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NOTE:  Stipulation of Facts 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 and to the entry of findings.

FINANCIAL INDUSTRY REGULATORY AUTHORITY
FINRA
2008
Forms U4, U5, and RE-3 and Rule 3070 Reports

Also see the Statutory Disqualification Index

VISIT WALL STREET'S LEADING ONLINE COMMUNITY
BrokeAndBroker.com

 

Samuel Jeffrey Toliver 
AWC/2007010057001/December 2008

Associated Person Toliver willfully failed to disclose material information on his Form U4. 

Samuel Jeffrey Toliver: Fined $5,000; Suspended 6 months in all capacities

Robert J. Soper
2007009246101/December 2008

Associated Person Soper willfully failed to disclose material information on his Form U4, and failed to respond to FINRA requests for information and documents. 

Robert J. Soper: Barred

Michael Joseph Salovay
AWC/2007010185501/December 2008 

Salovay willfully failed to disclose material information on his Forms U4

Michael Joseph Salovay: Fined $5,000; Suspended 9 months in all capacities

Matthew J. Pincus 
2006007131601/December 2008

Associated Person Pincus willfully failed to disclose material information on his Form U4, and failed to respond to FINRA requests for information. 

Matthew J. Pincus: Barred

Robert Donald Mudry 
AWC/2006004122401/December 2008

Associated Person Mudry engaged in securities activities requiring registration at a time when he was not registered, and was associated with the member firm while subject to statutory disqualification. Mudry filed a Form U4 that was inaccurate and misleading and failed to respond to a FINRA request to appear for on-the-record testimony. 

Robert Donald Mudry : Barred

Cheryl Simone Eaton
2007009838001/December 2008 

Associated Person Eaton willfully failed to disclose material information on her Form U4. The NAC has denied Eatonís request for a late appeal as result of her failure to respond to its request for information. 

Cheryl Simone Eaton: Barred

Susan Marie Capozzoli 
AWC/2007009428701/December 2008

Capozzoli willfully failed to disclose material information on her Forms U4. 

Susan Marie Capozzoli: Fined $5,000; Suspended 4 months in all capacities

Chris Theron Bond
OS/2007008605101/December 2008

Associated Person Bond willfully failed to disclose material information on his Form U4, andfailed to timely respond to FINRA requests for information. 

Chris Theron Bond: Fined $5,000; Suspended 2 years in all capacities

Omar Sharif Amanat
E102004094501/December 2008

Associated person Amanat willfully and repeatedly failed to update his Uniform Applications for Securities Industry Registration or Transfer (Forms U4) to disclose material information, and failed to respond to FINRA requests for information.

Omar Sharif Amanat: Barred

Avalon Partners, Inc. 
AWC/2006003682401/December 2008

The Firm failed to 

  • develop and implement policies and procedures reasonably designed to detect and cause reporting of suspicious transactions, and to achieve compliance with the Bank Secrecy Act and the implementing regulations promulgated thereunder by the Department of the Treasury;
  • maintain the required minimum capital while conducting a securities business; and
  • report, and timely report, statistical and summary information for customer complaints through the NASD Rule 3070 reporting system. 

Avalon Parnters, Inc.: Censured; Fined $20,000

Ruben Garcia Rojas
AWC/2007010993301/November 2008

Associated Person Rojas willfully failed to disclose material facts on his Form U4. 

Ruben Garcia Rojas: Fined $7,500; Suspended 4 months in all capacities

Nicholas Anthony Natale (Principal)
E072005005401/November 208

Natale failed to 

  • ensure that his member firm complied with the Taping Rule requirements under NASD Rule 3010(b)(2);
  • ensure that firm research analysts had passed the qualifying examinations before they published research reports;
  • file amended Forms U4 for registered representatives of the firm in response to written customer complaints the firm received; and
  • report, or to timely report, customer complaints to FINRA. 

Nicholas Anthony Natale: Fined $90,000; Barred in Principal capacity only

Jophlin Devon Johnson
2006005692701/November 2008 

Associated Person Johnson willfully failed to disclose material information on his Form U4 and failed to respond to FINRA requests for information. 

