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
PRIVATE SECURITIES TRANSACTIONS

VISIT WALL STREET'S LEADING ONLINE COMMUNITY
BrokeAndBroker.com

 

Eduardo Galan 
AWC/2007007215101/December 2008

Galan engaged in private securities transactions without prior written notice to, or prior written approval from, his member firm. Galan commingled customer funds withmonies not belonging to the customers in a bank account that he controlled. He failed to respond to FINRA requests for information and documents. 

Eduardo Galan: Barred

Steven Fisher Mosshart
OS/2005001798201/November 2008 

Mosshart 

  • engaged in private securities transactions and failed to give written notice to, and receive written acknowledgement from, his member firm;
  • borrowed funds from public customers contrary to his member firmís prohibition from borrowing from customers; and
  • completed and submitted questionnaires to his firm that were false and misleading, in that he represented that he had not borrowed money from firm customers. 

Steven Fisher Mosshart: Ordered to pay $905,000, plus interest, in restitution to public customers; Suspended 1 year in all capacities

Riley Kenneth McHugh (Principal)
AWC/2007008143401/November 2008 

McHugh participated in private securities transactions without prior written notice to, or prior written approval from, his member firm; and failed to respond to FINRA requests for information and documents. 

Riley Kenneth McHugh: Barred

Jordan Dean Main
AWC/2006006357701/November 2008 

Main engaged in private securities transactions and failed to give written notice of his intention to participate in the proposed transactions and to receive written acknowledgement of said notice. 

Jordan Dean Main: Fined $5,000; Suspended 4 months in all capacities

Christopher Ronald Guenther
AWC/2007009414201/October 2008

Guenther 

  • engaged in private securities transactions without prior written notice to, and written approval from, his member firm;
  • transferred a customer from an existing fee based account to a commission-based IRA (without the public customerís permission) and began making unauthorized trades in the account;
  • sold securities from the customerís other retirement accounts without authorization and transferred the funds into the commission-based account;
  • made unauthorized trades in the accounts, causing the accounts to sustain trading losses of $25,300 and to generate commission fees of $34,220; 
  • placed the customer into the commission-based account (without regard to the customerís fee structure preferences) with a fee structure that could reasonably have been expected to result in a greater cost than the previous fee-based account;
  • sent the customer an email that his member firm did not review or approve from his own personal email address;
  • solicited and recommended a highly risky and speculative investment to a public customer that was inconsistent with the customerís investment objectives and financial situation; and
  • made untrue statements during a FINRA on-the-record interview. 

Christopher Ronald Guenther: Barred

Johnson Rice & Company, L.L.C. and Edward Douglas Johnson Jr. (Principal)
AWC/2007007422001/October 2008

 

the Firm

  • issued equity research reports where the front page did not identify the specific page(s) on which required disclosures appeared and the required-disclosures section was not prominently titled;
  • failed to adopt and implement written supervisory procedures reasonably designed to ensure that the firm and its employees comply with the provisions of NASD Rule 2711(g)(6), which mandates the pre-approval of all transactions of persons who oversee research analysts to the extent such transactions involve equity securities of companies covered by the research analysts they oversee; 
  • failed to preserve all communications in compliance with Section 17(a) of the Securities Exchange Act and SEC Rule 17a-4; 
  • had a systemin place for preserving electronic communications, but the system was not effective at preserving all electronic communications; and
  • had no procedures requiring periodic retrospective reviews or ďspot-checksĒ of the system to determine whether it was preserving communications in compliance with SEC Rule 17a-4. 

Acting through Johnson, the Firm

  • failed to adequately supervise two of its associated personsí participation in hedge fund-related private securities transactions that the firm had authorized;
  • authorized the associated persons to each operate and manage his own hedge fund, but failed to adequately supervise their hedge-fund-related activities; and
  • failed to establish and implement written supervisory procedures relating to supervision of private securities transactions that the firm approved. 

