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.
October 2010
George Stephen Conwill (Principal)
AWC/2005003644601/October 2010
Conwill approved prior to execution, the sale (purchase) of securities to (from) customers where the firm, through other employees, failed to sell (buy) such securities at a price that was fair, taking into consideration all relevant circumstances, including market conditions with respect to each security at the time of the transaction, the expense involved and that the firm was entitled to a profit. The excessive markups and markdowns totaled $1,254,239 for the transactions; in some of the transactions, the markups and markdowns exceeded 10 percent and some of the transactions were for the accounts of a high-net-worth senior customer of the firm. Conwill neither directed any firm employees to disclose, nor did he disclose, the markups and markdowns to the firmís customers. Conwill failed to take reasonable steps to ensure that the firm established and maintained an adequate supervisory system, and he otherwise failed to reasonably and properly supervise the firm and its registered representatives to detect and prevent violations of NASD Rules 2110 and 2440, and NASD Interpretative Material 2440.
George Stephen Conwill (Principal): Barred
Tags:  Mark-Up Mark-Down     |    In: Cases of Note : FINRA
September 2010
Michael Alcide Poutre II (Principal)
AWC/2008011759201/September 2010
Poutre placed orders for the sale of corporate bonds and placed charges on the orders for markups, which were not fair and reasonable, in consideration of the factors set forth in NASD Interpretative Material 2440(b). Poutre solicited securities transactions in actively traded, liquid corporate bond transactions for customers and charged the customers markups or markdowns that exceeded 3 percent and $400; most of the transactions were large and, because they involved corporate bonds, a markup or markdown over 3 percent would be considered excessive. The corporate bonds involved were readily available and involved large transactions of higher priced securities, which justified lower percentage rates. Also, the markups and markdowns were not disclosed to the customers and the number of violative transactions established a pattern of excessive markups and markdowns, and nothing in Poutreís or his member firmís business activities justified the markups or markdowns of over 3 percent.
Michael Alcide Poutre II (Principal): No Fine in light of financial status; Suspended 30 days
Tags:  Mark-Up Mark-Down     |    In: Cases of Note : FINRA
August 2010
George Ernest Reilly (Principal)
2007007329501/August 2010
Reilly failed to establish and maintain a supervisory system with written supervisory procedures reasonably designed to prevent excessive markups in CMO bond transactions, and failed to exercise his supervisory responsibilities to ensure that the firmís CMO trader and other firm representatives complied with NASD Rules 2110 and 2440. Reilly made notations of his reviews of CMO trades for markups on a daily trade blotter but did not conduct reviews to ensure that the markups were fair, reasonable and consistent with market prices. Reilly had the authority to reverse or cancel CMO trades for unreasonable or excessive markups but did not do so, despite the fact that under his supervision, markups for CMO transactions were excessive.
George Ernest Reilly (Principal): Barred
Tags:  Supervision    CMO    Mark-Up Mark-Down     |    In: Cases of Note : FINRA
June 2010
EKN Financial Services Inc.
2005002259501/June 2010
EKN effected transactions with retail customers at prices that were not fair and not reasonably related to the current market price of the security. The Firm failed to preserve the order tickets for bond transactions at issue regarding the excessive markups, thereby failing to preserve required books and records. The Firm failed to exercise reasonable diligence to ascertain the best available price for its customers under the prevailing market conditions.
EKN Financial Services Inc. : Fined 32,500; Ordered to pay $4,092.30 plus interest in customer restitution
Tags:  Mark-Up Mark-Down     |    In: Cases of Note : FINRA
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