Jophlin Devon Johnson: Barred

John Douglas Audifferen
C1020030095/November 2008
Securities and Exchange Commission sustained findings of violation and sanctions on appeal of a National Adjudicatory Council decision on appeal from Office of Hearing Officers decision 

Audifferen 

  • improperly extended credit and caused member firm of registered securities association to extend credit to customer;
  • engaged in free riding with respect to customerís account; 
  • enjoyed beneficial use of and shared in the profits of the improperly extended credit;
  • caused member firm to extend credit improperly in registered representativeís brokerage accounts with member firm; and
  • failed to report a customer complaint on Form U4

John Douglas Audifferen: Fined $9,665; Ordered to pay $7,835 in restitution to a public customer; Barred

Bill Singer's Comment: The SEC's Opinion is quite well crafted and sets forth the issues with unusual clarity and then provides understandable explanations concerning the violations. Also, an interesting discussion of alleged FINRA hearing improprieties (by Staff and Hearing Officer) pertaining to alleged witness intimidation, sanctioning, advocacy by Hearing Officer, etc.
Midas Securities and Jay S. Lee (Principal)
OS/2005000075703/November 2008

The Firm and Lee failed to update Leeís Uniform Application for Securities Industry Registration or Transfer (Form U4) with material information. 

Midas Securities: Censured; Fined $15,000

Jay S. Lee: Fined $15,000: Suspended 45 days in all capacities.

Bill Singer's Comment: Although the fact pattern here is fairly garden-variety (see this U4 tab for examples), the noteworthy exception is that both the member firm and applicant were sanctioned.
Steven William Olin
AWC/2007007841301/October 2008 

Olin willfully failed to disclose material information on his Form U4. 

Steven William Olin: Fined $5,000; Suspended 3 months

Samuel Garth Nelson
AWC/2007010813601/October 2008

Associated Person Nelson failed to disclose material information on his Uniform Application for Securities Industry Registration or Transfer (Form U4). 

Samuel Garth Nelson: Fined $5,000; Suspended 3 months

Christopher Scott Swiecicki
AWC/20070094403/September 2008 

Swiecicki willfully failed to disclose material information on his Form U4. 

Christopher Scott Swiecicki: Fined $5,000; Suspended 3 months in all capacities

Gregory A. Smarr (Principal)
AWC/2006006515301/September 2008

Smarr willfully failed to disclose material information on his Form U4, and submitted multiple Forms U4 with incorrect information. 

Gregory A. Smarr (Principal): Fined $5,000; Suspended 8 months in all capacities

Billy D. Blanton
AWC/2007010631201/September 2008

Associated Person Blanton failed to disclose a material fact on his Uniform Application for Securities Industry Registration or Transfer (Form U4); and failed to appear for a FINRA on-the-record interview. 

Billy D. Blanton: Barred

Mark Richard Sommers
AWC/2006005509601/August 2008 

Sommers borrowed $42,000 from public customers, contrary to his member firmís written procedures forbidding registered representatives from borrowing money from customers. Sommers failed to amend his Form U4 to disclose material information.

Mark Richard Sommers: No fine in light of financial status; Suspended 6 months in all capacities

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

Mark Anthony Sanicki
AWC/2007009464701/August 2008 

Sanicki failed to report material information on his Form U4. 

Mark Anthony Sanicki: Fined $5,000; Suspended 9 months in all capacities

Tony James Parker
2007007959601/August 2008

Associated Person Parker willfully failed to disclose a material fact on his Form U4; and failed to respond to FINRA requests for information. 

Tony James Parker: Barred

Dina Mistry
AWC/2007009199301/August 2008

Associated Person Mistry willfully failed to disclose material information on her Form U4. 

Dina Mistry: Fined $5,000; Suspended 6 months in all capacities

Jose E. Llopiz Feliciano
AWC/2007010254301/August 2008 

Associated Person Feliciano failed to disclose a material fact on his Form U4.

Jose E. Llopiz Feliciano: Fined $5,000; Suspended 3 months

John Tawfik Iskander
AWC/2007009461101/August 2008 

Iskander willfully failed to disclose material information on his Form U4 and his member firmís Disclosure Form. 

John Tawfik Iskander: Fined $5,000; Suspended 6 months

Allan Yiv Chan
AWC/20070104825-01/August 2008

Associated Person Chan failed to disclose material information on his Form U4. 

Allan Yiv Chan: Fined $5,000; Suspended 3 months in all capacities

Jason John Morawski (Principal)
2005003382401/July 2008

Morawski willfully failed to disclose material information on Forms U4 and failed to respond to FINRA requests for information.

