Meyer verbally informed his supervisors of his outside business activities and his business plans, but failed to provide his firm with prompt written notice of his outside business activities, for which he accepted compensation. Without his relative’s knowledge, Meyer conducted subaccount transfers, or transactions, in an Individual Retirement Account (IRA) the relative held to his personal account, which held only a variable annuity contract.  The annuity sub-account transactions reduced the value of the variable annuity contract by $1,395.15 by the time the account was formally transferred to his relative.

Meyer transferred $1,800 from the relative’s IRA to his personal bank account. The firm immediately reversed the transaction as well as reimbursed Meyer’s relative $1,395.15 for the account’s reduction in value caused by Meyer’s transactions. Meyer has made full restitution to the firm.

Voccia was a brokerage partner with another registered representative, shared clients and commissions and collaborated on outside ventures, including a private company they formed. Voccia and his partner orally informed their member firm they were involved in an outside business activity relating to their company, and the firm gave oral approval with the understanding they would only solicit one firm customer; however, the two partners solicited other investors, including firm customers, without the firm’s knowledge and approval.

Voccia made misrepresentations and omissions of material fact when he told prospective investors that the company and its related companies had good chances of success and would be able to sustain themselves even though he had insufficient knowledge of the companies’ finances, and his representations were misleading because he focused on the potential benefits of investing in the company without providing adequate disclosure about the risks. Voccia engaged in capital raising for his company and his related companies; individuals invested approximately $6 million dollars during a five-year period.

Voccia and his partner were able to sell investments without the firm’s knowledge because the investments were not held with their firm’s clearing firm but were held with firms that their firm allowed its brokers to use to maintain custody of illiquid investments such as their company.

Voccia did not provide the firm with written notice of any of the proposed offerings and did not inform the firm that he had received, or might receive, compensation for selling the offered securities. In addition, the firm did not approve the private securities transactions, did not record them on its books and records and did not supervise Voccia’s participation in the transactions. Moreover, Voccia failed to disclose numerous outside business activities unrelated to his company without prompt written notice to his firm. Furthermore, Voccia failed to amend his Form U4 to disclose material information and failed to respond to FINRA requests for information, documents and to timely appear for testimony.

Duarte borrowed $50,000 in the form of a promissory note from a customer to start a business buying up distressed properties, and in order to do this, he needed money to establish a credit line. hen Duarte received the loan, his member firm’s written procedures prohibited employees from accepting or soliciting loans from firm customers/ He has not fully repaid the loan.

Also, Duarte engaged in an outside business activity without providing his firm with written notice of the activity; Duarte failed to disclose or obtain his firm’s written permission of his outside business activity of purchasing distressed properties. Duarte made misrepresentations to his firm in an annual compliance certification that he had not accepted any loans from customers and was not engaged in any outside business activities when, in fact, he had already obtained a loan from the customer and was engaged in an outside business activity.

White recommended that a customer invest in non-listed real estate investment trusts (REITs) and a tenants-in-common (TIC) interest in undeveloped rural real estate without a reasonable basis to believe that the recommendations were suitable for the customer based on the customer’s financial status and investment objectives, and the customer’s need for liquidity, preservation of capital, ready access to cash, and safety of principal. The customer instructed White to sell the REITs and White acknowledged receipt of the sell instructions and informed the customer to expect to receive a check for the sale proceeds within one to two weeks, but later refused to process the sell orders.White participated in the sale of TIC interests totaling $3,700,000, outside the course or scope of his employment with his firm and collected selling compensation of approximately $1,653,958 but failed to provide his firm with prior written notice describing the proposed transactions. 

Phillips' customers gave him funds to invest in various securities; and he instructed his customers to make their checks payable to a consulting company that Phillips owned and controlled. Phillips deposited the customers’ funds into the consulting company’s bank account, which he controlled, often delayed making the investments, and then only invested a portion of the funds his customers gave him. Phillips misused the customers’ funds by using those funds to pay the consulting company’s expenses.

Phillips willfully filed a Form U4 with materially false information.

Slagter participated in private securities transactions without giving written notice to and receiving approval from his member firm before participating in the private securities transactions outside the regular scope of his employment with the firm.

Slagter introduced firm customers and another individual to a principal of a mortgage processing company and the individuals invested in what were purportedly high-yield corporate bonds issued by the company, which were not firm-approved investments; the individuals invested a total of $490,599 in the bonds and lost approximately $475,599. Slagter engaged in an unapproved business activity by working as a loan originator for the mortgage processing company without notifying or requesting approval from his firm.

Slagter trained mortgage representatives to use mortgage software that was owned by the company without requesting or receiving permission from his firm to engage in this outside business activity; Slagter earned $41,744 in compensation from the mortgage processing company while employed with his firm.

