Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2010
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.
December 2010
Dwight John Schaefer
AWC/2008012636401/December 2010
Despite knowledge of his member firmís change in policy regarding the sale of equity indexed annuities that all business be sold and processed through the firm and representatives were only to sell specific annuities offered by firm-approved annuity companies, Schaefer sold annuities to customers, including firm customers, and did not sell or process the transactions through his firm and did not provide written notice to the firm of his intention to engage in outside business activities. The sales totaled approximately $1,856,597, and Schaefer was compensated approximately $93,163. Schaefer completed an annual questionnaire in which he falsely answered that he did not offer or sell equity indexed annuities to his clients.
Dwight John Schaefer: Fined $5,000; Suspended 4 months
Tags:  Annual Compliance Certification    EIA    Annuity     |    In: Cases of Note : FINRA
Timothy James Carroll
AWC/2009016531801/December 2010
Carroll executed transactions in a customer account without the customerís prior knowledge, authorization or consent; however, only one of the transactions resulted in commissions, which totaled $91.76. Carroll borrowed $500 from another customer although his member firm had procedures that generally prohibited borrowing money from customers, and it did not know of or otherwise approve the loan. Carroll falsely represented on a firm annual compliance questionnaire that he had never received loans from a customer.
Timothy James Carroll : Fined $10,000; Suspended 60 days
November 2010
John Christopher Romanoff
2008014858101/November 2010
Romanoff borrowed $70,000 from customers and evidenced the loan by a promissory note, even though his member firmís written procedures prohibited registered representatives from borrowing funds from firm customers. Romanoff did not notify his firm of the loan or obtain the firmís permission to borrow funds from the customers, defaulted on the promissory note and failed to repay any of the principal balance due to the customers, even though the customers complained to his firm. Romanoff provided his firm with a Financial Advisor Compliance Questionnaire which falsely represented that he had not entered into any loan with a customer. Romanoff failed to respond to FINRA requests for information.
John Christopher Romanoff : Ordered to pay $70,000 plus interest in customer restitution; Barred
Mark Boyar & Company, Inc.
AWC/2008011794901/November 2010

The Firm 

  • issued research reports that the firm labeled ďAsset Analysis FocusĒ (AAF) on a paid subscription basis;
  • did not consider the AAF a research report;
  • did not have in place policies and procedures designed to ensure compliance with the various research related rules applicable to firms that issue research reports, such as those relating to research analyst and research principal registration, disclosures, conflicts, annual attestations and written supervisory procedures;
  • allowed registered representatives at the firm to collaborate in the preparation of AAFs without having passed a qualifying examination,
  • allowed an individual also to collaborate in the preparation of AAFs without being registered as a general securities representative or in any other capacity through the firm, and without having passed a qualifying examination.

A general securities principal supervised the preparation of AAFs without having passed the qualifying examination.

Certain AAFs the firm issued failed to disclose certain NASD Rule 2711 required information, including the financial interest in the issuer of the research analysts who prepared the reports, price charts for issuers where the firm has assigned a price target for at least one year, and the valuation methods used to determine price targets and the risks that may impede achievement of the price targets.

An individual who collaborated in the preparation of AAFs purchased securities of companies during the 30-day period before the publication of the research reports concerning those companies. In addition, The firm did not have the required research report-related written supervisory procedures in place, and the firm did not have a senior officer make the required annual attestation that the firm had adopted and implemented the required written supervisory procedures.

Moreover, the Firm did not make the required annual attestations for several years and filed inaccurate annual attestations for other years.

Mark Boyar & Company, Inc. : Censured; Fined $20,000
Bill Singer's Comment
Talk about a cascade effect!  First, the firm creates the AAFs but fails to discern that the materials are research reports -- which unleashes a number of violations arising from the failed recognition of the nature of the publication.  It's hard to come down too harshly on the Firm simply because if you don't spot the core research issue it's unlikely that you would have realized the need to follow Rule 2711.  All in all, a fairly appropriate sanction that seems to have taken into the consideration the points noted here.
Ronald Arthur Knight (Principal)
AWC/2009016709007/November 2010
Knight sold interests in ULPs to members of the public and failed to provide his member firm with prior written notice about the sales and failed to obtain the firmís prior approval. Knight participated in the sales despite his member firm denying his request and received approximately $30,270 in commissions from the sales. Knight completed a firm questionnaire containing statements that he had not engaged in any outside business activities, which was false.
Ronald Arthur Knight (Principal): Barred
October 2010
Hugh Alexander Ross Sr.
AWC/2008016154401/October 2010
Ross borrowed $100,000 from firm customersóa husband and wifeócontrary to firm written procedures, and he did not obtain his member firmís written pre-approval for the loan. Ross falsely claimed to the firmís affiliate that the funds were not borrowed, and falsified a letter in support of that claim by affixing one of the customerís signature on the letter. Ross falsely certified on a firm compliance questionnaire that he had not borrowed money from customers.
Hugh Alexander Ross Sr. : Fined $10,000; Suspended 1 year
NWT Financial Group, LLC, David Eric Niederkrome (Principal), and Stephen Rudolph Rodgers (Principal)
AWC/2009016295901/October 2010

Acting through Rodgers,NWT:

  • allowed opening options transactions in accounts without signed options agreements;
  • allowed accounts to day-trade prior to firm approval;
  • failed to evidence that accounts had been approved for daytrading;
  • failed to evidence that customers had been furnished a risk disclosure statement prior to engaging in day-trading activities.

Each of the above noted accounts came to the firm as part of a mass transfer of accounts from a former member firm.

Acting through Rodgers and Niederkrome, the firm failed to implement portions of its supervisory control procedures, in that Rodgers and Niederkrome failed to test and verify that the firmís supervisory control procedures and policies were reasonably designed to achieve compliance with applicable rules; and, prepare and submit a report to senior management detailing the firmís system of supervisory controls, the summary of the test results, significant identified exceptions and any additional or amended supervisory procedures created in response to the test results.

Rodgers and Niederkrome failed to complete an annual certification pursuant to NASD Rule 3013(b), verifying that the firm had in place processes to establish, maintain, review, test and modify written compliance policies and written supervisory procedures to comply with applicable securities rules and regulations.

Censured; Fined $10,000 jt/sev with Niederkrome and Rodgers; Fined additional $5,000 jt/several with Rodgers

David Eric Niederkrome: Censured; Fined $10,000 jt/sev with NWT and Rodgers;

Stephen Rudolph Rodgers: Censured; Fined $10,000 jt/sev with NWT and Niederkrome; Fined additional $5,000 jt/sev with NWT

Tags:  Options    Day Trading    Annual Compliance Certification     |    In: Cases of Note : FINRA
August 2010
David Alan Murrell
AWC/2008015274701/August 2010
Murrell engaged in outside business activities without providing prompt written notice to his member firm. Murrell formed a partnership with a customer of a bank affiliated with his member firm to purchase, develop and sell private and commercial properties and make commercial loans secured by mortgages on realty, but failed to inform his firm. Murrell failed to disclose his outside business activities to his firm on an annual attestation form he completed on the same day he received in compensation from the partnership.
David Alan Murrell : Fined $10,000; Suspended 6 months
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 firmís 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 ďYESĒ 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 ďprofessional employer organizationĒ plans. Jewellís 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
Stephen Alan Jaffe
AWC/2009018230901/August 2010
Jaffe was the broker of record for a customerís nondiscretionary account at his member firm and exercised discretion in the customerís 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
Enforcement Actions
Tags
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+