Jason John Morawski: Barred

Andrew Walter Holtmeyer (Principal)
OS/2007007959701/July 2008 

Holtmeyer failed to disclose material information on his Form U4. 

Andrew Walter Holtmeyer: Fined $5,000; Suspended 20 business days all capacities

Frederick Ingwert Braren Jr.
AWC/2007008605601/July 2008 

Braren willfully failed to disclose material information on his Form U4. 

Frederick Ingwert Braren Jr.: Fined $5,000; Suspended 1 year in all capacities

Next Financial Group, Inc. 
AWC/2007007165602/July 2008

The Firm failed to timely report statistical and summary information regarding customer complaints to FINRA. The Firm failed to timely file Form U4 and Form U5 amendments with FINRA to reflect customer complaints against registered representatives. 

Next Financial Group, Inc.: Censured; Fined $10,000

EKN Financial Services Inc. 
AWC/ELI2005000604/July 2008

The Firm failed to 

  • meet disclosure requirements for research reports
  • include the required disclosures on the front page of reports in a prominent, clear and comprehensive manner; 
  • provide a valuation method to determine the price target and a disclosure of risks that impeded achievement of price targets; 
  • maintain records of public appearances by research analysts
  • balance favorable discussions with disclosures of associated risks; 
  • enforce its procedures for reviewing duplicate account statements for the accounts of its brokers, including research analysts, to detect an analystís purchase of restricted stock; and 
  • conduct an annual attestation that the firm had adopted and implemented its research analyst rule procedures. 

The Firm maintained inaccurate balances in its general ledger and trial balance, and filed inaccurate Financial and Operational Combined Uniform Single (FOCUS) reports. The Firm conducted a securities business while failing to maintain the required minimum net capital, and failed to timely file a FOCUS Part IIA report and an annual audit. The Firm failed to amend or file Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registry (Forms U5), and filed Forms U5 late. The Firm failed to report customer complaints, employee suspensions and an arbitration, and filed reports late or inaccurately pursuant to the NASD Rule 3070 reporting system. 

The Firm failed to maintain or preserve order tickets and confirmations in connection with equity, corporate debt, short sales and mutual fund transactions. The Firm failed to preserve and maintain time of order receipt, solicitation status, associated registered representative and/or customer name, and execution price on order tickets for municipal, government security or corporate debt transactions. Moreover, FINRA found that the firm failed to preserve and maintain, in an accessible place, written incoming and outgoing correspondence. The Firm indicated on confirmations that it was a market maker in a security when it was not. The Firm permitted $7,312.91 in excessive commissions to be charged in equity retail transactions, which the firm has since refunded to the affected customers. 

EKN Financial Services Inc.: Censured; Fined $80,000

Bill Singer's Comment: All that for only $80,000?  Looks like someone had one hell of a lawyer. 
Crowell,Weedon & Co.
AWC/2007009457601/July 2008 

The Firm failed to 

  • promptly file Submissions of Required Information Pertaining to Members, Member Organizations, Allied Members, Registered and Non-Registered Employees (Forms RE-3) with the New York Stock Exchange (NYSE) in connection with the misappropriation of funds by firm employees
  • implement a business continuity plan that addressed procedures relating to an emergency or significant business disruption; and
  • make and keep current order tickets identifying who entered or accepted the orders on the customerís behalf of and the receipt time of the orders. 

Crowell,Weedon & Co.: Censured; Fined $25,000

Dale Eugene Shields II 
OS/2006005506601/June 2008

Associated Person Shields provided false information on his Form U4. 

Dale Eugene Shields II: Fined $5,000; Suspended 30 days

Walter Alan Sayers
AWC/2006006902501/June 2008

Sayers willfully failed to disclose a material fact on his Form U4. 

Walter Alan Sayers: Fined $5,000; Suspended 4 months

Leonard Johnson
AWC/2007008697601/June 2008 

Associated Person Johnson willfully failed to disclose material information on his Form U4, and failed to respond to FINRA requests for information.

Leonard Johnson: Barred

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

Vincent Chen
AWC/2007009171701/June 2008

Associated Person Chen willfully failed to disclose material information on his Form U4. 

Vincent Chen: Fined $5,000; Suspended 6 months

Penn Plaza Brokerage, Ltd. and Leonard Thomas DíAngelo (Principal)
AWC/2006004375702/June 2008

Acting through DíAngelo, the Firm signed and submitted Uniform Applications for Securities Industry Registration or Transfer (Forms U4) to FINRA on behalf of an individual who was statutorily disqualified from associating with any member pursuant to Article III, Section 4(g) of FINRAís By-Laws. The Firm and DíAngelo submitted the Forms U4 while aware of the individualís securities fraud-related criminal history and allowed the individual to become associated with the firm. 