Blake-Zuniga formed a company before becoming associated with his member firm; once he became associated with his firm, he disclosed the company he formed as an outside business activity and described his role as a passive investor with no day-to-day employment or management responsibility.

While still associated with his firm, Blake-Zuniga became a director and the CEO of the company, which was a material change in the nature of Blake-Zuniga’s affiliation with his company and, therefore, a new outside business activity of which he was required to provide the firm with prompt written notice. Blake-Zuniga failed to provide the firm with the required notice.

Gold engaged in an outside business activity without providing prior written notice to his member firm. Prior to joining the firm, Gold entered into an agreement with a company that seeded hedge funds, to provide advisory services, and which permitted the company to publicly disclose that Gold was a member of the advisory board.

Upon his association with the firm, Gold disclosed his ownership interest in a hedge fund seeded by the company and another unaffiliated company, but failed to provide written notice concerning his ongoing affiliation with the company and continued providing it with advisory services. Because Gold terminated the agreement, he did not receive compensation from the company for his work while associated with his firm.

Blasko  engaged in outside business activities without providing prompt notice to his member firm. The firm permitted its representatives to sell fixed annuities only if the transactions were placed through the firm’s General Agency (GA) platform; however, Blasko sold fixed annuities to customers, at least two of whom were clients of the firm, and received compensation for these sales. Blasko’s sales were placed through the issuer, not through the firm’s GA.

On several occasions, Blasko falsely certified to the firm that he had not engaged in any outside business activities for which he received compensation.

Haeffele was appointed as a co-trustee for a trust and, wrongfully and without authorization, disbursed funds to himself from the trust’s mutual fund accounts and checking accounts.

Haeffele was appointed as a co-trustee for another trust, which owned life insurance policies for which Haeffele was the agent of record on, and Haeffele, wrongfully and without authorization, disbursed funds to himself from the life insurance policies held in the name of the trust. Haeffele used the funds from both trusts for his own benefit, thereby converting assets from the trusts. 

As trustee, Haeffele received account statements for the first trust from mutual fund issuers, but only provided the trust’s creators false and misleading account statements and related correspondence that he created on his computer for the trust. The fabricated account statements and correspondence grossly overstated the value of the trust’s assets.

Haeffele failed to provide written notice to his member firm that he had been serving as a trustee for the trusts, and had been receiving compensation for such activities. In addition, Haeffele completed a series of questionnaires submitted to the firm in which he failed to disclose that he was serving as a trustee and receiving compensation.

 Holody sold equity-indexed annuities (EIAs) to individuals, through insurance companies, with investments totaling approximately $1,002,555, without providing prompt written notice to his member firm; none of these individuals were customers of his firm. Holody received commissions of approximately $79,594.34 from these sales.

The firm prohibited its representatives from selling EIAs not on the firm’s approved product list; the annuities Holody sold were not on the approved product list and his acceptance of compensation for the sales constituted engaging in an outside business activity.

Holody recommended that a retired individual liquidate some variable annuity contracts and transfer the proceeds to purchase an EIA an insurance corporation issued. Holody processed all of the paperwork on the individual’s behalf to effect the variable annuity contract liquidations to purchase the EIA contract, and the insurance corporation issued a nine-year term EIA contract in the approximate amount of $253,997.37. As a result of these transactions, the individual lost approximately $49,604 in enhanced guaranteed death benefits available under the variable annuity contracts that the individual could never recover. In addition,the insurance corporation EIA contract was also not beneficial to the individual since the variable annuity contracts offered the individual other more favorable features. Moreover, based on the individual’s disclosed investment objectives of guaranteed returns on his retirement assets and to provide for his beneficiaries, and the individual’s financial situation and needs, Holody lacked reasonable grounds to believe that liquidating the variable annuities to generate funds for the purchase of the EIA contract was suitable for the individual.

Kimberly and Richard Morrison engaged in outside business activities without providing their member firm with written notice of their outside business activities. For nearly three years, Richard Morrison was the agent for transactions in annuities, which his firm had not approved for sale, that he sold through an insurance agency. In connection with these transactions, Richard Morrison met with customers, recommended that the customers purchase the annuities, completed and signed transaction paperwork and earned approximately $425,000 in commissions.

Richard Morrison failed to disclose the outside activities to his firm on annual questionnaires and actively concealed his outside business activities from his firm.

Richard Morrison had employees of the insurance agency sign paperwork effecting the exchanges; in each of these instances, he signed and was identified as the agent of record on the application that was sent to the insurance company that issued the new policy that was purchased. The insurance agency employees signed the exchange request forms that were sent to Richard Morrison’s firm instructing it to surrender a policy and forward the proceeds for the purchase of a new policy; as a result, his firm did not see that he had recommended and was the agent for the transactions.

