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
NAME REDACTED
OS/2009018050201/August 2011

While employed as a risk arbitrage research analyst with a member firm, REDACTED lied during conference calls convened for him to respond to questions FINRA posed regarding his involvement in Internet blogging activity.

Throughout his employment with the firm as a research analyst,REDACTED regularly posted responses to columns and articles published on Internet financial blog/media sites.REDACTED made his blog postings using different aliases and posted his comments on the blog sites during business hours using his firm computer.

NAME REDACTED: Fined $5,000; Suspended 6 months
Tags:  Internet    Website     |    In: Cases of Note : FINRA
May 2011
Christian Genitrini
AWC/2010022859701/May 2011

Genitrini advertised guaranteed returns on investments of up to 20 percent per year on a website belonging to a company he wholly owned. Genitrini claimed that his company was a full-service investment firm and would, among other claims, provide high-yield investment opportunities. The website declared that the company invested nationwide and all industries were considered, but did not disclose the nature of the investment product or the risks of investment.

Genitriniís ads appeared on other websites guaranteeing returns, and his companyís contemplated private placement documents provided no assurance that by following its current investment strategy, it would be successful or profitable, although the subscription agreement also stated that the investments the company carried might be volatile and present operational risks.

Genitriniís Internet ads constituted communications with the public; were not based on principles of fair dealing and good faith; were not fair and balanced; did not disclose risks associated with the investment; guaranteed promising returns that were exaggerated, unwarranted or misleading; and the predictions of performance were also exaggerated or unwarranted.

Genitriniís private offering of securities, which involved promissory notes his company issued according to the private placement memorandum, was not made pursuant to an effective registration statement filed with the SEC; the offering was intended to be made pursuant to the exemption from registration in Section 4(2) of Rule 506 of Regulation D of the Securities Act of 1933, which prohibits offers or sales of securities by any form of general solicitation or general advertising. Genitriniís use of the Internet and his companyís website violated Section 5 of the Securities Act of 1933, and guaranteeing returns in the offer of securities over the Internet violated Section 17(a)(1) of the Securities Act of 1933.

In addition, Genitrini falsely described his work with his company on his member firmís outside business activity disclosure form and also failed to disclose that he maintained a website for the company; Genitrini told his firm, in writing, that his business and website were for tax-planning services.

Christian Genitrini : Fined $15, 000; Suspended 2 years; Required to requalify by exam for Series 7 and Series 63 before becoming re-associated with a member firm after the expiration of the suspension term. NOTE: The fine shall be paid in installments beginning 90 days after Genitriniís reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier.
Tags:  Website    Internet    Private Placement     |    In: Cases of Note : FINRA
Puritan Securities, Inc. nka First Union Securities, Inc. and Nathan Perry Lapkin (Principal)
AWC/2009017339801/May 2011

Acting through Lapkin, the Firm failed to enforce its heightened supervisory procedures for a representative placed on heightened supervision based on his prior disciplinary history. Lapkin was responsible for implementing the heightened supervision plan, which required review of the representativeís correspondence on a daily basis, review of all of the representativeís transactions prior to execution, quarterly reviews with the representative of his business, and quarterly review of the representativeís journal of all conversations that resulted in any business. Lapkin did not perform any of the required steps and the firm failed to take any steps to ensure that he followed the plan. The firm, acting through Lapkin, allowed a representative to continue using a website, which is deemed an advertisement pursuant to NASD Rule 2210, that promoted investments to be made through the firm, even though it violated the content standards of the rule. The website failed to provide a sound basis for evaluating the investment products being promoted, and contained exaggerated, incomplete and oversimplified statements comparing alternative investments to traditional investment products. Also,  the website further made unsubstantiated claims by identifying investments as ďpremierĒ alternative investments and stating that alternative investments can help dampen volatility and provide protection in down markets without providing a credible basis for these claims. In addition, the website also compared alternative investments to publicly traded investments, but failed to disclose all of the material differences between the investments, including the risks associated with the alternative investments.

Acting through Lapkin, the Firm allowed its representatives to sell shares of a fund through a flawed PPM that failed to disclose that the fundís manager had been terminated from his member firm because, according to his Uniform Termination Notice for Securities Industry Registration (Form U5), he had misreported, falsely input and reported late into the firmís internal booking systems for bond transactions, and that the fund manager had misreported numerous nondeliverable forward transactions, causing false profits on his profit and loss statements. Lapkin was aware of the content of the fund managerís Form U5 and knew that the PPM was silent about it. This omission was material because, as disclosed in the PPM, the fundís trading decisions relied primarily on the fund managerís knowledge, judgment and experience.

Puritan Securities, Inc. nka First Union Securities, Inc.: Censured, Fined $10,000 (A lower fine was imposed after considering, among other things, the firmís revenues and financial resources.)

Nathan Perry Lapkin: Fined $10,000; Suspended in Principal capacity only for 15 business days.