Penn Plaza Brokerage, Ltd.: Censured; Fined $25,000 jt/sev with D'Angelo

Leonard Thomas DíAngelo (Principal): Fined $25,000 jt/sev with Firm; Suspended 10 business days all capacities; Suspended 45 days in Principal capacity.

Luke St. James Youngblood
AWC/20070094721/May 2008

Youngblood failed to disclose material facts on an application for employment submitted to a member firm. 

Luke St. James Youngblood: Fined $4,000; Suspended 5 months

Jeffrey Steve Stephan 
AWC/2007008535601/May 2008(CRD #862599

Stephan willfully failed to disclose material information on his Form U4. 

Jeffrey Steve Stephan: Fined $5,000; Suspended 1 year

Dale Eugene Shields II
OS/2006005506601/May 2008

Shields failed to disclose a material fact on his Form U4. 

Dale Eugene Shields II: Fined $5,000; Suspended 30 business days

Darrin Michael Marion
AWC/2007008359701/May 2008 

Marion willfully failed to disclose a material fact on his Form U4, and failed to appear for a FINRA on-the-record interview. 

Darrin Michael Marion: Barred

Kevin Troy Litterell
AWC/2006007157201/May 2008

Litterell failed to timely amend his Form U4 with material information, and failed to respond to FINRA requests for information. The findings stated that . (FINRA Case #)

Kevin Troy Litterell: Barred

Gary Gerard Kelly
AWC/2007009425001/May 2008

Kelly failed to disclose material facts on his member firmís annual update questionnaire and his Form U4

Gary Gerard Kelly: Fined $5,000; Suspended 6 months

Juan Carlos Hernandez
AWC/2007009435601/May 2008 

Hernandez engaged in a pattern of charging commissions on equity trades substantially in excess of his member firmís standard commission rate that began at the start of, and continued throughout, his employment with the firm. He manipulated the firmís order entry system so as to enable him to charge the commissions in question. Hernandez had an express agreement with a public customer to charge a lower commission rate, but he fraudulently violated the agreement. Hernandez failed to report complaint letters from the customer as reportable complaints to his member firm, causing his firm to violate NASD Rule 3070(c). 

Juan Carlos Hernandez: Barred

Leonard & Company 
AWC/E8A2005012903/May 2008

In connection with the sale of unregistered promissory notes, the Firm was unable to establish that the sale of the notes qualified for any exemption from registration. The Firm failed to submit any documentation about the public offering of the unregistered promissory notes to FINRA prior to their sale, and made no written disclosures to the purchasers of the conflict of interest in the offering of unregistered promissory notes prior to their purchase. 

Leonard & Company: Censured; Fined $25,000

===============

Leonard & Company 
AWC/E8A2005012904/May 2008

The Firm failed to 

  • disclose on order memoranda the execution time in inter-dealer municipal debt securities transactions, and the receipt time and execution time in other customer transactions for municipal debt securities; 
  • include an execution time on customer order memoranda regarding corporate debt securities;
  • maintain all of the required information for customer accounts;
  • retain email communication registered representatives sent and/or received;
  • comply with the terms of its membership agreement in that it opened branch offices while failing to obtain prior approval from FINRA because of its material change in business operations;
  • establish and maintain a system to supervise each registered representativeís activities reasonably designed to achieve compliance with applicable securities laws and NASD rules, in that the firm failed to have a supervisory system designed to ensure that its offices were registered as branch offices;
  • report a reportable event within 10 business days after it knew, or should have known, of the existence of disciplinary action it was taking against an individual; and
  • timely file amended Forms U4 and Uniform Termination Notices for Securities Industry Registration (Forms U5). 

Leonard & Company: Censured; Fined $65,000

Xadimul R. Samba
AWC/2006006643801/April 2008

Samba willfully failed to disclose material information on his Form U4 and failed to timely respond to FINRA requests for information. 

Xadimul R. Samba: Fined $10,000; Suspended 1 year

Christopher Shawn Kyle (Principal) 
AWC/2007008617101/April 2008

Kyle willfully failed to disclose material information on his Form U4. 

