Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2012
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.
January 2012
Hantz Financial Services, Inc and Bruce Frederick Coleman (Principal)
AWC/2008012747901/January 2012
AWC/2008012747901/January 2012
Hantz Financial failed to establish and
maintain an adequate
supervisory system and WSPs to ensure that it immediately recorded
on the firm’s books
and records checks its customers mailed to the firm. The firm failed to enforce that particular WSP, these deficiencies
were exploited by a registered
representative who embezzled approximately $2.6 million from
customers and contributed
to the firm’s failure to detect his scheme.
The representative
exploited the firm’s check handling
procedures by taking control of customer checks totaling
approximately $850,000
and depositing the customer funds into his own bank accounts,
without the checks
being logged in the firm’s tracking system.
By and
through Coleman, its CCO, the Firm failed to establish and maintain
adequate WSPs addressing the
circumstances under which it would contact and communicate with a
customer following
receipt of a complaint.
The firm’s lack of adequate WSPs
describing circumstances
under which complaining customers would be contacted contributed
to its failure to
discover the representative’s scheme after a customer sent a
written complaint to a
variable annuity company, which was subsequently forwarded to the
firm, asserting
that recent distributions from variable annuity policies were
unauthorized and seeking
reinstatement of the funds. The complaint also
alleged that the customer
had sent the firm money and was unable to ascertain what assets
were purchased with
the money. Although the firm interviewed the
representative, the
customer was never contacted and the representative’s illegal
activities continued for
approximately another 10 months. After the representative’s death,
the firm undertook a
forensic audit of the representative’s transactions, which led to
identification of numerous
customers whose funds had been embezzled; the results were shared
with FINRA and were
instrumental in exposing how the funds were embezzled and the
extent of the customer
harm. In addition, the firm voluntarily
provided more than $2
million in restitution to customers.
Hantz Financial Services, Inc: Censured; Fined $10,000 jt/sev with Coleman; Fined Additional $50,000
Bruce Frederick Coleman: Censured; Fined $10,000 jt/sev with Hantz Financial
Enforcement Actions
Tags
- AML
- Annual Compliance Meeting
- Borrowing
- Changes Of Address
- Checks
- Commissions
- Confidential Customer Information
- Due Diligence
- Elderly
- Electronic Communications
- Electronic Storage
- Embezzled
- Installment Plan Contracts
- Internet
- Life Settlement Contracts
- LOA
- Membership Agreement
- Money Laundering
- Mortgage
- OSJ
- Ponzi
- Private Placement
- Referral Fees
- Supervision
- Testing
- Unregistered Person
- Unregistered RRs
- Unregistered Securities
- Variable Annuity
- WSPs