 

Tags:  Supervision    Private Placement    Website     |    In: U4, U5, RE-3, Rule 3070
Bill Singer's Comment
Interesting and well-presented case. Shows how an individual has increased regulatory exposure when he/she is on "notice" of circumstances that otherwise might not be known.
Weston International Capital Markets LLC
AWC/2009016198601/May 2011
The Firm did not retain certain books and records that were required to be retained pursuant to SEC Rule 17a-4, including employment applications, signed original Uniform Applications for Securities Industry Registration or Transfer (Forms U4), articles of incorporation, records of internal inspections, and compliance, supervisory and procedures manuals, including updates, modifications and revisions. The firm failed to properly designate a registered FINOP, but continued to file FOCUS reports as required. The firm had at least one affiliated entity for which a website was established that referenced the firmís broker-dealer business, and he website was never filed with and approved by FINRAís Advertising Regulation Department within 10 days of first use or publication, and the firm did not evidence that the website had been approved by a registered principal by signature or initial. The firm failed to conduct AML testing and training, and failed to timely file a quarterly FOCUS report.
Weston International Capital Markets LLC : Censured; Fined $15,000
Tags:  FINOP    AML    Website     |    In: Cases of Note : FINRA
April 2011
Courtlandt Gerdes Miller (Principal)
OS/2008013183601/April 2011

Miller caused a research report to be published on a website that he had previously operated when he was the owner and president of a former FINRA member firm. Miller caused a press release to be issued by a public relations firm announcing the research report that was distributed to financial wire services. Miller did not inform or obtain approval from his member firm where he was registered regarding either the intention to publish the report on the former FINRA member firmís website, or cause a press release to be issued announcing the research report. Neither the website nor the press release were approved by signature or initial and dated by a principal of firm where Miller was registered.

Millerís firm filed an application with FINRA seeking approval for the firm to produce and distribute research reports. Miller was aware that the application had been filed and at the time the research report was published and the press release issued, the application was still pending and FINRA had not approved it. In addition, even though Miller knew that his firm had filed the application, he took no steps to ascertain whether or not the application had been approved. Moreover, he caused his firm to engage in the production and distribution of a research report at a time when it was not approved to do so. Furthermore, the research report and press release contained false information that stated it was prepared by a member firm although it had withdrawn its membership and was no longer a FINRA member firm.

Courtlandt Gerdes Miller (Principal): Fined $7,500; Suspended 10 business days
Tags:  Website     |    In: Cases of Note : FINRA
February 2011
Jason Leekarl Beckett
AWC/2009016600001/February 2011

Beckett submitted an advertisement to a local newspaper, which listed an entity he owned as offering certain investments, including certificates of deposit (CDs) and fixed annuities, and that he did not submit the advertisement to his member firm for review and approval; moreover, the advertisement content included misleading statements regarding the offered investments.

Beckett maintained a website for an entity he owned, which was accessible to the investing public, and he failed to submit the website material to his firm for review until a later date. Beckett failed to obtain his firmís written approval of the website content prior to its use.

Beckett completed an annual certification, which he provided to his firm and he answered ďnoĒ to the question asking whether he anticipated using any type of electronic communication systems such as the Internet for soliciting business.

Jason Leekarl Beckett : Fiend $10,000; Suspended 2 months
Kim Edward Elverud (Principal)
OS/2008013429301/February 2011

Elverud caused his member firm to use Internet advertisements, websites and other public communications that were misleading, did not supply fair and balanced presentations of risks and rewards, or failed to give a sound basis for evaluating information. Elverud failed to approve or maintain records of public communications his firm issued. Elverudís firm distributed a newsletter, which Elverud wrote, about a company whose securities the firm marketed; the letter was unduly and excessively positive, and failed to disclose material facts concerning the companyís financial difficulties, which caused the communication to be misleading.

Elverud made misrepresentations to investors through letters written on firm letterhead, about the securities the company issued, and the letters misrepresented the individual offers being made as a general reinvestment option to keep the investors from redeeming their holdings in the companyís securities, and omitted material information regarding the companyís financial difficulties.

Elverud caused his firmís books and records identifying personnel holding supervisory and compliance responsibilities to be inaccurate. Elverud caused his firm to conduct a securities business while it was in violation of its net capital requirements.

Kim Edward Elverud (Principal): Barred
Tags:  Website    Internet     |    In: Cases of Note : FINRA
January 2011
Jenny Quyen Ta (Principal)
AWC/2010021538701/January 2011

Ta engaged in outside business activities and failed to give prompt written notice to her member firm. Ta failed to disclose that she had financial interests and/or discretionary authority in multiple brokerage accounts at other broker-dealers and failed to give her firm prompt written notice of these accounts; on account applications, she falsely indicated that she was not affiliated with a securities firm. On a firm securities annual attestation form, Ta falsely stated that she did not have a personal securities account.

Ta created websites which included representations about her career accomplishments but never obtained a registered firm principalís approval for those sites. One of the websites stated that Ta founded a full-service broker-dealer that was a FINRA member when, in fact, it was not; although that entity had a new member application pending with FINRA, it was not an actual broker-dealer and never became a FINRA member.

Ta failed to inform a registered firm principal that she had a Twitter account which, on occasion, she used to tout a particular stock. In addition, Taís ďtweetsĒ were unbalanced, overwhelmingly positive and frequently predicted an imminent price rise, and Ta did not disclose that she and her family members held a substantial position in the stock.

Jenny Quyen Ta (Principal): Fined $10,000; Suspended 1 year.
Tags:  Away Accounts    Website    Internet    Electronic Communications     |    In: Cases of Note : FINRA
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