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.
Scott David McElhenny (Principal)
McElhenny applied one investment model in numerous customersí
accounts by executing
thousands of trades on a group basis in a variable annuity
offered by one
company and a mutual fund platform
offered by another company.
McElhenny could place
one trade, which was not individualized for each of his customers,
and that trade would be
processed for all of his customers that were part of the trading
The group trading
executed by McElhenny in his customersí accounts involved inverse
and leveraged funds.
McElhenny engaged in such trading without
grounds for believing that the recommendation was suitable for
each of his customers in
light of their individual investment objectives, financial
situation and needs. As a result
of McElhennyís recommendations, the customers sustained a
collective loss exceeding $1
million. McElhenny exercised
discretion in the customersí
accounts without each customerís written authorization and his
member firmís acceptance
of the accounts as discretionary. McElhenny executed more
than one hundred unauthorized securities transactions in one
Scott David McElhenny (Principal): Barred
Frank Porporino Jr.
Porporino executed two unauthorized trades in a customerís account without the customerís prior knowledge, authorization or consent, which cost $474,000 and $444,000 respectively, resulted in approximately $37,000 in losses to the customer and netted Porporino approximately $16,200 in commissions.
Contrary to firm procedures that generally prohibited registered representatives from borrowing funds from customers unless they had the firmís presidentís prior written approval, Porporino borrowed $40,000 from a customer without disclosing the loan to his firm; he repaid the loan, including $8,000 in interest. The was unaware of and did not otherwise approve the loan.
Frank Porporino Jr. : Fined $5,000; Suspended 9 months; Ordered to pay $37,000 plus interest in restitution to a customer.