Johnson Rice & Company, L.L.C. : Censured; Fined $65,000 ($5,000 jt/sev with Johnson)

Edward Douglas Johnson Jr.: Fined $5,000 jt/sev with Firm; Suspended 10  business days in Principal capacity only

Mark Aderek Schultz
AWC/2007009054501/September 2008 

Schultz participated in private securities transactions without prior written notice to his member firm.

Mark Aderek Schultz: Fined $5,000; Suspended 4 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

Rose Pauline Morandini
OS/2006005483401/September 2008 

Acting with scienter, Morandini directly or indirectly, in connection with the purchase or sale of securities, by the use of means or instrumentalities of interstate commerce, or of the mails, employed devices, schemes or artifices to defraud; made untrue statements of material fact or omitted to state material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; or engaged in acts, practices or courses of business that operated, or would operate, as a fraud or deceit upon purchasers or prospective purchasers and effected transactions in, or induced the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance. Morandini engaged in private securities transactions without prior written notice to, and written approval from, her member firm. Morandini failed to respond fully to FINRA requests for documents and information; and failed to cooperate with her firmís inquiry regarding her activities. 

Rose Pauline Morandini: Barred

Stephen Matthew Sirianni 
OS/E8A2004095401/August 2008

Sirianni participated in private securities transactions and failed to give prior written notice to, and receive written approval from, his member firm. While using the means and instrumentalities of interstate commerce to offer securities for sale, Sirianni made material misrepresentations in the form of price predictions to induce transactions, which did occur. Sirianni engaged in outside business activities and failed to give prompt written notice to his member firm. He failed to amend his Form U4 to disclose an SEC civil action

Stephen Matthew Sirianni: Fined $15,000; Suspended 2 years in all capacities

Farhang Oshidary
AWC/2007009432901/August 2008 

Oshidary engaged in private securities transactions without prior written or oral notice to his member firm. 

Farhang Oshidary: No fine in light of financial status; Suspended 4 months in all capacities

Paul Andrew Niess
2005003332001/August 2008 

Niess participated in private securities transactions without prior written notice to, or written approval from, his member firm. Also,  Niess borrowed $405,000 from public customers in violation of his firmís written supervisory procedures, which prohibited registered representatives from ďmaking loans to or accepting loans from customers.Ē 

Paul Andrew Niess: Barred

name deleted at sole discretion of rrbdlaw.com
AWC/20060072975-01/August 2008

JANE DOE participated in private securities transactions, for compensation, without prior written notice to, and written approval from, her member firm; and she subsequently failed to appear for a FINRA on-the-record interview. 

name deleted at sole discretion by rrbdlaw.com: Barred

Jack Alexander Arnold 
AWC/2007009927401/August 2008

Arnold participated in private securities transactions, for compensation, without prior written notice to, or prior written approval from, his member firms. He invested $145,000 in a common stock without providing his member firm with prior written notice of his intent to purchase this stock and obtaining his member firmís approval. 

Jack Alexander Arnold : Barred

Thomas Edward Sullivan
AWC/2006006995901/July 2008 

Sullivan participated in private securities transactions and failed to notify his member firms of his participation in the transactions. 

Thomas Edward Sullivan: Barred

Vivian Veryle Gwin
AWC/20060072975-01/July 2008 

Gwin participated in private securities transactions, for compensation, without prior written notice to, and written approval from, her member firm. Also, she failed to appear for a FINRA on-the-record interview. 

Vivian Veryle Gwin: Barred

Scott Burtenshaw Gordon (Principal)
AWC/2006006584301/July 2008 

Gordon engaged in private securities transactions, for compensation, and failed to provide prior written notice to his member firm describing the proposed transactions and his role therein, and failed to obtain his member firmís written approval. Also, Gordon received $67,500 from public customers to invest but, instead, used themoney to fund expenses incurred in connection with the general operations of his approved outside business activity company

Scott Burtenshaw Gordon: Barred

Richard C. Dergance Jr.
AWC/20070081647-01/July 2008 

Dergance participated in private securities transactions, for compensation, without prior written notice to his member firm. 

