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
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 firm’s 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
AWC/2009017068502/January 2012
As his member firm’s 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 firm’s 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 business’sbank 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
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
MML Investors Services, LLC
AWC/2010020873501/January 2012
AWC/2010020873501/January 2012
MML Investors Services failed to timely file Forms
U5 and amendments to
Forms U4 and U5.
The firm’s failure to
comply with its reporting
obligations may have hampered the investing public’s ability to
assess the background of
certain brokers through FINRA’s 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 firm’s supervisory system and procedures were not
reasonably designed to
achieve compliance with the reporting requirements of Article V of
FINRA’s 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 firm’s 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 FINRA’s 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.
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