In addition, for nearly two years, Kimberly Morrison was listed as the agent for transactions in annuities that took place away from her firm. Moreover, in connection with these transactions, Kimberly Morrison telephoned customers to solicit them to meet with Richard Morrison and/or herself, accompanied Richard Morrison to some meetings with customers, and completed and signed transaction paperwork as the agent of record. Furthermore, the insurance agency paid Kimberly Morrison $7,483.53 in commissions on the transactions; she did not notify her firm of her involvement in any of the transactions, and did not disclose them in her firm’s annual broker questionnaire. 

Richard Thomas Morrison (Principal): Barred

Kimberly Ann Morrison: Fined $10,000; Suspended 1 year

Aretz established an outside business activity and never made a written request to, or received permission from, his member firm to engage in the outside business activity.

In connection with the outside business, Aretz borrowed approximately $242,800 from firm customers without requesting or obtaining permission from his firm, and has yet to repay the loans. Aretz’ firm prohibited its registered representatives from borrowing funds from customers without the express written consent of the firm’s chief compliance officer or a member of the firm’s senior management. Aretz failed to disclose the loans on several annual firm compliance questionnaires and that he failed to respond to FINRA requests for information.

Cross failed to supervise the activities of a registered representative of his member firm in a manner that was reasonably designed to achieve compliance with applicable securities laws and regulations. Cross was the registered representative’s designated supervisor. The registered representative, through her fraudulent scheme, converted to her own use and benefit at least $8 million from clients, including the firm’s customers.

The representative persuaded her clients to liquidate existing investments, for the purpose of purchasing other investments, and instructed the customers to make the checks payable to an entity Cross owned and with which she conducted business. Rather than use the clients’ funds to purchase the other investments, she diverted their funds to her own personal use.

In order to conceal her conversion of the clients’ funds, she prepared and sent to the clients’ false account statements, and she concealed from the firm the personal bank account where the clients’ funds were deposited. 

Approximately once a month Cross received from the representative a blotter that listed purchases and sales processed through direct applications to issuers. Also, Cross received reports from the firm’s insurance affiliate, which showed the representative’s insurance sales activity, except for the business she conducted with other insurers. Some of the representative’s outside insurance business was conducted through Cross’ insurance agency; Cross was therefore able to track all of the representative’s business except for a portion of her outside insurance business.

The representative’s income from her securities business and from insurance business conducted through the firm’s affiliate was not sufficient to pay her expenses; and that, although it was obvious that the representative had additional income, Cross did not attempt to determine the source of that income. In addition, the securities blotters Cross reviewed showed numerous sales of securities by the representative’s clients and did not show that they had purchased other products with the proceeds of those sales; but Cross did not take note of the liquidations shown on the blotters and make inquiries to determine what happened to the proceeds of those sales.

Moreover, Cross conducted an inspection of the representative’s office; and that the firm’s inspection checklist required him to complete a checking account review form for each doing business as (DBA) and outside business activity (OBA) accounts owned or controlled by the representative as well as any other accounts where commissions are deposited, including business accounts, DBA accounts and personal accounts. Furthermore, before the inspection of the representative’s office, Cross participated in the firm’s webcast training session regarding office inspections; a significant portion of the training was devoted to the review of checking accounts. As part of the inspection, Cross reviewed account statements for the registered representative’s business account; the representative told Cross that the business account was her only bank account.

There were several reasons why Cross should have known that the representative had another bank account and that some of her commissions were deposited into that account; Cross should have realized that the commissions deposited into the business account represented less than all of the registered representative’s income. Cross knew that the representative frequently sold an entity’s annuities and there was no evidence that the entity’s commissions were deposited into the business account; and that Cross could also see that the representative did not pay her personal expenses from the business account, a further indication that she had another account. Cross failed to note large deposits that were shown on the business account statements; that the statements showed 35 deposits of $2,000 or more from unidentified sources in a 12-month period, and that the total amount of those deposits was approximately $497,585.

In addition, pursuant to his firm’s directives, Cross should have requested documentation showing the sources of those payments; had he done so, Cross would have learned of the personal account where the registered representative had deposited clients’ funds, and thus would have discovered that the representative had received large payments from customers.

Davis participated in private securities transactions by introducing customers of his member firm and another individual to a principal of a mortgage processing company without giving written notice to, and receiving approval from, his member firm before participating in the private securities transactions outside the regular scope of his employment with the firm.

Davis engaged in an unapproved outside business activity by working as a loan originator with the same mortgage processing company without notifying his firm or requesting its approval. Davis did not request or receive permission from his firm to engage in this outside business activity. Davis earned $12,500 in compensation from the company while employed at his firm.

Boehm entered into a handwritten agreement with a customer of his member firm wherein he agreed to provide financial advisory services to the customer in exchange for older vehicles, which the customer sold to him at a discounted price.

