Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2011
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 2011
Corinne A. Perrone
AWC/2010024718001/December 2011
Perrone instructed a bank teller under her supervision, while acting as a bank branch manager, to process a withdrawal of $2,500 from her personal savings account, knowing the account had insufficient funds to cover the withdrawal, but misrepresented to the teller that the account belonged to one of her customers. When the teller discovered that the account had a $5 balance, Perrone falsely claimed that the customer would be making a deposit into the account in the near future, and Perrone performed an override on the account. The teller processed the transaction and gave Perrone $2,500 in cash.

Perrone forged a relativeís name on a signature card, opened a checking account in her relativeís name at another bank branch, traveled to another bank branch and instructed a bank teller, whom she formerly supervised, to process a withdrawal of $6,500 from that account, without her relativeís knowledge or authorization. Perrone knew the account had insufficient funds to cover the withdrawal but misrepresented to the teller that the account belonged to one of her customers. When the teller discovered that the account had a $25 balance, Perrone falsely advised him that she had just completed a wire transfer deposit into the account for the customer and that it would take a few minutes to appear on the system. After the teller processed the $6,500 withdrawal, Perrone directed him to give her $2,500 in cash and to deposit the remaining $4,000 into a checking account her relative legitimately owned. 
Corinne A. Perrone: Barred
Tags:  Bank    NSF     |    In: Cases of Note : FINRA
November 2011
Krittibas Ray
AWC/2010023781701/November 2011

Ray solicited prospective investors to purchase promissory notes as a vehicle to fund the start up of a hedge fund and to pay the ongoing operations of the fund; investors purchased more than $675,000 in promissory notes from Ray. Ray represented he could pay above-U.S. market interest rates based in part on the fact he could obtain these rates by investing the funds in a foreign bank; Ray failed to invest the proceeds of the notes with the foreign bank, used some of the proceeds for personal expenses and used proceeds from later sales to pay interest and repay principal amounts due on notes earlier purchasers held.

Ray made materially misleading statements and omissions of fact, including misrepresenting the use of proceeds from the sale of the promissory notes, misrepresenting how and where the proceeds were to be invested, and failing to disclose he was using the proceeds from the sale of promissory notes to pay interest and principal amounts due to earlier note holders. Ray participated in private securities transactions through the sale of promissory notes without providing written notice to his firm describing in detail the proposed transaction, his role therein and stating whether he received, or would receive compensation, and without obtaining his firmís approval.

Krittibas Ray : Barred
Tags:  Banks    Promissory Notes    Hedge Fund     |    In: Cases of Note : FINRA
Bill Singer's Comment
Nathaniel Aaron Finkin
AWC/2009020132901/November 2011
Finkin's customer submitted an application to the firm for a mortgage, term loan, and line of credit, and as part of the application process, the firm retained an outside law firm to engage in negotiations on the term of the loans with the customerís counsel. Finkin sent fabricated emails to various individuals involved in the negotiations, including the customerís counsel, and each of the emails instructed the recipients to contact Finkin with any questions or concerns; Finkin sent the emails from his personal email account in a way that made the messages appear to the recipient to be from a paralegal at the outside law firm, and not Finkin.
Finkin failed to comply with a FINRA request for a document.
Nathaniel Aaron Finkin: Barred
Tags:  Banks    Email    Impersonation    Mortgage     |    In: Cases of Note : FINRA
October 2011
Aaron Joseph Coculo
AWC/2011026065501/October 2011
Coculo converted funds from bank customer accounts while employed with his member firmís bank affiliate. Coculo ordered and intercepted automated teller machine (ATM) cards and withdrew funds from those accounts, which totaled approximately $5,500. Coculo improperly obtained ATM cards from relatives and effected unauthorized withdrawals totaling approximately $9,000; in total, Coculo misappropriated approximately $14,500 from the customer accounts without permission or authority from the customers or the bank. The transactions did not involve funds from an account held at a FINRA regulated entity.
Aaron Joseph Coculo : Barred
Tags:  Banks    ATM     |    In: Cases of Note : FINRA
Christopher P. Smith
AWC/2009019838802/October 2011

Smith misappropriated approximately $231,000 from bank customers by completing credit line advance request forms seeking withdrawals from customer accounts without the customersí knowledge or consent, withdrew the money in cash and used it to pay personal expenses or deposited it into his personal bank accounts. When some of the customers questioned the withdrawals, Smith reimbursed their accounts by making some unauthorized withdrawals from other customer accounts.

