NOTE: 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 and to the entry of findings.

FINANCIAL INDUSTRY REGULATORY AUTHORITY
FINRA
2008

OUTSIDE BUSINESS ACTIVITIES

VISIT WALL STREET'S LEADING ONLINE COMMUNITY
BrokeAndBroker.com

 

Alexandre Pereira Guimaraes
AWC/2006006868301/December 2008 

Guimaraes engaged in outside business activities, for compensation, without prompt written notice to his member firm. 

Alexandre Pereira Guimaraes: Fined $5,000; Suspended 30 business days in all capacities

Joseph Andrew Zaragoza Jr.
E8A2002109804/November 2008
National Adjudicatory Council (NAC) affirmed findings and sanctions on appeal from the Office of Hearing Officers (OHO).

Zaragoza engaged in excessive trading in a public customerís account that was inconsistent with the customerís investment objectives and financial situation and was thus unsuitable. The sanction was also based on findings that stated that Zaragoza exercised discretion in the customerís account without prior written authorization from the customer and written notice to his member firm and that he failed to submit pieces of email correspondence to his firm for review and approval. Also, Zaragoza engaged in outside business activities, for compensation, and failed to provide his member firm with written notice, but the NAC declined to impose a sanction for this violation because of the bar imposed for the other violations. 

Joseph Andrew Zaragoza Jr.: Barred in all capacities

Sloan Securities Corp. and James Curtis Ackerman (Principal) 
AWC/E9B2005014202/November 2008

Acting through Ackerman, the Firm 

  • allowed a registered representative to act as an unregistered principal of a branch;
  • failed to establish, maintain and enforce a supervisory system and written procedures to supervise the activities of registered members to achieve compliance with applicable rules and regulations regarding 
    • markups/markdowns
    • commission charges
    • municipal securities and private securities transactions, 
    • outside business activities, 
    • Securities and Exchange Commission (SEC) Regulation SP
    • sale of private placements
    • free-riding and withholding
    • advertising and sales literature, and 
    • the Regulatory Element of the Continuing Education Requirement;
  • failed to enforce its supervisory system and written procedures regarding the securities activities of a branch office so that the firm failed to provide for supervision of that branchís registered representatives, particularly with respect to suitability of unregistered securities;
  • in connection with its branch office inspections, failed to prepare a written inspection report that included the testing and verification of its policies and procedures regarding the safeguarding of customer funds and securities, validation of customer address changes, transmittal of funds and other areas;
  • failed to establish or enforce procedures for a registered principal to review business-related electronic correspondence in one of its branch offices;
  • failed to designate and specifically identify to FINRA one or more principals to establish, maintain and enforce a system of supervisory control policies and procedures and, therefore, failed to establish procedures providing for the review and supervision of customer account activity conducted by branch office managers, sales managers or other supervisory persons;
  • failed to establish procedures reasonably designed to provide heightened supervision over the activities of each producing manager responsible for generating 20 percent or more of the revenue of the business units supervised by the producing managerís supervisor;
  • in connection with a transaction in which the firm received approximately $350,000 in customer funds to purchase shares of an unregistered stock, the firm failed to 
    • establish and maintain a Special Reserve Bank Account for the Exclusive Benefit of Customers, 
    • prepare computations to determine the amount of funds and/or qualified securities needed to be deposited in the reserve account, and 
    • make the required deposit of funds and/or qualified securities to the account. 
    • accurately post the receipt and payment of customer funds in its general ledger. 
  • in connection with a contingent private offering in which it was seeking to raise $60 million as a placement agent, caused the release of public customer funds from escrow before the satisfaction of the contingency, contrary to the terms of the offering. 
  • failed to maintain a Checks Received and Forwarded Blotter in a branch office, and that order tickets for equity, corporate bond and municipal securities transactions contained deficiencies;
  • failed to file summary and statistical information with FINRA for customer complaints

Sloan Securities Corp.: Censured; Fined $65,000

James Curtis Ackerman: Fined $35,000, Suspended 3 months in Principal capacity; Suspended 10 business days in all capacities (suspensions to run concurrently); Ordered to requalify by examination as a general securities principal by passing the Series 24 examination within 60 days of the end of the three-month suspension. If Ackerman fails to pass the examination, he may not perform any functions requiring principal registration until such time as he passes the required examination.