Boehm entered into the business agreement to provide financial advisory services, outside the scope of his relationship with his firm, and without first notifying the firm or obtaining the firm’s written approval of the arrangement. His firm's WSPs specifically prohibited registered representatives from entering into outside employment or business activities without obtaining the firm’s prior approval.

Smith provided partial responses to FINRA requests for information and failed to provide requested documents. Smith engaged in outside business activity without providing prompt written notice to, and receiving written approval from his member firm.

Smith served as executor of a customer’s estate and as successor trustee to the customer’s trust. Smith understood that he would receive compensation when he was required to perform the duties, and he did receive compensation for performing the duties of executor and trustee; his firm’s procedures required written notice of outside business activities, and the firm’s written approval, before a representative could engage in such activity.

Smith never notified his firm that he had accepted the appointment to serve as the executor of the estate, and never received his firm’s written approval. The customer’s heirs filed a lawsuit against Smith, which resulted in a default judgment against him for $851,985.81; the judgment included compensation for various substantial diversions of funds from the customer’s accounts, her trust and her estate, including diversion of annuity funds from the customer’s grandchildren to Smith’s relatives by substituting his relatives as beneficiaries.

Cocozza engaged in outside business activities without providing written notice to his member firm. The firm’s policies and procedures prohibited its employees from engaging in outside employment or business ownership without prior written approval from a firm supervisor or the firm’s compliance department.

Cocozza failed to respond to FINRA requests for information, documents and to provide on-the-record testimony.

Gregory served as vice president and board member of a purported charitable foundation he managed with other non-registered principals, and unbeknownst to his member firm, he effected the transfer of approximately $400,000 from member firm customers (most of whom are now deceased) to the foundation as supposed donations.  Of that $400,000 Gregory transferred nearly $184,000 to the foundation from the sole known surviving donor customer’s brokerage account. For almost seven years, Gregory, in conjunction with the other non-registered principals, collectively converted for their personal use a total of $79,444.70 from the foundation account they controlled, which was maintained at Gregory’s member firm. The money generally was used to fund the educations of the principals’ relatives; Gregory personally converted a total of $26,619.45 of that amount for his own personal use.

For more than a decade while associated with both the foundation and his member firm, Gregory failed to disclose to his firm his officer and director positions and role in a business activity outside the scope of his relationship with his firm; Gregory did not disclose his association with the foundations until after the firm undertook an internal review of his activities related to the foundation.

Gregory assisted an elderly customer in causing a bank to issue him a $40,061.48 check as a gift from the customer, contrary to his firm’s WSPs that required associated persons, including Gregory, to notify the firm of, and receive approval for any non-de minimis gifts received from customers, Moreover, the firm's procedures imposed an annual $100 cap on customer gifts. Gregory failed to disclose, and receive written approval for, the $40,061.48 gift, violating his firm’s WSPs.

As a result of his violations of the firm’s procedures, Gregory impeded his firm’s ability to effectively supervise over subjects of regulatory importance, including, but not limited to, issues relevant to customer protection.

Jan attempted to arrange an outside third-party business loan for a prospective client without obtaining written authorization or otherwise notifying his member firm; if successful, Jan would have received a referral fee. The potential client agreed and Jan, using his personal email account on his home computer, sent the prospective client a detailed client information sheet from an outside lender; the document Jan sent required the prospective client to provide numerous pieces of information relating to the potential loan, including a passport number, business tax ID number and bank account information. Jan requested a copy of the potential client’s passport and a copy of a bank guarantee or standby letter of credit for review and acceptance. Although Jan used his personal email account, his signature block identified him as a financial consultant with his firm.

Jan engaged in business outside the scope of his relationship with his firm without providing prompt written notice to his firm, and Jan’s conduct was contrary to his firm’s written policies and procedures. Along with conducting outside business with a prospective client through his personal email account, Jan admitted to attempting to solicit business from an unspecified number of other customers using his personal email account. In addition, at times, Jan communicated with a customer who had firm accounts through his home email account about details relating to an asset that was to be deposited in one of the customer’s accounts. Moreover, Jan knew that his firm’s procedures required approval of his email and he thereby circumvented his firm’s supervisory procedures and compromised the firm’s ability to supervise and monitor his communications with the public.

Brandt provided written notice to his firm that he was engaged in sales of secured real estate notes outside the regular course and scope of his employment with the firm; however, the firm failed to recognize that the notes were securities and allowed Brandt to continue selling them without further supervision. Brandt again disclosed his sales of the notes on his annual Outside Business Questionnaire (OBQ) form, following which the firm determined that the notes were actually securities and ordered him to stop selling the notes and remove any mention of note sales from his OBQ. Thereafter, Brandt submitted a new OBQ devoid of any mention of note sales.