Smith pleaded guilty to misapplication of bank funds in the U.S. District Court for the Western District of Louisiana for stealing approximately $231,000 that was entrusted to the bankís care and control.

Christopher P. Smith: Barred
Tags:  Banks     |    In: Cases of Note : FINRA
Jo Ann Marie Head
2009017530101/October 2011

Head conveyed false and exaggerated account values to customers verbally and with falsified documents; and borrowed $20,000 from a customer and has repaid only $1,000 to the customer, contrary to the firmís written procedures prohibiting representatives from borrowing from customers without branch manager or other supervisor approval and the written approval of the firmís compliance department. Head did not request or obtain permission from her firm to borrow money from the firmís customer.

Head settled and/or offered to settle a customer complaint without her firmís knowledge or authorization. Head sent an unapproved and materially false letter to a bank by preparing, signing and mailing a letter to a bank stating that a customerís assets totaled over $4 million in order to assist the customer in obtaining a mortgage loan; although the firmís procedures required that outgoing correspondence be reviewed and approved before mailing. Head neither sought nor obtained approval for the letter.

Head exercised discretion in customer accounts without written authorization; Head neither sought nor obtained authorization from customers or her firm to exercise discretion in their accounts.

Head mischaracterized solicited trades in customersí accounts as unsolicited, causing her firmís books and records to be inaccurate. In addition,

Head repeatedly sent emails and text messages to customers from her personal email accounts, which violated her firmís policies forbidding the use of personal email accounts and mandating that business-related electronic communications with customers occur within the firmís network.  Headís use of her personal email account prevented the firm from reviewing her email and text messages, and delayed the discovery of her misconduct in customersí accounts.

Head submitted false and evasive information to FINRA in response to a written request for information; and subsequentlyfailed to appear or otherwise respond to FINRA requests for testimony.

Jo Ann Marie Head: Barred; Ordered tp pay $19,000 restitution
Tags:  Borrowing    Discretion    Correspondence    Bank    Mortgage    Rule 8210     |    In: Cases of Note : FINRA
Bill Singer's Comment
Talk about a cascade effect of violations!
Karl Henry Rodriguez (Supervisor)
AWC/2011026130701/October 2011

 Rodriguez converted and misappropriated $10,000 from the bank checking account of a customer of his member firm and the firmís bank affiliate.

While researching an investment for the customer, a bank employee discovered that Rodriguez had diverted a $10,000 check from the customerís bank checking account and made the check payable to a third party, who was also a bank customer and Rodriguezí close personal friend. The customer neither authorized Rodriguez to make the check payable to the third party nor divert the funds to the third partyís account at the bank. The third party made cash withdrawals totaling $10,000 from the bank account, and gave the money to Rodriguez, who used the funds for his personal benefit.

Ultimately, the bank re-deposited $10,000 into the customerís bank checking account, and as a result of the bankís inquiry, Rodriguez repaid approximately $5,000 to the bank.

Karl Henry Rodriguez (Supervisor): Barred
Tags:  Banks    Checks    Conversion     |    In: Cases of Note : FINRA
September 2011
Devin Raj Anand
2009017302001/September 2011

Anand converted customer funds by wiring funds totaling $51,289 from the customerís account to outside bank accounts of which Anand was associated; the customer did not authorize and had no knowledge of any of the wire transfers Anand made. Anand attempted to wire additional funds totaling $24,000 from the customerís account but Anandís member firm did not complete the wires.