Bill Singer's Comment: First off, I've been working on Wall Street for more than a quarter of a century.  Frankly, I can't think of any case that I've read or been involved with where there was such a breathtaking panoramic scope of violations.  Sloan is absolutely impressive on that account alone.  

However (and, yes, there is always that qualifier), I still have a nagging feeling or fear that all is not what it seems.  Assuming that FINRA hasn't hyped the facts here (and we know that would never, ever happen), I did quite a double take when I saw that the firm was fined a mere $65,000.  I rubbed my eyes because I thought the fine was $650,000, which made sense to me given the enormity of the violations; but when I saw that there were only three zeroes after the "65" I was astonished.  Then I figured that Mr. Ackerman was going to be barred as a Principal or certainly sat down for a few years.  Gee, imagine my puzzled look when I saw he got three months with a requal for the Series 24 and a mere 10 business days in all capacities.

My research revealed that Sloan has been an NASD/FINRA member since 1987.  I truly do not understand how all of the above just materialized in 2008, out of the blue, to the apparent shock and mystification of regulatory staff.  Moreover, since Mr. Ackerman was apparently suspended in 2005 to 2006 by NASD for one-year as a Compliance Director, you would think that his activities and that of his firm would have been subjected to all the more scrutiny during examinations since then. 

Ultimately, Sloan is the single most illustrative case of all that I see wrong with how Wall Street is regulated. I find it hard to believe that the good old FINRA examiners just happened to stroll into Sloan one fine day and, voila, the firm was in total disarray.  A compliance meltdown of this magnitude does not occur all at once. So many things had to be wrong from day one, so many things had to take months to go wrong, that you have to wonder why FINRA just didn't catch any of this earlier.  And if the best that FINRA can do for our industry and the investing public is to read the toe tag on this corpse of a member firm, then we're not really talking so much about pre-emptive regulation as post-mortems. 

Earl Robb Eastman and Robert Aaron Fink
AWC/2006006441701/2006006441702/October 2008

Eastman and Fink engaged in outside business activities, for compensation, and failed to provide their member firm with prompt written notice. 

Earl Robb Eastman and Robert Aaron Fink: Each fined $10,000; Each Suspended 3 months in all capacities

Michael Anthony White
AWC/2006003881701/September 2008

White 

  • accepted loans totaling $504,000 from public customers without his member firmís permission prior to accepting the loans, and did not subsequently disclose to his firm that he had accepted the loans;
  • completed annual compliance questionnaires in which he falsely represented to his firmthat he had not borrowed money from, or loaned money to, any firm customers. 

Also,White engaged in outside business activities without providing written notice to his firm. 

Michael Anthony White: Fined $20,000; Suspended 1 year in all capacities

Amy Lou Styer
AWC/2007010641101/September 2008

Styer engaged in an outside business activity, for compensation, without prompt written notice to her member firm; and failed to respond to a FINRA request to testify under oath. 

Amy Lou Styer: Barred

Sharon Ann Stanley
AWC/20070092161-02/September 2008

Stanley engaged in outside business activities for compensation without written notice to her member firm. 

Sharon Ann Stanley: Fined $5,000; Suspended 3 months in all capacities

Donald Harold Relyea (Principal) 
AWC/2007010657601/September 2008

 

Relyea 

  • participated in private securities transactions without prior written notice to his member firm;
  • completed annual compliance questionnaires and falsely represented that he was not engaged, and had not engaged, in any private securities transactions;
  • engaged in outside business activities for compensation, without prompt written notice to his member firm; and
  • completed an annual firm compliance questionnaire in which he falsely represented that he had not engaged in any outside business activity. 

Donald Harold Relyea: No fine in light of financial status; Suspended 20 months in all capacities

Starrla Ramae Norman
AWC/2007009216101/September 2008 

Norman engaged in outside business activities for compensation without written notification to her member firm.

Starrla Ramae Norman: Fined $5,000; Suspended 6 months in all capacities

Noel D. Martin
AWC/2007009235201/September 2008 

Martin engaged in outside business activities for compensation and failed to provide prompt written notice to his member firm. 

Noel D. Martin: Fined $5,000; Suspended 90 days in all capacities

Juhn Ki Lee
AWC/2007009084701/September 2008

Lee engaged in outside business activities without prompt written notice to his member firm. 

