Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
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 firm’s 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 firm’s chief financial officer (CFO) and FINOP, caused the funds to be deposited into the parent company’s checking account and used some or all of the funds, without the individual’s 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
Anthony Edward Guaimano (Principal0
AWC/2008012444205/April 2011

Guaimano engaged in pre-arranged trading of CMO bonds in a proprietary trading account of his member firm. Guaimano effected CMO bond trades, consisting of paired purchases and sales, in the firm’s proprietary trading account with a registered principal and trader as the contra-party. Each pair of matched transactions was pre-arranged and directed by the registered principal. The registered principal and Guaimano traded the bonds at prices consistent with the current market for the securities; simultaneously, the registered principal agreed to repurchase them from Guaimano, at a specified time, at an agreed-upon price that usually provided Guaimano’s firm with a profit. Guaimano participated in pre-arranged transactions in which he did not take a profit, but as a result of the riskless principal CMO transactions in the proprietary account, Guaimano generated trading profits, markups and interest income for his firm of approximately $455,144.23.

Guaimano participated in the pre-arranged trading with the principal as an accommodation based upon Guaimano’s belief that the principal was “refreshing” his CMO bond inventory in order to maintain positions he wished to maintain and still be in technical compliance with inventory risk controls at his employer relative to the length of time positions that could be held in proprietary accounts. Guaimano knew, or should have known, that the pre-arranged nature of the trades, particularly the agreement that the principal would repurchase the securities in short order, caused beneficial ownership of the securities to remain with the principal’s employer.

Guaimano should have known that the principal’s effort to create the appearance of compliance with the inventory restrictions by liquidating positions could only succeed if the principal concealed from his employer the fact that he had committed to repurchase the bonds from Guaimano at the same or a higher price. Furthermore, Guaimano should have known that his participation in the pre-arranged transactions enabled the principal to deceive his employer as to its inventory positions and risk.

Anthony Edward Guaimano (Principal0: Fined $10,000; Suspneded 6 weeks
Tags:  Proprietary Traders    CMO     |    In: Cases of Note : FINRA
Bill Singer's Comment
Interesting facts and fair sanctions
February 2011
Douglas Christopher Green (Principal)
2008012444201/February 2011

Green affected trades in collateralized mortgage obligation (CMO) bonds in his member firm’s proprietary trading account to conceal inventory positions and create the false appearance of profitability through the use of fictitious and pre-arranged trades. In some cases, no contra-party had agreed to the transaction at the time Green submitted an order, and in other cases, Green had agreed to repurchase the security from the contra-party at an agreed-upon price that guaranteed a profit to the contra-party, causing the beneficial ownership to remain with Green.

Green devised a strategy that not only hedged and concealed the positions, but circumvented trading capital and inventory limits his firm set, and created the impression of profitable trading by extending the settlement dates for certain bonds and coordinating fictitious transactions with other broker-dealers.

Green received compensation based upon the overall profitability of the firm’s proprietary account, and because Green’s scheme created the appearance of profitability, he received compensation based upon the apparent profits; Green received $7,353,000, which resulted in an overstatement of the firm’s net capital and caused the firm to cease business. Green caused the firm’s books and records to be inaccurate. In addition, he failed to respond to FINRA requests for documents and information, and to appear for on-the-record testimony.

Douglas Christopher Green (Principal): Barred
Tags:  Proprietary Traders    CMO    Trading Limits    Trading Volume     |    In: Cases of Note : FINRA
Bill Singer's Comment
$7.4 million in compensation for fictitious trades? How come I never seem to see ads for these jobs in the papers? Where can I sign up?
Enforcement Actions
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