Anand 18 Disciplinarmisappropriated funds from a non-customer (the individual was an employee of a business Anandís relatives owned) by creating a false account, borrowing $49,500 in funds from her 401(k) account without her knowledge or authorization, depositing the money into a bogus account he created in the noncustomerís name at his firm, and then wiring funds out of the account for his benefit. The individual did not authorize Anand to open an account, did not complete or sign any new account opening documents and, in furtherance of the scheme,

Anand created false documents related to the opening of the account which he submitted to his firm, thereby causing his firm to maintain inaccurate books and records. Anand failed to respond to FINRA requests for information and to appear and testify at an on-the-record interview.

Devin Raj Anand : Barred
Tags:  Banks     |    In: Cases of Note : FINRA
August 2011
David Lee Cheviron (Principal)
AWC/2010022831701/August 2011

Cheviron wrongfully converted a total of $75,331.08 from customers by withdrawing funds from a customerís bank account and then took the funds to another branch of the bank, where he deposited the funds into his own personal account.  Ultimately, he used the customerís funds to make home improvements to his personal residence.

Chevironís member firm compensated the customer for the funds wrongfully taken from her account; Cheviron has not reimbursed his firm.

Cheviron caused other customers to sign distribution requests to an insurance company with instructions to mail checks to Chevironís attention at several banks and his personal residence. Upon receipt, Cheviron deposited these funds into his personal bank accounts and used the funds for his personal benefit. In an effort to conceal that he was the beneficiary of the customersí funds, Cheviron created false account statements, which he provided to one of the customers.

David Lee Cheviron (Principal): Barred
Tags:  Banks    Checks    Insurance     |    In: Cases of Note : FINRA
July 2011
Casey W. Smith
AWC/2009018573101/July 2011

Smith improperly accepted $15,300 in cash gifts from a customer and her relative.

The customer and her relative gave Smith cash gifts when they visited their safe deposit boxes. Smith was given and accepted a cash gift during a visit to the customerís home. At the time Smith accepted the gifts, he was aware that the bankís code of conduct where he was employed prohibited employees from accepting gifts from customers.

This matter came to light when the customer offered cash to another bank employee after assisting her with her safe deposit box; the employee refused the gift and reported the matter to his supervisor. When Smithís supervisor questioned him, Smith admitted to accepting gifts from the customer, and his employment was terminated.

Casey W. Smith: Fined $15,000; Suspended 3 months
Tags:  Banks    Gifts     |    In: Cases of Note : FINRA
Bill Singer's Comment
I wonder what the going rate was for opening the safe deposit boxes -- after all, $15,300 isn't chicken feed. Then there's the other issue.  Why the hell would customers want the IRS to learn that they're keeping wads of cash (apparently) in their safe deposit boxes?  This one makes me cringe on so many levels.
Salvatore Demeo Jr.
2009018139301/July 2011
Demeo converted funds from a customerís account by withdrawing $9,417.11 from the customerís bank account without the customerís knowledge or authorization, deposited the funds into a bank account for his company and used them for his personal benefit. Demeo failed to appear for FINRA on-therecord testimony.
Salvatore Demeo Jr.: Barred
Tags:  Conversion    Bank     |    In: Cases of Note : FINRA
Wendy Rice Stern
AWC/2009018870401/July 2011

Stern charged personal expenses on her corporate credit card totaling approximately $5,200. Stern made approximately $2,700 in payments to the bank affiliate of her member firm for the personal expense which she charged on her corporate credit card.

The bank notified Stern on several occasions about a number of aged items that were charged on the card for which no employee expense reports were submitted by Stern. Subsequently, the bank notified Stern that her card was two payments past due and it was being suspended.

Stern then admitted that she had made the personal purchases on her corporate credit card. Stern also made a $500 payment to the bank and thus reduced the outstanding amount owed due to her personal use of the corporate card to $1,984.

