Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2012
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.
January 2012
Hantz Financial Services, Inc and Bruce Frederick Coleman (Principal)
AWC/2008012747901/January 2012
Hantz Financial failed to establish and maintain an adequate supervisory system and WSPs to ensure that it immediately recorded on the firm’s books and records checks its customers mailed to the firm. The firm failed to enforce that particular WSP, these deficiencies were exploited by a registered representative who embezzled approximately $2.6 million from customers and contributed to the firm’s failure to detect his scheme.  

The representative exploited the firm’s check handling procedures by taking control of customer checks totaling approximately $850,000 and depositing the customer funds into his own bank accounts, without the checks being logged in the firm’s tracking system.

By and through Coleman, its CCO, the Firm failed to establish and maintain adequate WSPs addressing the circumstances under which it would contact and communicate with a customer following receipt of a complaint. The firm’s lack of adequate WSPs describing circumstances under which complaining customers would be contacted contributed to its failure to discover the representative’s scheme after a customer sent a written complaint to a variable annuity company, which was subsequently forwarded to the firm, asserting that recent distributions from variable annuity policies were unauthorized and seeking reinstatement of the funds. The complaint also alleged that the customer had sent the firm money and was unable to ascertain what assets were purchased with the money. Although the firm interviewed the representative, the customer was never contacted and the representative’s illegal activities continued for approximately another 10 months. After the representative’s death, the firm undertook a forensic audit of the representative’s transactions, which led to identification of numerous customers whose funds had been embezzled; the results were shared with FINRA and were instrumental in exposing how the funds were embezzled and the extent of the customer harm. In addition, the firm voluntarily provided more than $2 million in restitution to customers.

Hantz Financial Services, Inc: Censured; Fined $10,000 jt/sev with Coleman; Fined Additional $50,000

Bruce Frederick Coleman: Censured; Fined $10,000 jt/sev with Hantz Financial

Tags:  Checks    WSPs    Embezzled    Variable Annuity     |    In: Cases of Note : FINRA
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