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.
July 2010
Nathan Eugene Calhoun
AWC/2009018652501/July 2010
Calhoun participated in a private securities transaction outside the regular course of his employment with his member firm by introducing the firmís customer to an issuer, a private bank offering an investment in a managed foreign currency trading program, and acting as a liaison between the issuer and the customer. The customer lost the $30,000 invested in the foreign currency trading program. Calhoun failed to provide prior notice to his firm and failed to receive his firmís written acknowledgment concerning his participation in the private securities transaction.
Nathan Eugene Calhoun: Fined $5,000; Suspended 1 month
Tags:  FOREX     |    In: Cases of Note : FINRA
Bill Singer's Comment
I'm noticing a definite increase in regulatory scrutiny of these FOREX deals.
June 2010
Robert Franklin Hockensmith Jr.
OS/2008013190801/June 2010

Hockensmith participated in transactions involving investment in a purported foreign currency exchange (FOREX) trading program and did not seek his member firmís written authorization to participate, and the firm was unaware of and did not authorize his participation. The purported FOREX trading program was not a firm-approved product and the firm did not have a selling agreement with the purported trading program.

The firmís written procedures advised representatives that prior to engaging in a private securities transaction, representatives must submit a written request to the compliance department describing the proposed transactions and that written authorization from the compliance department must be received before a representative could engage in such conduct. Hockensmith completed and executed his firmís representative affirmations addressing the firmís policies and procedures regarding selling away/private securities transactions, and the firm addressed the topic at multiple annual compliance meetings, as well as issuing compliance bulletins/notices to its representatives regarding selling away/private securities transactions.

Hockensmith borrowed $200,000 from a client without his firmís knowledge or consent and contrary to the firmís written procedures prohibiting representatives from borrowing from a customer. Hockensmith executed representative affirmations agreeing to his firmís procedures manual regarding prohibited activities, which included borrowing from customers.

Hockensmith failed to respond to FINRA Rule 8210 requests for information.

Robert Franklin Hockensmith Jr. : Barred
Tags:  FOREX         |    In: Private Securities Transactions
Bill Singer's Comment

I'm noticing an uptick in commodity futures and FOREX activities by registered reps, many of whom appear unaware of the ramifications of engaging in such outside activity. Let Hockensmith serve as a warning. You need to notify your firm and obtain approval. Note that the issue in Hockensmith isn't simply that the RR was trading FOREX for his customers -- to the contrary, the assertion seems to be that the RR was enrolling clients in a FOREX trading program. Even taking into account that "once removed" aspect of using a program rather than undertaking the trading directly on your own, this practice is still not discretionary for the RR and requires firm approval. See this article for another FOREX case: http://www.brokeandbroker.com/index.php?a=blog&id=442

 

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