Sternís employment at her firm and the bank were terminated for improper use of the corporate credit card.

Wendy Rice Stern: Barred
Tags:  Banks    Credit Cards     |    In: Cases of Note : FINRA
Bill Singer's Comment
Frankly, this is a far too common scenario in the financial services community -- a form of "kiting" one's credit card purchases through mixed use of the card for business and personal expenses and than delaying reimbursement. Some companies permit the mixed use of the corporate card provided that the employee promptly notifies the employer of the personal purchases and undertakes prompt reimbursement.  The abuses of this "honor system" are legendary.
June 2011
Michael Douglas Larsen
2009018143701/June 2011

Larsen convinced an elderly bank customer to surrender annuities totaling approximately $355,000, which he deposited into the customerís bank checking account. Larsen debited the customerís bank checking account approximately $94,000 and purchased a bank check in that amount payable to an entity and opened an account at that entity for the customer; Larsen then executed an internal form with the entity that effectively changed the name on the account to an entity that Larsen owned and controlled, thereby misappropriating the customerís money, without the customerís authorization.

Larsen, took approximately $261,000 from the customerís bank checking account at his member firm kept $4,500 for his personal use, gave $1,250 to the customer and had a bank check issued for the remaining approximately $255,000 payable to the entity Larsen owned and controlled, and deposited the funds into a checking account at the bank in the entityís name.

Larsen used a debit card associated with the checking account in the name of his entity to make purchases for his personal benefit totaling approximately $72,000, which was funded by proceeds from the customerís bank checking account, without the customerís authorization.

When the customer reviewed his bank statements and noted that some of his money was not in the bank account, he made inquiries to the bank and the bank sued Larsen to recover funds that he had transferred out of the customerís bank account. The bank was able to recover approximately $183,000 from Larsen, which it used to repay the customer and paid the customer an additional $171,000 to make him whole.

Larsen failed to respond to FINRA requests for documents.

Michael Douglas Larsen : Barred
Tags:  Banks    Debit Card    Elderly     |    In: Cases of Note : FINRA
May 2011
Joshua Daniel Gould
AWC/2010024945501/May 2011

Gould converted more than $1,315,000 from customers who had purchased annuities from him by, among other deceptive means and devices, convincing his customers to sign blank annuity withdrawal request forms, which he subsequently completed with instructions to the insurance companies to transfer his customersí funds to a bank account held in the name of a company he owned and controlled. In some instances, the withdrawal request forms contained a medallion signature guarantee that he improperly obtained.

Gould converted funds from other annuity customers by using withdrawal request forms that contained customersí signatures to direct insurance companies to transfer funds from the customersí annuities to his bank account. Gould unlawfully converted customer funds from customersí brokerage accounts by, among other deceptive means and devices, improperly transferring funds from their brokerage accounts to the bank account he owned and controlled. The customers either did not authorize or were not aware of the conversion resulting from the transfer of funds from their annuities and brokerage accounts to Gouldís bank account.

Gould used the unlawfully converted funds to pay for his own personal and business expenses; none of the customers were aware he was withdrawing funds for his personal use. On numerous occasions, Gould falsified documents to make it appear that customers had authorized the transfer of funds from their annuities and brokerage accounts to his bank account, and in some instances, effectuated these transfers by convincing customers to sign withdrawal request forms, some of which were blank.