Brandt sold a note to a customer and received a commission of $3,459.21 for the sale although he failed to obtain the firm’s prior written approval to sell the note. Brandt sold additional notes to other customers without receiving any compensation for those sales and obtaining the firm’s prior approval. The total value of the notes Brandt sold, after submitting the new OBQ devoid of any mention of note sales, was $637,293.21. In addition, Brandt recommended and sold notes totaling $805,000 to other customers who were referred to him without having reasonable grounds for believing that his recommendations were suitable for these customers.

Moreover, Brandt failed to obtain information about these customers’ investment objectives, risk tolerances, financial circumstances or other information upon which he could reasonably base a suitability determination. Furthermore, Brandt relied upon representations from the referring individuals that they had analyzed the customers’ profiles and determined the notes to be suitable for the customers. Brandt received at least $54,450.00 in commissions for these sales.

Camarillo entered into a contract with a company to sell its private placements, and sold approximately $370,000 of these private securities to his customers, receiving over $13,000 in commissions, without providing notice to, or receiving approval from, his member firm.

Camarillo’s firm’s written procedures, which he attested to reading and understanding, instructed employees to provide notice to the firm’s compliance department and to seek the firm’s written approval prior to engaging in any securities transactions not executed through the firm. The company provided Camarillo with sales literature, and without submitting the brochure to his firm for approval, he distributed the brochure to his customers; the brochure contained several unwarranted, exaggerated and misleading statements, omitted material facts and ignored risk while guaranteeing success.

Camarillo did not have a reasonable basis to recommend that his customers purchase the securities, had no experience selling these types of products and did not conduct proper due diligence. Camarillo did not sufficiently understand the products offered through the company or how the investments were managed; all of Camarillo’s customers who invested in the products informed Camarillo that they were seeking preservation of capital and viewed the investments as a retirement investment. Camarillo did not investigate the claims made in the sales literature that the returns were guaranteed, he had no basis to recommend the investment to customers seeking preservation of capital, and his recommendations to invest in the company were unsuitable.

Camarillo’s customers lost tens of thousands of dollars by relying on his recommendation, because even after partial reimbursement from the company’s court-ordered receivership, Camarillo’s customers only recouped 69 percent of their investment. Moreover, the products, as marketed, were securities, the sale of which required Camarillo to possess a Series 7 license; at the time he sold the securities, Camarillo held only a Series 6 license.

Christensen sold approximately $650,000 in a company’s promissory notes to customers without providing his member firm with written notice of the promissory note transactions and receiving the firm’s approval to engage in these transactions.

Based upon expected interest payments from the promissory notes, some of the customers also purchased life insurance policies from Christensen and another registered representative the firm employed. These customers expected to use the promissory note interest payments to pay for the life insurance premiums.

Christensen received direct commissions from the company related to the sale of the promissory notes to customers and received commissions from the sale of life insurance products to the customers, who intended to fund those policies with the interest payments from the promissory notes.

The company defaulted on its obligations and the customers lost their entire investment. The customers who also purchased life insurance based upon the expectation that they would receive interest payments from their investment relinquished their policies and the firm compensated them for the premiums paid, but the customers did not receive any reimbursement for the investments in the company that sold the promissory notes.

Christensen completed a firm annual compliance questionnaire, in which he falsely stated that he had not been engaged in any capital raising activities for any person or entity; had not received fees for recommending or directing a client to other financial professionals; had not been personally involved in securities transactions, including promissory notes, that the firm had not approved; and had not assisted a client with an application for investments not available through the firm or contracted or otherwise acted as an intermediary between a client and a sponsor of such investments without the firm’s prior approval.

Finally, Christensen failed to respond to FINRA requests for documents and testimony.

While registered at member firms, Kelly failed to provide written notice to each firm that he was employed by or accepted compensation from other persons as a result of business activities that were neither passive investments nor within the authorized scope of his relationship with his firms.

Kelly was primarily responsible for the operation of a company, having handled its formation, negotiated its loan agreements and controlled its finances, including investments and distributions and received direct and indirect compensation. Kelly formed additional entities, filed registration documents, served as their registered agent and took out loans on their behalf, which were business activities unrelated to his relationship with his member firms.

Kelly failed to disclose these companies to his member firms and falsely represented on his qualifying questionnaire for his most recent firm that he did not and would not engage in any outside business activities without prior notification to, and written consent from, the firm.

Kelly participated in private securities transactions without prior written notice to his firms describing in detail the proposed transactions, his proposed role therein, and stating whether he received, or might receive, selling compensation.

Cruz participated in an outside business activity without providing her member firm with prior written notice.

An individual offered Cruz $3,000 in exchange for referring firm clients and others with available credit on their personal credit cards who would invest in his newly created business. The individual failed to pay those who invested in his business as promised. Cruz misrepresented to her firm her involvement in the outside business activity on a compliance her firm review conducted. Upon admitting her involvement in the outside business activity to her firm, the firm immediately suspended Cruz, conducted an internal investigation and later terminated Cruz.

