYSE Arca Options Rule 11.3(a) by failing to establish, maintain, or enforce adequate written policies and procedures reasonably designed to prevent misuse of material, non-public information by employees;
Section 17(a)(1) of Exchange Act, and Rule 17a-3(a)(12) thereunder, and NYSE Arca Options Rule 11.16(a), by failing to appropriately conduct and document background checks of employees prior to employment, and by failing to properly retain and preserve manually signed Forms U-4;
NYSE Arca Options Rule 11.18 by failing to establish, maintain, and/or enforce appropriate written policies and procedures for supervision and control, including separate system of follow-up and review, in following areas:
(a) conducting and documenting background checks of employees prior to employment, including maintaining complete and accurate signed Forms U-4;
(b) retention in proper format and review of business-related e-mails, instant messages and faxes sent or received by employees; and
(c) prevention of misuse of material, non-public information by employees .
Associated Person Lee willfully made false statements with respect to material facts on his Form U4 and failed to respond to FINRA requests for information.
Darren Kai Yun Lee: Fined $5,000; Suspended 2 years
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
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.
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.