Joshua Daniel Gould : Barred
Tags:  Annuities    Blank Forms    Signature    Bank     |    In: Cases of Note : FINRA
Michael Jon Davies
OS/2009020069601/May 2011
Davies engaged in a pattern of check-kiting, in which he wrote checks totaling $1,070 from his personal bank checking account, maintained at another bank and payable to himself, deposited the checks into another personal checking account of his that was maintained at his firmís bank affiliate, even though he knew or should have known that he had insufficient funds in his account maintained at the other bank to cover the checks, and then immediately withdrew these funds via automatic teller machine (ATM) from that checking account at his firmís bank. Each of the checks was subsequently returned for insufficient funds.
Michael Jon Davies : Fined $5,000; Suspended 6 months
Tags:  Check Kiting    ATM    Bank    NSF     |    In: Cases of Note : FINRA
Reba Rose Cope
2009020243101/May 2011
A customer of Associated Person Cope's member firmís bank affiliate instructed her to use the proceeds from a maturing certificate of deposit (CD) to purchase new CDs in the names of different people. Cope purchased one of the CDs, took the remaining proceeds of $9,878.89, converted them to a cashierís check payable to the person for whom the CD should have been purchased, and later cashed the cashierís check and kept the money for her personal use. Cope failed to respond to FINRA requests for information and documents.
Reba Rose Cope : FINRA did not seek restitution because a bank reimbursed the customer for the amount Cope converted, plus interest; Barred
Tags:  Conversion    CDs    Checks    Bank     |    In: Cases of Note : FINRA
William Thomas Hernandez,
AWC/2010025260501/May 2011

Hernandez converted a total of $98,559.12 from elderly customers for his own personal use and benefit. Hernandez received checks totaling $14,378.27 from a customer to be deposited into the customerís brokerage account at his member firm for investment purposes; however, he did not invest those funds -- instead, he deposited the checks into his personal checking account.

Without any authorization, Hernandez withdrew $60,220.85 from a checking account belonging to a customer of his firmís bank affiliate and then deposited those funds into his personal investment account, converting the proceeds for his own use and benefit. Similarly, he withdrew without any authorization, another $24,000 from that same customerís account and deposited the funds into his personal checking account.

Hernandez failed to respond to FINRA requests for information and documents.

William Thomas Hernandez,: Barred
Tags:  Elderly    Checks    Bank     |    In: Cases of Note : FINRA
April 2011
Daniel A. Contreras (Principal)
AWC/2009018398701/April 2011

Contreras engaged in private securities transactions by recommending that customers invest in promissory notes, which were not approved investments of his member firm. Contreras failed to provide written notice to his firm describing in detail the proposed transactions and his proposed role therein, and stating whether he had received, or might receive, selling compensation in connection with the transactions.

The company that issued the promissory notes filed for Chapter 13 Bankruptcy, and all of Contrerasí customers lost their entire investment.

Contreras borrowed approximately $65,000 from his customers, contrary to his firmís written procedures prohibiting registered representatives from borrowing money or securities from any prospects or customers, including non-firm prospects/customers, and Contreras failed to pay back any of the money he borrowed.

Contreras failed to respond to FINRA requests for information and testimony.