Christopher Shawn Kyle: Fined $5,000; Suspended 6 months

David Neil Frand
AWC/2007008109101)/April 2008 

Frand failed to disclose a material fact on his Form U4. 

David Neil Frand: Fined $5,000; Suspended 3 months

David Skaggs Curtis
AWC/2006007438601/April 2008

Curtis failed to disclose material information on his Form U4. 

David Skaggs Curtis: Fined $2,500; Suspended 3 months

Mellon Daniel Bryant 
2006006368001/April 2008

Bryant failed to respond to FINRA requests for information. The findings stated that Bryant willfully failed to disclose material information on his Form U4.

Mellon Daniel Bryant : Barred

Alex Lee Bernal
AWC/2007009433401/April 2008 

Bernal failed to disclose material facts on an application for employment he submitted to his member firm.

Alex Lee Bernal: Fined $5,000; Suspended 6 months

Gene Michael Askins
OS/2007007607801/April 2008

Askins willfully failed to disclose material facts on his Uniform Application for Securities Industry License or Transfer (Form U4) and failed to respond to FINRA requests for information.

Gene Michael Askins: Barred

Pershing LLC
AWC/2007009522001/April 2008 

The Firm employed persons who were statutorily disqualified because it failed to submit the fingerprints of temporary workers who were working for the firm for a background check to the Federal Bureau of Investigation (FBI), and failed to promptly notify the New York Stock Exchange (NYSE) of its association with persons subject to statutory disqualification. The Firm failed to establish, maintain and enforce written procedures, including a system of follow-up and review of its business activities, with respect to its hiring of temporary workers to achieve compliance with federal securities laws, NASD and NYSE Rules relating to association with statutorily disqualified individuals.

Pershing LLC: Censured; Fined $95,000

ING Financial Advisers, LLC 
AWC/2007007182602/April 2008

The Firm failed to timely file summary and statistical information for numerous public customer complaints that the firm received. The Firmís supervisory system 

  • was not reasonably designed to ensure that summary and statistical information concerning customer complaints was filed in accordance with NASD Rule 3070; and
  • failed to provide for reasonable follow-up and review to ensure that required customer complaint filings were made. 

ING Financial Advisers, LLC : Censured; Fined $15,000

Michael J. Skrabis (Principal) 
AWC/#2006007020501/March 2008

Skrabis failed to disclose material information on his Form U4. 

Michael J. Skrabis: Fined $5,000; Suspended 6 months (credited with 2 months)

Bhupinder Singh Pannu
AWC/20060067866-01/March 2008 

Pannu failed to disclose material information on his Form U4. 

Bhupinder Singh Pannu: Fined $2,500 (in light of financial status); Suspended 3 months; Twenty percent of the fine must be paid either immediately upon Pannuís 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.

Jose Martin Lugo 
AWC/2007009364201/March 2008

Lugo failed to disclose material information on his Form U4.

Jose Martin Lugo: Fined $5,000; Suspended 6 months.

Vinh Gia Liu 
AWC/20070098640-01/March 2008

Liu failed to disclose material information on his Form U4. 

Vinh Gia Liu: Fined $5,000; Suspended 3 months

James Robert Kelly (Principal) 
OS/2006005457801/March 2008

Kelly failed to provide complete and timely responses to FINRA requests for information. He willfully failed to amend his Form U4 with material information, and filed an amendment to his Form U4 that included an optional comment regarding an AWC which constituted a public statement denying directly or indirectly an allegation in the AWC, and created the impression that the AWC was without factual basis, which was in violation of the terms of the AWC. 

James Robert Kelly: Fined $10,000; Suspended 8 months

Bill Singer's Comment: I have long counseled clients against denying the allegations set forth in a settlement document that is predicated upon the defendant/respondent neither admitting nor denying the allegations.  I guess the one thing here that puzzles me is whether this is yet another example of how regulators apply a double standard as between the "big fish" and the "small fry."  

On May 2, 2003, the New York Times reported (MORGAN STANLEY DRAWS S.E.C.'S IRE by Floyd Norris) that the Securities and Exchange Commission, the New York State Attorney General (Eliot Spitzer) and other states alleged that Morgan Stanley paid $2.7 million to other Wall Street firms so that they would provide research on companies whose initial public offerings were underwritten by Morgan. The day after the announcement of a $1.4 billion settlement of the research scandal involving leading Wall Street firms, (Morgan's contribution to that settlement was $125 million) then Morgan Stanley CEO Phillip J. Purcell had attended a investors conference where he appeared to dismiss the allegations by stating that 

"I don't see anything in the settlement that will concern the retail investor about Morgan Stanley.  Not one thing."