Richard C. Dergance Jr.: Fined $5,000; Suspended 4 months in all capacities; Ordered to disgorge $18,541 plus interest in commissions as partial restitution to public customers.

James Douglas Walker 
OS/2006004754302/June 2008

Walker engaged in private securities transactions, for compensation, without prior written notice to, or written approval from, his member firm. 

James Douglas Walker: Fined $10,000; Suspended 6 months

Blair Christopher Mielke
AWC/20060054450-05/June 2008 

Mielke engaged in private securities transactions without prior written notice to, and written approval from, his member firm. 

Blair Christopher Mielke: Fined $5,000; Suspended 6 months

Wayne Allen Ritenour Jr. (Principal)
AWC/2006006476901/May 2008 

Ritenour engaged in a private securities transaction without prior written notice to, and approval from, his member firm. He failed to appear for a FINRA on-the-record interview. 

Wayne Allen Ritenour Jr.: Barred

Terrance Reid Pipenhagen (Principal) 
AWC/2006006849601/May 2008

Pipenhagen solicited individuals to invest $475,000 in commodities trading accounts he maintained and controlled. Pipenhagen lost all of the investorsí funds and sent false account statements to the investors in order to conceal their losses and to prevent them from pulling out their investments before he had a chance to recover their losses. Also, Pipenhagen engaged in private securities transactions without prior written notice to his member firm. 

Terrance Reid Pipenhagen: Barred

Nicole Yvette Allen
2006005891201/May 2008

Allen engaged in a private securities transaction without providing prior written notice to her member firm, and failed to respond to FINRA requests for information. 

Nicole Yvette Allen: Barred

John Hutchison Arnette
2005002734201/April 2008 

Arnette failed to appear for FINRA on-the-record interviews, and engaged in private securities transactions without prior written notice to, and approval from, his member firm.

John Hutchison Arnette: Barred

Dennis Wayne Sharp (Principal) 
AWC/2006006587101/March 2008 

Sharp engaged in private securities transactions without prior notice to, and approval from, his member firm. Sharp represented to public customers that payments on promissory notes were guaranteed when he should have known that they were not guaranteed, and failed to inquire sufficiently into their status before making representations. Sharp made recommendations to public customers without reasonable grounds for believing they were suitable for the customers on the basis of facts disclosed by them as to their other security holdings, financial situation and needs. 

Dennis Wayne Sharp: Barred

Kenneth Robert Mahoney 
AWC/2006004140201/March 2008

Mahoney participated in private securities transactions with his member firm customers without prior written notice to, or prior written approval from, his member firm. 

Kenneth Robert Mahoney: Fined $49,123 (includes $44,123 in disgorgement); Suspended 6 months in all capacities.

John Thomas Blanchette (Principal) and Danny Ray Woosley (Principal)
AWC/20060054450-03/20060054450-04/March 2008

Blanchette and Wossley engaged in private securities transactions without prior written notice to, and approval from, their member firm. 

John Thomas Blanchette (Principal): Fined $5,000; Suspended 20 business days

Danny RayWoosley (Principal): Fined $5,000; Suspended 10 business days

NAME DELETED AT SOLE DISCRETION OF RRBDLAW (Principal) 
AWC/2007008938701/February 2008

XXX engaged in private securities transactions without prior written notice to, or prior  written approval from, his member firm. XXX settled a customer complaint without his member firm 's knowledge or approval. Also, he failed to reasonably supervise a registered representative engaged in private securities transactions to prevent his violations and achieve compliance with applicable securities rules, regulations and NASD rules. 

NAME DELETED AT SOLE DISCRETION OF RRBDLAW: Barred

Joel Michael Vanderhoof (Principal)
AWC/2006005194501/January 2008

Vanderhoof engaged in private securities transactions, without compensation, and provided his member firm with oral notice but failed to provide prior written notice.

