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
Joseph John Giuliano (Principal)
AWC/2009019382101/December 2011
An individual who subsequently became a trader with Giuliano's member firm provided $250,000 to the firmís parent company, without loan documentation or written agreement, either as funds to be traded in a firm proprietary account or be held as a security deposit to insure the brokerdealer against trading losses the individual might incur. Giuliano, an owner of at least a 40-percent stake in the parent company and the firmís chief financial officer (CFO) and FINOP, caused the funds to be deposited into the parent companyís checking account and used some or all of the funds, without the individualís consent or authorization, to pay various expenses and debts of the parent company and the firm, thereby misusing the funds.
Joseph John Giuliano (Principal): Barred
Tags:  Proprietary Traders    Loan    FINOP     |    In: Cases of Note : FINRA
April 2011
Hyon Chu Kang
AWC/2010022258701/April 2011

Kang made loans totaling at least $294,000 to a firm customer who was also a close personal friend. The loans were in the form of cash and checks to the customer and undertaken to assist the customer in meeting her business obligations.

Although the customer had signed promissory notes, she died and Kang has not been fully repaid. At the time she made the loans, Kang was aware that her member firm did not permit loans from or to customers unless they were immediate family members; however, Kang did not obtain pre-approval from her firm prior to lending monies to the customer, nor did she otherwise inform the firm of the loans.

Hyon Chu Kang : Fined $7,500; Suspended 60 days
Tags:  Borrowing    Loaning    Promissory Notes     |    In: Cases of Note : FINRA
Bill Singer's Comment

Okay, just to be clear, very, very clear, I absolutely detest and hate this case. A fairer resolution would have been to send Kang a sternly worded letter explaining why she should not do this and how it was necessary to obtain pre-approval from her firm.  Nontheless, under the totality of the circumstances, I find it absurd to impose a $7,500 fine upon the RR.  Moreover, I see no reason to sit her down for 60 days. 

Justice is not blind. Justice wears a blindfold. Every so often, Justice needs to lift the blindfold and take a peak.  The reality of this case is that a broker lent a large amount of money to a friend in order to help out with a business issue.  The broker did not borrow the funds from the client. Yes -- I know, the rule prohibits both borrowing and lending. And, yes, I respect why such a rule is in place and am not disputing its wisdom.  However, sometimes you just need to dilute the consequences when the underlying facts argue for some compassion and leniency. 

January 2011
Lyndall Conway Medearis Jr. (Principal)
AWC/2008014825001/January 2011

Medearis became an additional credit card holder on a customerís credit card accounts which were revolving lines of credit. Medearis made charges to the cards totaling approximately $134,000, effectively borrowing this amount through the credit card transactions, and subsequently made payments to cover the charges.

Medearisí member firmís written procedures prohibited registered representatives from borrowing money from or loaning money to customers unless the customer was a member of the registered representativeís immediate family and the registered representative had requested and received prior written permission from the firm. Medearis borrowed an additional $132,000 from the customer in separate transactions, and Medearis never informed his firm.

Medearis loaned $6,420.33 to a customer who was a member of his immediate family but failed to obtain the firmís prior written permission before entering into the loan arrangement with the customer.

Lyndall Conway Medearis Jr. (Principal): Fined $10,000; Suspended 90 days
Tags:  Borrowing    Credit Cards    Loaning     |    In: Cases of Note : FINRA
Bill Singer's Comment
FINRA essentially has Medearis coming (borrowing) and going (loaning) money to customers.
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