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.
August 2011
Richard A. Garaventa
OS/2009017072301/August 2011

While employed by his member firmís New York Positions Services (NYPS) Group, Associated Person Garaventa was responsible for processing corporate actions. In that capacity, he

Garaventa entered, or caused to be entered, numerous false journal entries into the firmís electronic system to transfer and credit at least $59,349 of unreconciled customer funds to other NYPS suspense accounts that Garaventa was using to misappropriate funds. Garaventa misappropriated customer funds from an SEC settlement fund by entering, or causing to be entered, numerous false journal entries into his firmís electronic system to credit SEC checks totaling approximately $120,395 to the other NYPS suspense accounts he was using to misappropriate funds.

Garaventa entered, or caused to be entered, into the firmís electronic system check requests against the suspense accounts that Garaventa was using to misappropriate funds; in this way, Garaventa misappropriated at least $179,744 of customer funds for his own benefit. Garaventa misappropriated funds from the firm by entering, or causing to be entered, numerous false journal entries into the firmís electronic system to transfer and credit approximately $1,786,052 from different firm sources, including the firmís Foreign Exchange accounts, leftover balances from corporate actions and accumulated American Depositary Receipt (ADR) fees, commingled with funds from other sources, to the NYPS suspense accounts; Garaventa then entered, or caused to be entered, into the firmís electronic system check requests to be issued against those funds.

Garaventa misappropriated:

  • funds from a firm counterparty; the counterparty calculated a payment to the firm related to a corporate action based on an incorrect tax withholding rate, which resulted in a $1,000,000 overpayment by the counterparty, which was credited to an NYPS suspense subaccount;
  • approximately $320,422 of the $1,000,000 overpayment by entering numerous false journal entries into the firmís electronic system, transferring the funds to other NYPS suspense accounts that he was using to misappropriate funds, and caused checks to be issued against those funds by having NYPS employees who reported to him enter check requests on his behalf, which Garaventa approved and used the identification number and password of another NYPS employee who reported to him to enter check requests; one of the checks contained funds from other firm sources; and
  • an additional $228,031 from other undetermined sources by entering numerous false journal entries into the firmís electronic system to transfer those funds to other NYPS suspense accounts he was using to misappropriate funds, and caused checks to be issued against those funds, which had been commingled with funds from other sources.

FINRA also found that Garaventa issued, or caused to be issued, approximately 50 false check requests and entered, or caused to be entered, hundreds of false journal entries in the firmís systems to foster his misappropriation of funds from the firm, its customers and a firm counterparty.

Garaventa failed to respond to FINRA requests for information.

Richard A. Garaventa : Barred
Tags:  Suspense Account     |    In: Cases of Note : FINRA
Bill Singer's Comment
Quite a prodigious undertaking for a mere associated person. What a waste of talent.
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