Juhn Ki Lee: Fined $5,000; Suspended 1 year in all capacities

Cathy Ann Katzenberger
AWC/20070084123-01/September 2008 

Katzenberger participated in outside business activities for compensation without providing written notice to her member firm. 

Cathy Ann Katzenberger: Fined $5,000; Suspended 2 months in all capacities

James Soo Jang
AWC/20070091180-02/September 2008 

Jang engaged in outside business activities by referring individuals to a mortgage lender for which he received $900. Jang failed to provide his member firm with prompt written notification of the referral activity and provided his firm with a written statement in which he falsely stated that he did not receive any money from the mortgage lender. 

James Soo Jang: Fined $5,000; Suspended 3 months in all capacities

Allan Bruce Rosenthal 
AWC/2007009427201/August 2008

Rosenthal effected unauthorized transactions and/or failed to execute sell orders in public customer accounts. He marked all of the order tickets for the unauthorized trades as unsolicited when the trades, in fact, were solicited. Also, Rosenthal sent misleading and unapproved emails to customers from his personal email address, contrary to NASD rules and his member firmís policy requiring that all written correspondence be sent from the firmís system and prohibiting the recommendations of securities not followed by the firmís research. Rosenthal failed to provide prompt written notice to his firm of his outside business activities

Allan Bruce Rosenthal: Barred

Bill Singer's Comment: Interesting how a number of disparate threads come together to knit a case. He solicited trades but marked the tickets as "unsolicited." That's one violation.  Then there is the underlying fact that the trades were unauthorized. That's a second shot. Then he failed to execute sell orders. Strike three. Then he sends out emails that are misleading (fourth violation), unapproved (fifth), and sent from his personal email address in violation of Firm policy (sixth).  On top of that, some of his emails recommended securities not on the firm's approved research list in contravention of policy. Seven down. And, to top it all off with a not so lucky eight, he then violated the outside business activity rule.
Manuel Raul Montanez
AWC/2006007065501/August 2008 

Montanez engaged in outside business activities and failed to provide his member firm with prompt written notice. 

Manuel Raul Montanez: Fined $5,000; Suspended 3 months

Mitchell Scott Kenvin
AWC/2007008106801/August 2008 

Kenvin engaged in outside business activities without prompt written notice to his member firms. 

Mitchell Scott Kenvin: Fined $10,000; Suspended 18 months in all capacities

Aaron Donald Vallett
AWC/2006005754402/July 2008 (Principal) 

Vallett engaged in outside business activities, for compensation, without prompt written notice to his member firm. Vallett completed a firm questionnaire in which he represented that he was not engaged in outside employment or business activity. Vallett signed a firm form acknowledging that firm employees were not permitted to sell equity-indexed annuities and were required to report past sales, despite his past sales of equity-indexed annuities. 

Aaron Donald Vallett: Fined $5,000; Suspended 4 months in all capacities

Michael Hollis Stewart
AWC/2006007225201/July 2008 

Stewart engaged in outside business activities, for compensation, and failed to give prompt written notice to his member firm. 

Michael Hollis Stewart: Fined $5,000; suspended 30 business days

Carolyn Ann Monahan
OS/2006006773501/July 2008 

Monahan engaged in outside business activities, for compensation, without prompt written notice to her member firm. Monahan failed to timely respond to FINRA requests for documents and information. 

Carolyn Ann Monahan: Fined $2,500 (in light of her financial status); Suspended 6 months 

Glenn Ferrell Bruce Jr. 
OS/2007009269801/July 2008

Bruce engaged in outside business activities, for compensation, without prompt written notice to his member firm. 

Glenn Ferrell Bruce Jr.: Fined $5,000; Suspended 1 month in all capacities.

Franklin Brent Porter
AWC/2007008195901/June 2008 

Porter engaged in outside business activities, for compensation, contrary to his member firmís written procedures that require that representatives obtain the firmís prior written permission. Porterís firm never received, reviewed or approved a written request.

Franklin Brent Porter: Fined $2,500; Suspended 10 business days

Michael Walter Firehock
OS/2006004978301/June 2008

Firehock willfully failed to disclose material information on his Form U4. Firehock engaged in outside business activities without prompt written notice to his member firm, and submitted documents with false information to his member firm that claimed that he was no longer involved in outside business activities.