As Norris reported, then SEC Chairman William H. Donaldson wrote a letter to Purcell:

'First, your statements reflect a disturbing and misguided perspective on Morgan Stanley's alleged misconduct,'' Mr. Donaldson wrote. ''The allegations in the commission's complaint against Morgan Stanley are extremely serious. They include charges that Morgan Stanley paid other firms to provide research coverage, compensated its research analysts, in part, based on the degree to which they helped generate investment banking business, offered research coverage by its analysts as a marketing tool to gain investment banking business and failed to establish adequate procedures to protect research analysts from conflicts of interest.

''In light of these charges,'' Mr. Donaldson continued, ''your reported comments evidence a troubling lack of contrition and lead me to wonder about Morgan Stanley's commitment'' to complying with the law.

Mr. Donaldson noted that the settlement required Morgan Stanley not to deny the allegations, and added that that requirement applied to Mr. Purcell. ''I caution you that the commission would regard a violation of that obligation as seriously as a failure to comply with any other term of the settlement,'' the chairman wrote.

. . .

NASD, the nation's largest self-regulatory organization, also expressed concern about Mr. Purcell's comments at the conference on Tuesday. A spokeswoman for NASD said: ''Chairman Donaldson's letter is clear. We share his concerns and we're in communication with Morgan Stanley about that meeting.''

I have found absolutely no indication that either Morgan Stanely or Mr. Purcell were sanctioned in any manner by the apparently outraged SEC, states, or NASD (now FINRA).  Clearly, at some point, regulators must regulate and enforce the sanctity of their settlements.  I fully appreciate the principle upon which Chairman Donaldson rebuked Purcell.  Nonetheless, whatever James Robert Kelly did, it could not have risen to the enormity of the public comments by Morgan's CEO.  Kelly seems to have taken a shot at a lousy AWC on his U4.  Perhaps not the smartest move in the world, but not exactly the stuff makes the headlines of the next day's news.  

Odd, isn't it--that the Kellys of Wall Street wind up getting suspended for much the same misconduct that the CEOs of major firms get nasty letters.  I am oh so heartened that FINRA's predecessor (NASD) shared the SEC's concerns and was in communication with Morgan Stanley.  Now, why couldn't FINRA have just communicated with Mr. Kelly rather than suspend him?  And before you're so quick to answer -- why didn't Purcell get suspended for eight months or fined one cent?  You give me an answer that fairly addresses both scenaria and then we can begin the debate.  

Sheldon Anthony Goldberg
AWC/2007007930401/March 2008

Goldber failed to timely amend his Form U4 to disclose material information. 

Sheldon Anthony Goldberg: Fined $5,000; Suspended 9 months

Timothy Joseph Clain
AWC/2007008769101/March 2008

Clain willfully failed to disclose a material fact on his Form U4.

Timothy Joseph Clain: Fined $5,000; Suspended 6 months

Gregory Steven Azulphart
2006005746701/March 2008 

Azulphart failed to disclose material information on his Form U4. 

Gregory Steven Azulphart: Fined $5,000; Suspended 6 months

Berry-Shino Securities, Inc.
OS/E3A20050037-02/March 2008 

The Firm effected mutual fund transactions for public customers and charged transaction fees that were unreasonable and unfairly discriminatory. Some of these transactions involved the purchase of mutual funds with sales loads and that the firm 's imposition of charges in addition to the sales loads constituted the sale of mutual funds at prices other than the current public offering prices described in the funds' prospectuses. 

The Firm failed to report, or timely report, items that NASD Rule 3070(a) required to be reported, and failed to timely report customer grievances required to be reported pursuant to NASD Rule 3070(c). The Firm failed to file required amendments to Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5), and submitted amendments to Forms U4 and U5 late. The Firm transacted an options business in a branch office without a qualified on-site principal. The Firm voluntarily created a heightened supervision plan for a registered representative but failed to implement the plan. 

Berry-Shino Securities, Inc.: Censured; Fined $40,000; Ordered to pay $24,918.62 plus interest in restitution to public customers.

Bill Singer's Comment: Okay, where to start?  One, if you have a complicated written document detailing all those mutual fund charges, maybe it's not that great an idea to take on additional charges that aren't set forth in that same document.  Two, pay attention to those nasty 3070 and U4/U5 disclosures.  Three, once again (second so far this month), if you have a heightened supervision plan make sure to enforce it.