Daniel A. Contreras (Principal): Barred
Tags:  Borrowing    Bankruptcy    Private Securities Transaction     |    In: Cases of Note : FINRA
Bill Singer's Comment
An all too typical scenario involving private securities transactions and borrowing from clients. A lot of folks are surprised when they learn how often those two factors go hand in hand.  Of course, an equally common factor is that an RR who fails to pay back customers from whom he borrowed money, also tends not to respond to FINRA requests for information and testimony.
March 2011
Craig Michael Bettencourt
AWC/2010023336301/March 2011
Without his clientís authorization, Bettencourt created a debit memorandum from his clientís account for $35,000 and directed that the debit memorandum be converted to a check payable to a bank where Bettencourt held a personal account. The findings stated that Bettencourt endorsed the check and deposited it into his personal account at the bank, converting the funds to his personal use and benefit. To disguise the conversion, Bettencourt created a false Certificate of Deposit (CD) in his clientís name for $35,000, created a false CD account in his clientís name and delivered a receipt to his client.
Craig Michael Bettencourt: Barred
Tags:  Conversion    CDs    Checks    Bank     |    In: Cases of Note : FINRA
February 2011
Buka Uzoma Nwigwe aka Chukwuebuka Nwigwe
#2009019332001/February 2011
Nwigwe misappropriated customerís funds when he worked as a personal banker for his member firmís affiliate bank. Nwigwe requested that a credit card for a customer be delivered to his attention at the branch, used the credit card to incur approximately $1,746 in unauthorized charges for his personal use and forged the customerís signature on multiple occasions to complete purchases with the card. Nwigwe admitted to the firmís internal investigators that he used the unauthorized credit card for his personal use.
Buka Uzoma Nwigwe aka Chukwuebuka Nwigwe: Barred; The Hearing Officer did not order restitution because the customer was not required to pay for the unauthorized charges on the credit card.
Tags:  Bank    Credit Cards     |    In: Cases of Note : FINRA
Dennis OíNeal Blackstone (Principal)
2009020488001/AWC/February 2011
As the registered representative on the joint securities account of customers at his member firm, Blackstone created a false Letter of Authorization (LOA), without the customersí knowledge or authorization, and forged their signatures to authorize a transfer of funds from their joint account at the firm to a bank account that Blackstone controlled. Based on the forged LOA, the firm wired $28,320 from the customersí joint account to the bank account Blackstone controlled and, after receiving the funds in his bank account, Blackstone used the funds for his personal expenses.
Dennis OíNeal Blackstone (Principal): Barred
Tags:  Joint Account    LOA    Forgery    Bank     |    In: Cases of Note : FINRA
Derek Matthew Christenson
2009019406701/February 2011

Christenson converted customer funds by transferring $66,000 in several transactions from a bank customerís saving account into several of his personal checking accounts, without the customerís knowledge. Christenson failed to respond to FINRA requests for information.

Derek Matthew Christenson: Barred
Tags:  Bank     |    In: Cases of Note : FINRA
Jarred A. Milliner
AWC/2010021764801/February 2011
 Milliner was an ATM custodian whom both his member firm and a bank suspected of misappropriating funds from an ATM, and both began an internal investigation of his actions. Milliner denied taking any funds from an ATM, but in response to specific questioning, he admitted that he had misappropriated $100 from his teller drawer several months earlier. In connection with the internal investigation, Milliner made full restitution of the $100 and voluntarily resigned his employment.
Jarred A. Milliner: Barred
Tags:  Bank    ATM     |    In: Cases of Note : FINRA
Bill Singer's Comment

From a purely technical perspective, I don't like the presentation of the facts in this cases.  We are told that Milliner was "suspected" of misappropriating ATM funds but there is absolutely no suggestion or assertion that he was ever found guilty of that suspicion. What is irrefutable is his admission of stealing $100 from his teller drawer, for which he made full restitution. I'm really not sure what the allegations about the ATM have to do with anything in this case, at this point in time, and I don't feel that the inclusion of those suspicions are appropriate.  He's been barred. He has admitted to stealing $100. That's the case and those are the facts. Period.

Robert Anthony Yacovone (Principal)
AWC/2010021361001/February 2011
While employed at a bank affiliate of his member firm, Yacovone obtained a bank withdrawal slip that was blank and signed by a bank customer. Yacovone completed the withdrawal slip indicating the customerís checking account number and a withdrawal of $40,000, and provided it to a teller at his branch with instructions to withdraw the funds from the customerís bank checking account and transfer the funds to Yacovoneís relativeís bank account. Yacovone used the $40,000 to repay a short-term loan and existing debt that he owed on an approved outside business he owned with his relative. The customerís assistant contacted Yacovone to advise him of the $40,000 unauthorized withdrawal from the customerís bank checking account and, as a result of the inquiry, Yacovone repaid the customer $40,000 with funds he received from his relatives.
Robert Anthony Yacovone (Principal): Barred
Tags:  Bank     |    In: Cases of Note : FINRA
January 2011
Janney Montgomery Scott, LLC
AWC/2007009458001/January 2011