Contrary to his member firm’s prohibition on accepting loans from customers, Kepes borrowed $50,000 from a customer in the form of a loan, not documented and not backed by collateral, was a “bridge loan” pending payment of the firm’s annual retention bonus, to assist Kepes with a number of immediate expenses.

Kepes held the loan for six months and 20 days, repaying $53,000 to the customer. Kepes encouraged the same customer to loan $30,000 to a realtor to assist in “flipping” (buying, repairing and then selling) a house. The customer advanced the funds as a favor to Kepes, without documentation or collateral, but the realtor never repaid the loan. Kepes’ firm paid the customer $30,000 to compensate her for the money the realtor failed to repay.

Kepes accepted a $1,000 check as a gift from the customer although firm policy prohibited accepting gifts in excess of $100.

Moreover, contrary to firm policy and without informing his firm, Kepes entered into an Advisory Board Agreement to serve as an independent contractor for a privately held business and was compensated by stock options with some of the shares being exercisable on the date the agreement was signed, in recognition of services already provided prior to signing the agreement. Furthermore, Kepes’ supervisor directly informed him that he could not join the company advisory board or engage in other activities called for by the agreement when compensated by stock options; nevertheless, Kepes signed the agreement and engaged in various activities called for by the agreement. Subsequently, Kepes requested approval to participate on the Advisory Board without informing his firm that, prior to his request, he signed the agreement and began service as an independent contractor to the company. After the request was denied, Kepes continued his service to the company as an independent contractor without informing his firm until the firm terminated him.

Cronister participated in the sales of a total of $266,302.51 in Universal Lease Programs (ULPs) to public customers and failed to provide his member firms with prior written notice and failed to obtain the firms’ prior written approval; Cronister received approximately $33,080 total in commissions.

Cronister engaged in outside business activities and accepted a total of $64,491.64 in checks from a ULP issuer made payable to a corporation he wholly owned; the checks were for sales of ULPs made by independent agents of his corporation. Cronister failed to provide prompt written notice of his outside business activities to his member firms. Cronister participated in a face-to-face interview with a compliance officer at one of his firms, acknowledged that all forms of outside business activities must be disclosed on an outside business activity form and must receive the firm’s written approval prior to engaging in any outside business activity but never provided oral or written notification that he was engaged in outside business activity and receiving overrides on the sale of ULPs by other individuals.

Benson engaged in outside business activity, outside the scope of his employment with his member firm, when he facilitated the sale of his relative’s company to an individual without providing prompt written notice to his firm of the dealings and, as compensation for facilitating the acquisition, accepted a finder’s fee in the form of 50,000 shares of stock in the newly formed corporation. 

Benson provided the individual with $11,000 to be used to pay expenses of the newly formed corporation, and in exchange, Benson acquired 1.1 million shares of stock in the corporation. The shares of stock were securities, the transaction was conducted entirely apart from Benson’s employment with his firm, and Benson did not give his firm prior written notice of, and the firm did not give him prior written approval of, the transaction.

Respondents failed to put any heightened supervisory measures in place for a branch manager or to follow up on “red flags.” Notwithstanding the branch manager’s remote location, prior disciplinary history, outside business disclosures or his disclosure that he was potentially under financial stress and unable to meet financial obligations, the Firm and Long failed to put any heightened supervisory measures in place or to follow up on the red flags after he disclosed information on a compliance questionnaire, for which the affirmative answer required that he attach a separate sheet providing complete details about the disclosed activities, which Long did not complete or enforce. Also, the firm’s and Long’s heightened supervision of the branch manager was inadequate in that it consisted only of inspecting his office annually and speaking on the phone on a fairly regular basis. Long inspected the branch manager’s branch office, and although she was aware that the manager was involved in certain outside business activities, based on the disclosures that he made on his Uniform Application for Securities Industry Registration or Transfer (Form U4), she admitted that she did not inspect any files or financial records associated with his disclosed outside business activities and did not detect any undisclosed outside business activities or private securities transactions.During a subsequent inspection, Long again did not review documentation regarding the branch manager’s disclosed outside business activities and did not detect any undisclosed outside business activities or private securities transactions.

Additionally, the branch manager had participated in private securities transactions wherein he had raised more than $1.5 million from investors, many of whom were firm customers.

In addition, the firm and Long failed to review or retain email communications on the branch manager’s outside email account, and Long did not review his outside email account during her inspections of his branch office. Moreover, FINRA found that the firm did not have any supervisory procedures regarding the review and retention of email communications on outside email accounts.