Finally, a little bit of nuance for all you compliance nerd.

Rule 3070(c) actually states:

(c) Each member shall report to the Association statistical and summary information regarding customer complaints in such detail as the Association shall specify by the 15th day of the month following the calendar quarter in which customer complaints are received by the member. For the purposes of this paragraph, "customer" includes any person other than a broker or dealer with whom the member has engaged, or has sought to engage, in securities activities, and "complaint" includes any written grievance by a customer involving the member or person associated with a member.

So, what's with the red-lettered and highlighted language?  Well, a lot of you haven't digested what it says.  First, a customer is any person other than a broker or dealer. Okay, so that's like a lot of folks, including children and maybe even dogs that are dressed up on Halloween to look like Winston Churchill, Abe LIncoln, and so on.  Not sure about the dogs part, but I'll check that out.  Anyway, getting back to the serious stuff, so a customer is anyone whom the member has "engaged" (okay, so that's like an actual paying customer) and "sought to engage, in securities activities."  That's a truly amazing bit of expansive language.  If you seek to engage in securities activities with anyone, they are a customer; and if they "complain" about you, then you have a 3070 disclosure.  So...if you get someone on the phone and they were in the shower and are annoyed about that, I guess if they file a complaint against you that it's now a 3070 item.  Oh "no," you say!  Complaining that you got them out of the shower and that they dripped water on the carpet is not reportable.  The "customer" (the guy or gal in the buff who is dripping water on their floor) hasn't complained about a securities matter.  Oh yeah, I says.  Go look at the definition of "complaint": "any written grievance by a customer..."  ANY...WRITTEN...GRIEVANCE.  Of course, it would help if we knew what's a "grievance" and what's not a "grievance."

Phillip M. Sikich
AWC/2006006193501/February 2008

Sikich failed to disclose material facts on his Form U4. 

Phillip M. Sikich: Fined $5,000; Suspended 30 days.

Thomas Vincent Di Benedetto
AWC/2007007926801/February 2008

Benedetto failed to disclose a material fact on his Form U4. 

Thomas Vincent Di Benedetto: Fined $5,000; Suspended 60 days.

Todd William Cowle 
#2006004494201/February 2008

Cowle willfully failed to amend his Form U4 to disclose material information. 

Todd William Cowle: Fined $2,500; Suspended 5 business days.

Money Concepts Capital Corp
AWC/#2006003704001/February 2008 

The Firm failed to report customer-related matters disclosable under NASD Rule 3070 in a timely manner . The Firm failed to amend Forms U4 and U5 for registered representatives to report customer-related matters in a timely manner

Money Concepts Capital Corp: Censured; Fined $13,500

Legend Merchant Group, Inc.
AWC/20060036818-01/February 2008

The Firm effected material and ongoing changes in its business operations by adding a branch office and expanding the number of associated persons with direct customer contact without FINRA's prior approval. The Firm failed to timely report statistical and summary information regarding customer complaints; and failed to report the most egregious problem as alleged in customer complaints as FINRA required. 

Legend Merchant Group, Inc.: Censured; Fined $22,500; Required to file an application with FINRA, consistent with NASD Rule 1017 for approval of the material changes referenced in the AWC concerning changes to its Membership Agreement, and the firm must comply fully and timely with related FINRA requests for additional information and documents.

Bill Singer's Comment:  As my readers know, I have long warned firms about materially changing the terms/limits of their Membership Agreements without prior notice and approval from FINRA -- hell, that's a "Developing Enforcement Trend" item at the top of this page!  On the other hand, truly, I am mystified by FINRA's suggestion that there is some rule on its books that states it is a violation to fail "to report the most egregious problem as alleged in customer complaints."  Frankly, regulation is far too serious an undertaking to be subject to such whim and whimsey as a self-regulator making things up as it goes along.  Without question, NASD Conduct Rule 3070 sets forth numerous reporting obligations -- none of which I have any sincere dispute with.  Nonetheless, I find NOTHING therein that obligates a member to report the "most egregious problem as alleged in customer complaints."  If FINRA disagrees, I invite the regulator to communicate that dispute with me and I will publish the response.
H&R Block Financial Advisors, Inc. 
AWC/E8A2005010002/February 2008

The Firm failed to file Uniform Termination Notices for Securities Industry Registration (Forms U5) with FINRA in a timely manner. The Firm failed to establish and maintain a system to supervise the activities of each registered representative and associated person reasonably designed to achieve compliance with the requirements of Article V, Section 3 of FINRA's By-Laws to ensure timely filing of Forms U5. 