The Firm failed to

  • establish certain elements of an adequate AML program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act and implementing regulations promulgated by the Department of Treasury;
  • establish policies and procedures reasonably expected to detect and cause the reporting of transactions required under 31 USC 5318(g) by failing to provide branch office managers with reports that contained adequate information to monitor for potential money-laundering and red flag activity; and for the firmís compliance department to perform periodic reviews of wire transfer activity, require either branch managers or the AML compliance officers to document reviews of AML alerts in accordance with firm procedures, identify the beneficial owners and/or agents for service of process for some foreign correspondent banks accounts, and establish adequate written policies and procedures that provided guidelines for suspicious activity that would require the filing of a Form SAR-SF;
  • establish policies and procedures that required ongoing AML training of appropriate personnel related to margin issues, entering new account information, verifying physical securities and handling wire activity;
  • ensure that its third-party vendor verified new customersí identities by using credit and other database cross-references, and after the firm determined that the vendorís lapse was resolved, it failed to retroactively verify customer information not previously subjected to the verification process;
  • establish procedures reasonably expected to detect and cause the reporting of suspicious transactions required under 31 USC 5318(g), in that it failed to include in its AML review the activity in retail accounts institutional account registered representatives serviced;
  • review accounts that a producing branch office manager serviced under joint production numbers;
  • evidence in certain instances timely review of letters of authorization, correspondence, account designation changes, trade blotters, branch manager weekly review forms and branch manager monthly reviews; failed to follow procedures intended to prevent producing branch office managers from approving their own errors;
  • follow procedures intended to prevent a branch office operations manager from approving transactions in her own account and an assistant branch office manager from reviewing transactions in accounts he serviced;
  • establish procedures for the approval and supervision related to employee use of personal computers and, during one year, permitted certain employees to use personal computers the firm did not approve or supervise,
  • include a question on thefirmís annual acknowledgement form for one year that required its registered representatives to disclose outside securities accounts and the firm could not determine how many remained unreported due to the supervisory lapse;
  • follow policies and procedures requiring the pre-approval and review of the content of employeesí radio broadcasts, television appearances, seminars and dinners, and materials distributed at the seminars and dinners; representatives conducted seminars that were not pre-approved by the firmís advertising principal as required by its written procedures; the firm failed to maintain in a separate file all advertisements, sales literature and independently prepared reprints for three years from date of last use; and a branch office manager failed to review a registered representativeís radio broadcast. A branch office manager failed to maintain a log of a registered representativeís radio broadcasts and failed to tape and/or maintain a transcript of the broadcasts and there was no evidence a qualified principal reviewed or approved the registered representativeís statements. Branch office managers did not retain documents reflecting the nature of seminars, materials distributed to attendees or supervisory pre-approval of the seminars; retain transcripts of a representativeís local radio program and TV appearances or document supervisory review or approval of materials used; and retain documents reflecting the nature of a dinner or seminar conducted by representatives or materials distributed;
  • record the identity of the person who accepted each customer order because it failed to update its order ticket form to reflect the identity of the person who accepted the order; and

  • to review Bloomberg emails and some firm employeesí instant messages

The Firm distributed a document, Characteristics and Risks of Standardized Options, that was not current, and the firm lacked procedures for advising customers with respect to changes to the document and failed to document the date on which it was sent to certain customers who had recently opened options accounts. Also, the firmís compliance registered options principal did not document weekly reviews of trading in discretionary options accounts.