Portfolio Advisors Alliance, Inc.: Censured; Fined $35,000

Marcelle Long: Fined $7,500; Suspended in Principal/Supervisory capacity only for 30 days

The Firm made certain unsecured loans to its parent that exceeded the parameters set forth in SEC Rules 15c3-1(e)(1)(i) and (ii), thereby triggering its reporting obligation. Through its financial and operations principals (FINOPs), Guerra and Robles, the Firm provided notices to FINRA at the beginning of several months of loans that it anticipated making during the course of the month, but the notices did not comply with the requirements of SEC Rule 15c3-1(e)(1); the firm did not provide adequate advance notice of loans that exceeded the 30 percent threshold on numerous occasions and did not provide subsequent notice of unsecured loans that exceeded the 20 percent threshold on other occasions. Guerra and Robles, as FINOPS at the firm, were responsible for providing the required notices on the firm’s behalf but failed to do so.

The Firm had inadequate excess net capital for a year because it failed to include in its net capital calculation certain positions in Latin American and other debt securities held in firm accounts at its clearing firms, and did not report these positions as assets on its balance sheet or apply haircuts to these positions in its computation of net capital; deficiencies ranged from at least $900,000 to at least $13.7 million and all of the positions relevant to the net capital deficiency had later either paid down their principal or were sold by the firm.

The firm engaged in securities transactions in which commissions were split between the firm and a nonregistered foreign person with the person receiving most of the commissions and the firm getting the balance. In addition to making the initial referrals, the non-registered foreign person, along with the firm, among other things, negotiated the terms of the transactions, which the firm executed. The firm did not properly reflect the payment to the finder on its books and records, and also did not disclose the compensation arrangement as required.

Moreover, the Firm did not maintain adequate books and records concerning proprietary positions the firm held at separate clearing firms for over a year; this included failing to reflect the positions on any of the firm’s internal books and records, failing to maintain documents related to the processing of the transactions such as the electronic or paper order tickets and the trade confirmations, failing to maintain documents related to the supervision of the transactions, and failing to appropriately reflect its liabilities and assets on financial documentation the firm maintained. Furthermore, although FINRA staff advised the firm that its procedures related to SEC Rule 15c3-1(e) were not reasonably designed to achieve compliance with that rule and needed to be amended, the firm failed to amend its procedures to establish supervisory procedures reasonably designed to ensure compliance with the rule.

Guerra engaged in outside investment activities through a limited liability company that used his firm’s address, and he failed to provide prompt written notice of these business activities to his member firm.

Bulltick, LLC: Censured and Fined $300,000

Javier Guerra (Principal): Fined $20,000; Suspended 10 business days 

Victor Manuel Robles (Principal): Fined $10,000; Suspended 5 business days 

Eppler disclosed his outside business activities to his member firm as part of a branch office review and reported that he was engaged in the sale of new and renewal sales of a particular company’s insurance products that his firm did not approve for sale. In response to the disclosure, Eppler was informed, orally and in writing, that he should discontinue selling those products and he could only receive renewals on prior sales.

Eppler was sent an email reminding him of deficiencies found in the branch examination, which included his sale of the particular insurance products, and that he was to discontinue selling the insurance products. Eppler responded to the email by advising the firm that all of the deficiencies had been corrected, which was untrue because Eppler continued to sell the non-approved insurance products and received $967.79 as commissions from the sales.

Eppler’s branch office was again reviewed, and as part of that review, Eppler reported his outside business activities and reported that he was receiving commissions only for renewals of the non-approved insurance products, which was false, in that Eppler continued to sell new non-approved insurance policies, for which he received compensation. Eppler engaged in these activities without giving prompt written notice to his firm that he was continuing to sell new non-approved insurance policies.

McLean failed to provide written notice of his involvement in unapproved private securities transactions to his member firm and lied to his firm during monthly supervisory meetings. McLean’s member firm prohibited its registered representatives from engaging in any private securities transactions unless they were personal investments and only after obtaining the firm’s prior written approval, but McLean referred a customer and another individual to someone who was raising monies for real estate projects. These individuals invested approximately $75,000 in promissory notes with entities controlled by the individual to whom McLean referred them, and McLean received $1,500 in cash for the referrals. Because of concerns stemming from items reported on McLean’s personal credit report, his firm placed him on heightened supervision and, among other things, McLean was required to meet with his supervisor monthly to discuss securities-related and outside business activities; but not once during these meetings did McLean disclose his involvement with the individual. On seven separate occasions, he signed statements affirming that he was not engaged in outside business activity beyond those already disclosed and that it was unnecessary to update his Form U4.

While employed by another member firm, McLean acted as an agent for an entity not affiliated with his firm and over which his firm had no control, without providing written notice to his firm or receiving his firm’s approval to serve in this role. In addition, as an agent for the entity, McLean introduced individuals to an individual through whom they invested in a purported diamond mining operation. Moreover, these individuals entered into promissory notes, investing more than $40,000 with an entity the individual controlled. Furthermore, in addition to making referrals, as an agent for the entity, McLean was expected to provide financial and consulting advice to investors once their investments began earning profits, and in exchange, McLean stood to earn $2 million worth of shares in a company the individual controlled.