H&R Block Financial Advisors, Inc: Censured; Fined $150,000

Michael Derek Weihrauch (Principal) 
AWC/#2006005917201/January 2008

Weihrauch failed to amend his Form U4 to disclose a material fact; and he failed to respond to FINRA requests for information. 

Michael Derek Weihrauch: Barred

Craig Edward Massey 
OS/#2007008374401/January 2008

Massey willfully failed to amend his Form U4 to disclose a material fact; and failed to respond to FINRA requests for information. 

Craig Edward Massey: Barred

Paul Edward Craycroft 
AWC/#2006006851801/January 2008

Craycroft willfully failed to disclose material information on his Form U4. 

Paul Edward Craycroft: Fined $5,000; Suspended 6 months

I-TRADEdirect.com Corp. 
AWC/#2006003853701/January 2008

The Firm 

  • charged customer markups, markdowns or commissions that were not fair and reasonable;
  • failed to timely amend a Form U5 to report a customer complaint;
  • failed to timely file with FINRA reports of disciplinary actions that the firm took against representatives;
  • failed to timely report statistical and summary information regarding customer complaints;
  • failed to keep and preserve a separate file for all customer complaints and grievances in its OSJ;
  • failed to keep and preserve documents associated with the complaints and grievances;
  • failed to file any application for the approval of its material change in business operations prior to hiring additional registered representatives. 

Also, the Firm received securities from customers and held the securities for short time periods in violation of its Membership Agreement, and opened a branch office but failed to promptly notify FINRA of such action. The firm received checks from customers, but failed to prepare and maintain a blotter showing the received and forwarded checks. Moreover, the Firm failed to maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations related to handling and reporting customer complaints, implementing material changes to its business operations and changes to its membership Agreement. Furthermore, the Firm's compliance system was not kept current, and its written supervisory procedures failed to address, or adequately address, requirements to file customer complaints and grievances, obligations to amend Forms U5 for customer complaints after receiving termination information and requirements to submit requests for material changes in business operations. 

I-TRADEdirect.comCorp. : Censured; Fined $60,000; Ordered o disgorge $865.17, plus interest, to public customers.

Bill Singer's Comment: If you read between the lines here, you'll see that it's not so much a case of not doing things, as it is a case of not "timely" doing things.  Frankly, this is just one of those cases that the firm's Compliance Dept. must be blamed for.  It drives most of us compliance/regulatory professionals nuts when a firm gets charged for violations because someone forgot to prepare a required record or failed to file something on time.  That type of miscue is sort of silly because the firm is disclosing the problems anyway (here disciplinary actions, customer complaints, customer funds, etc.) and not hiding the events.  Ultimately, it's a dollar and a day late--which FINRA will simply take as a layup.
Hunter Scott Financial LLC and Peter Alex Gouzos (Principal)
AWC/#2006003702101/January 2008 

Acting through Gouzos, the Firm 

  • failed to file, or to timely file, with FINRA statistical and summary information relating to customer complaints received by the firm that were required to be reported under NASD Rule 3070;
  • failed to file, or to timely file, amendments to Uniform Applications for Securities Industry License or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5) disclosing the receipt of customer complaints or arbitrations;
  • did not effectively enforce the firm 's procedures regarding the prohibition on external email accounts;
  • failed to maintain and preserve certain of its electronic communications as SEC Exchange Act Rule 17a-4 required;
  • failed to implement a written training plan to achieve compliance with the Firm Element of the Continuing Education Requirements; 
  • failed to conduct an annual internal inspection of its OSJ's activities;
  • failed to prevent public customers from purchasing securities in accounts that were supposed to be frozen pursuant to Section 220.8(c) of Regulation T without having cash on deposit to pay for the purchases.

Hunter Scott Financial LLC and Peter Alex Gouzos (Principal): Censured; Fined $125,000 jt/sev.

Bill Singer's Comment: A classic kitchen-sink case for starting the New Year.  Highlights a number of 2007's regulator hot buttons and likely signals an ongoing focus: customer complaint policies, timely U4 updates, external email policies, and  preservation of email.

 



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