Michael Walter Firehock: Fined $7,500; Suspended 2 years

Philip Paul Rusnak
AWC/2006006744601/May 2008 

Rusnak engaged in an outside business activity, for compensation, without prompt written notice to his member firm. 

Philip Paul Rusnak: Fined $5,000; Suspended 30 days

Victor Gregory Grieco
AWC/2007008267701/May 2008 

Grieco engaged in outside business activities without prompt written notice to his member firm. He referred public customers to an independent insurance broker to purchase life insurance and received $18,000 in commissions from the sale of the policies. 

Victor Gregory Grieco: Fined $10,000;Suspended 10 business days

Steven Paul Cariati (Principal)
AWC/2008012269901/May 2008

Cariati engaged in an outside business activity, for compensation, outside the scope of his employment with a member firm and without prompt written notice to his member firm. 

Steven Paul Cariati: Fined $5,000; Suspended 10 business days

Dana Dewitt Toney
2006006995801/April 2008

Toney engaged in outside business activities without providing his member firm with prior written notice, and failed to respond to FINRA requests for information. 

Dana Dewitt Toney: Barred

Angelo David Castricone
AWC/2008012269801/April 2008

Castricone engaged in outside business activities, for compensation, without providing prompt written notice to his member firm.

Angelo David Castricone: Fined $2,500; Suspended 10 business days

Walter Yun (Principal) 
AWC/#2006006195001/January 2008

Yun engaged in outside business activities, for compensation, without prior written notice, or any notice at all, to his member firm. When Yun was questioned by his firm about his business activities, he made misrepresentations regarding any involvement, receiving compensation, distributing sales or marketing material, discussing the business activity with any individuals and knowing any firm customers that had invested in the company. 

Yun settled customer complaints about their losses by giving the customers promissory notes without telling his firm about the customer complaints or purported settlements. Yun guaranteed customers against loss. Yun executed discretion in customer accounts without the customers' prior written authorization and his firm 's prior written acceptance of the accounts as discretionary, and exercised discretionary authority without disclosing it to his firm. 

Walter Yun (Principal): Barred

Bill Singer's Comment: This case is fairly typical of how regulators' often view certain violations as the likely tip of an iceberg, and, as such, use such opportunities as launching pads to uncover further misconduct.  As is often the case, an outside business activity (OBA) violation generally involves some deceit or effort to cover-up by the offending RR. [For more examples of this violation, visit the OBA page of this site]  It was bad enough that Yun failed to follow the OBA Rule and give prior written notice to his firm, but he then compounded his misconduct by misrepresenting the nature and extent of his involvement.  Moreover, as is often the natural result of such deceitful conduct, Yun had a number of customer complaints and similarly tried to handle those sub rosa by entering into undisclosed settlemetn. [For more about these cases, visit the Undisclosed Settlements page of this site].  

Many would think that juggling two such violations would be enough, but, frankly, veteran defense lawyers and enforcement attorneys know that there is even more below the surface.  Generally, if someone has covered up an OBA activity and entered into undisclosed settlements, there's a good chance that there's yet another improper side deal.  The way it often goes is that the RR says to the customer: "Look, give me a chance here to make it up to you.  Let me trade your account and I'll get your losses back."  And if the once-burned client says 'no,' then the RR often retorts with "Okay, how about I guarantee you against any loss?  Will that persuade you to keep this all quiet and give me a chance?"  I have no idea what happened with Yun, but I am not surprised to see how the dominos fell here.

Phillip Michael Graff
OS/#2005003325801/January 2008 

Graff engaged in outside business activities, for compensation, and failed and neglected to give prompt written notice of his activities to his member firm . Graff falsified firm questionnaires by stating that he was neither engaged in outside business activities nor receiving compensation for outside business activities. The findings also stated that when confronted by his member firm , Graff denied being involved, and failed to provide his personal income tax returns to his firm and to respond to written questions from his firm.

PhillipMichael Graff: Fined $5,000; Suspended 6 months

Carol Joy Bouabid
OS/2005000029202/January 2008 

Bouabid failed to provide prompt written notice to her member firm that she was engaged in outside business activities for compensation. Bouabid testified falsely during a FINRA on-the-record interview regarding her outside business activities and the reason she left another member firm.

Carol Joy Bouabid: Fined $10,000; Suspended 2 years

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