Joel Michael Vanderhoof: Fined $10,000; Suspended 30 days

Bill Singer's Comment: A fairly rare Private Securities case in which the RR actually gave notice (albeit oral) but did not wait to receive the requisite written approval.
Gary Dwight Sissel 
#2005001710701/January 2008

Sissel engaged in private securities transactions with public customers by issuing promissory notes totaling $432,500 and failed to provide written notice to his member firm. Sissel failed to repay the customers when the notes matured. Sissel failed to respond to FINRA requests for information.

Gary Dwight Sissel: Barred

Henry Paul Nemanich (Principal) 
AWC/#2005003468701/January 2008

Nemanich misused public customer funds, in that he wired $2,665,000 from the bank account for a limited liability limited partnership he controlled to his personal checking account, and used the proceeds contrary to the representations made to the customers in a private placement memorandum. Nemanich participated in private securities transactions, for compensation, without prior written notice to, and prior written approval from , his member firm. Nemanich borrowed $2.8million from an elderly customer and stopped making monthly installment payments on the loan. Nemanich failed to respond to a FINRA request for documents and information.

Henry Paul Nemanich (Principal): Barred

Daniel William Nay II
AWC/#2006005034801/January 2008

Nay participated in private securities transactions, for compensation, and failed to give written notice to, and receive written approval from , his member firm prior to engaging in the transactions. Nay borrowed $40,000 from a public customer in violation of his member firm's written procedures. Nay declined to appear for a FINRA on-the-record interview.

Daniel William Nay II

Howard Richard Gurvitch (Principal)
AWC/#2007009419401/January 2008

Gurvitch referred public customers to a third-party hedge fund adviser without providing written notification to his member firm that he was participating in private securities transactions for compensation. 

Howard Richard Gurvitch (Principal): Fined $154,048 (includes $144,048 disgorgement of compensation received from a third-party hedge fund advisor for customer referrals); Suspended 6 months

Kathy Joy Gordon (Principal) 
AWC/#2006006081501/January 2008

Gordon engaged in private securities transactions without prior written notice to her member firm.

Kathy Joy Gordon (Principal): Fined $5,000; Suspended 3 months

Multi-Financial Securities Corporation
AWC/2006004754301/January 2008

The Firm's supervisory systems and procedures were not reasonably designed to detect and investigate the nature and extent of a registered representative's private securities transactions. The Firm failed to detect the ongoing private securities transactions, to approve or disapprove the transactions, to supervise any approved transactions and to record them on its books and records. 

Multi-Financial Securities Corporation: Censured; Fined $12,000

Bill Singer's Comment: A most unhelpful regulatory report.  Since the Private Securities Rule is predicated upon the RR's first notifying the employing BD and obtaining prior written authorization, I'm not sure exactly what it is that FINRA found to be unreasonable systems/procedures.  Which is not to suggest that a BD may properly turn a deaf ear or a blind eye to apparent misconduct, but what exactly didn't this firm do that FINRA wanted it to do--or what is it that the firm did that wasn't adequate.  
MidSouth Capital, Inc. and Mark David Hill (Principal)
AWC/#2006004243001/2006003959801/January 2008

Acting through Hill, the Firm failed to supervise and record a registered representative's private securities transaction activities in the manner NASD Rule 3040(c) required. The Firm failed to record private securities transactions on its books and records and failed to report municipal securities transactions within the time period MSRB Rule G-14 prescribed. The Firm failed to adopt, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with its trade reporting obligations under MSRB Rule G-14. 

MidSouth Capital, Inc.: Fined $40,000 ($25,000 jt/sev with Hill); Suspended 6 months from approving any private securities transactions involving a hedge fund and/or a private investment partnership formed and/or managed by a firm representative registered with FINRA.

Mark David Hill (Principal): Fined $25,000 jt/sev with Midsouth; Suspended 20 days in Principal capacity.

Bill Singer's Comment: Another hefty suspension against a member firm.  Clearly, FINRA has come out swinging.  See Loeb case immediately below.
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