Janney Montgomery Scott, LLC : Censured; Fined $175,000
Tags:  Annual Compliance Certification    Email    Instant Messaging    SAR    AML    Bank    Third Party Vendor    Away Accounts    Broadcast    Producing Manager     |    In: Cases of Note : FINRA
Bill Singer's Comment
What can I say -- even I'm impressed!
Kirk Alan Tessendorf
AWC/2009018272001/January 2011
Tessendorf willfully failed to disclose material information on his Form U4. The findings stated that during firm inclusive producer interviews and on compliance surveys, Tessendorf falsely replied to questions when specifically asked whether he was subject to bankruptcies, liens, creditors, etc., despite acknowledging on the surveys that he had an obligation to keep his Form U4 current with regard to judgments and liens.
Kirk Alan Tessendorf: Fined $5,000; Suspended 9 months
Tags:  Bankruptcy     |    In: Cases of Note : FINRA
NEXT Financial Group, Inc.
AWC/2009016272902/January 2011

NEXT Financial Group did not have a reasonable system for reviewing its registered representativesí transactions for excessive trading. The firm relied upon its OSJ branch managers to review its registered representativesí transactions and home office compliance personnel to review its OSJ branch managersí transactions, but the firm failed to utilize exception reports or another system, and the supervisors and compliance personnel only reviewed transactions on weekly paper blotters or electronic blotters.

The monthly account statements and contingent deferred sales charge reports for mutual fund activity were also available for review and could be indicators of excessive trading, however, given the volume of trading certain principals reviewed, and in certain cases, the large number of representatives for which the principal was responsible, it was not reasonable to expect principals to be able to track excessive trading on a weekly sales blotter, let alone through monthly account statements or mutual fund sales charge reports.

Due to the lack of a reasonable supervisory system, the firm failed to detect a registered representativeís excessive trading, which resulted in about $102,376 in unnecessary sales charges; the firm failed to identify or follow up on other transactions that suggested other registered representativesí excessive trading in additional customer accounts. 

The Firm did not have a reasonable system for ensuring that it obtained and documented principal review of its registered representativesí transactions, including sales of complicated products such as variable annuities, and the firm should have been particularly attentive to maintaining books and records that established that the transactions had been properly reviewed. The firm failed to provide reasonable supervision of municipal bond markups and markdowns to ensure that its registered representatives charged its customers reasonable markups and markdowns. In addition,  the firmís branch office examination program was unreasonable because it was not designed to carry out its intended purpose of detecting and preventing violations of, and achieving compliance with, federal, state and FINRA securities regulations, as well as its own policies.

The firm failed to have a reasonable supervisory system to oversee implementation of its heightened supervision policies and procedures for its registered representatives as it failed to comply with the terms of its heightened supervision for its registered representatives regarding client complaints, regulatory actions or internal reviews, therefore it had a deficient implementation of heightened supervision policies and procedures.

The firm failed to have a reasonable supervisory control system or to have in place Supervisory Control Procedures as required by FINRA Rule 3012, and it failed to perform adequate 3012 testing or prepare adequate 3012 reports. Moreover,the firm failed to have a reasonable system and procedures in place to review and approve investment advisorsí private securities transactions.

Furthermore, the firm filed inaccurate and late Rule 3070 reports relevant to customer complaints, and did not file or amend Form U4 and Uniform Termination Notice for Securities Industry Registration (Form U5) reports in a timely manner.

The Firm's AML systems and procedures were unreasonable, as the firm failed to establish and implement an AML Compliance Program reasonably designed to achieve compliance with NASD Rule 3011. Although the firm utilized a money movement report, its supervisors did not detect red flags involving numerous instances of potentially suspicious activities relating to the trading of a companyís stock and the transfers of proceeds relating to the trading of a stock, and thus failed to investigate and report these activities in accordance with its own procedures and the requirements of the Bank Secrecy Act and the implementing regulations.

In addition, over 1.3 million shares of a companyís stock were traded in customer accounts a registered representative serviced; during a one-week period, the firmís only AML exception report that monitored large money movement flagged the customerís account, but the firm took no action and failed to file any SARs as appropriate.

NEXT Financial Group, Inc.: Censured; Fined $400,000; Ordered to pay $103,179.84, plus interest, in restitution to customers.
Tags:  Bank    AML    SAR    Mutual Funds    Annuity    Mark-Up Mark-Down     |    In: Cases of Note : FINRA
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