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
Askar Corp
AWC/2010021008701/January 2012
Although the Firm had WSPs that were appropriate with respect to private securities transactions, it failed to enforce the procedures as written, and, as a result, the Firm failed to review and approve or disapprove the private securities transactions of some registered representatives who were associated with the firm. The firmís failure to supervise these private securities transactions violated NASD Rule 3040, which requires members to give prior written approval or disapproval of any proposed private securities transaction by an associated person.The firm failed to establish and enforce a supervisory system and WSPs to supervise private securities transactions some of its registered representatives executed, including failing to record the transactions on its books and records.
Askar Corp: Censured; Fined $12,500
Tags:  WSPs     |    In: Private Securities Transactions
Daryl Eugene Allison (Principal)
AWC/2009017068502/January 2012
As his member firmís president and chief supervisory officer, Allison he failed to adequately supervise a registered representative because he did not ensure that the representative was registered with a state before the representative conducted business with clients in the state

Allison failed to adequately supervise another registered representative when he learned that her business had borrowed money from a customer. The firmís WSPs prohibit registered representatives from borrowing from customers. Allison did not properly follow up on this information; he did not ensure that the customer was repaid or examine the businessísbank statements to determine whether the representative had borrowed from additional customers. Even when Allison placed the representativeon heightened supervision, after learning of the loan from the customer, he did not begin conducting the quarterly audits the plan mandated until months later.
Daryl Eugene Allison (Principal): Fined $6,000; Suspended in Principal capacity only for 10 business days
Tags:  Supervision    WSPs    Borrowing    Unregistered RRs     |    In: Cases of Note : FINRA
Hantz Financial Services, Inc and Bruce Frederick Coleman (Principal)
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 firmís 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 firmís failure to detect his scheme.  

The representative exploited the firmís 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 firmís 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 firmís lack of adequate WSPs describing circumstances under which complaining customers would be contacted contributed to its failure to discover the representativeís 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 representativeís illegal activities continued for approximately another 10 months. After the representativeís death, the firm undertook a forensic audit of the representativeís 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

Tags:  Checks    WSPs    Embezzled    Variable Annuity     |    In: Cases of Note : FINRA
MML Investors Services, LLC
AWC/2010020873501/January 2012
MML Investors Services failed to timely file Forms U5 and amendments to Forms U4 and U5. 

The firmís failure to comply with its reporting obligations may have hampered the investing publicís ability to assess the background of certain brokers through FINRAís public disclosure program, rendered certain information unavailable to member firms making hiring determinations, may have reduced the ability of state securities regulators to review applications by brokers to transfer firms, and hindered FINRA from promptly investigating certain disclosure items.

The firmís supervisory system and procedures were not reasonably designed to achieve compliance with the reporting requirements of Article V of FINRAís By-Laws. The firm failed to enforce the written procedures it had adopted to prevent late disclosures to FINRA. The firm did not enforce a sanctions policy for late filings of Forms U4 and U5 that it had implemented. That firm policy was updated to strengthen the sanctions for late disclosures to the firm. There were numerous instances of late filings in which the firm either failed to issue a letter of warning to the representative or failed to fine the representative as called for by its procedures. Although the firmís procedures called for the termination of any representative who failed to timely disclose three reportable events to the firm, it did not terminate at least two such representatives. There were also instances in which the firm failed to sanction supervisors as called for by its procedures. 
MML Investors Services, LLC: Censured; Fined $300,000; Required to * review its supervisory systems and WSPs for compliance with its reporting obligations concerning the timely filing of Uniform Application for Securities Industry Registration or Transfer (Form U4) disclosure amendments and the timely filing of Uniform Termination Notices for Securities Industry Registration (Forms U5) and Form U5 amendments, * certify in writing to FINRA within 90 days of the issuance of the AWC that the firm currently has in place systems and procedures reasonably designed to achieve compliance with its reporting obligations under FINRAís By-Laws, Article V, 11 January 2012 Sections 2(c), 3(a) and 3(b) with respect to the timely filing of required Forms U4 and U5, and amendments thereto; * within 15 days following the end of each quarter in calendar year 2012, the firm will submit a report to FINRA detailing any Form U5 filings or disclosure amendments to Forms U4 and U5 that were not timely filed with FINRA that quarter, and an officer of the firm will certify in writing to FINRA that the submitted report is accurate.
Tags:  WSPs         |    In: Cases of Note : FINRA
Bill Singer's Comment
An interesting and detailed requirement concerning ongoing U5 reporting compliance.
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