McLean failed to respond fully to FINRA requests for documents and information. 

Ivan executed an agreement purportedly on the firm’s behalf, in which a non-customer corporation agreed to pay the firm a $35,000 refundable deposit in exchange for the firm agreeing to act as an exclusive placement agent to assist the corporation in arranging for $8 million dollars in debt financing. Subject to the agreement, Ivan instructed the corporation to wire the $35,000 deposit to a personal brokerage account he controlled at another FINRA member firm. Instead of using the funds as he represented to the corporation and in accordance with the terms of the signed agreement, Ivan diverted the corporation’s funds by wiring $25,000 of the deposit to another business entity that was supposedly going to assist the corporation with arranging the financing and used the remaining $10,000 for his personal benefit. The debt financing for the corporation never materialized, and the corporation did not receive the return of its $35,000 deposit.

Ivan made untruthful statements and provided false documents to FINRA when he untruthfully represented in his written response to FINRA that he had forwarded the $35,000 from the corporation to a business entity assisting with the financing, and that he did not receive any compensation or payments relating to his participation in arranging the financing. Ivan provided FINRA a document purporting to be an account statement for his outside brokerage account, which falsely reflected a wire transfer of $35,000 out of his account to a business entity assisting with the arrangement of financing, when in fact, the wire transfer amount had only been $25,000. That brokerage account statement had false entries for the figures representing the total amount of checks written and the total amount of checking, debit card and cash withdrawals.

Moreover, Ivan held a financial interest in a brokerage account maintained at another FINRA member firm without giving prompt written notification to the firm that he had such an account, and without notifying the other brokerage firm of his association with his member firm. Furthermore, Ivan falsely answered “N/A” on the firm’s outside brokerage account new hire certification form when requested to list every brokerage account over which he had full or partial ownership.

Cohen sold equity indexed annuities (EIAs), issued by an insurance company that was not a FINRA member, outside the scope of his employment with a member firm, and without providing the firm prompt written notice of the business activity. Cohen effected undisclosed EIA sales totaling over $1.5 million and received compensation totaling about $176,000 from the transactions. Cohen effected the sales directly with the insurance company that issued the EIAs rather than through the insurance company affiliated with his firm.

Cohen completed an outside business activities questionnaire for the firm in which he falsely represented that he was not licensed as an insurance agent for the purpose of selling fixed insurance with any entity other then the insurance company affiliated with the firm and its approved programs, and that he had not engaged in any outside business activity.

Mata participated in private securities transactions without prior written notice to, and prior written approval or acknowledgment from, his firm for these activities. Mata participated in outside business activities and failed to provide prompt written notice to his firm regarding these activities, for which he received compensation totaling $21,417.44.

Mata participated in numerous sales seminars with customers in which he failed to obtain prior written approval from a firm principal for the sales literature used in his seminars; failed to file the sales literature used in his seminars, which included information on variable contracts, with FINRA’s Advertising Regulation Department; and used sales literature in his seminars that was not fair and balanced, contained exaggerated or unwarranted claims, and contained predictions of performance.

Davidson recommended and participated in securities transactions outside the scope of his employment with his member firm when he recommended that clients, nearly all of whom were firm customers, participate in a managed foreign currency exchange-trading program; these clients invested $2,682,518.19, for which he received $3,894.64 in compensation for the referrals.

Davidson did not provide prior written notice, or any notice at all, to the firm of his involvement with the transactions, nor was the firm aware of Davidson’s recommendations and referrals until two months after his resignation when a customer complained about her losses. The clients Davidson referred to the securities transactions lost more than $2.4 million of the approximately $2.68 million they had invested in the managed foreign currency exchange-trading program.

Davidson signed a customer’s name to multiple account-related documents without her knowledge or consent.

Chew engaged in a

• private securities transaction, by purchasing shares of stock via subscription agreement, outside the regular scope of his employment with his member firm and without providing prior written notice of this private securities transaction to the firm; and
• outside business activity, as the president and sole owner of an entity, without providing prompt written notice to his firm.

Chew made false statements and attestations to his firm when he completed compliance questionnaires and annual attestations on which he declared to the firm that he had not personally invested in any private security transaction outside of the firm, that he was not “engaged in any outside activity either as a proprietor, partner, officer, director, trustee, employee, agent or otherwise,” and that he did not participate in any outside business activities except for those previously disclosed to, and approved in writing by, the firm.

Riolo referred customers of his member firm to entities controlled by his relative, who was purportedly engaging in trading off-exchange foreign currency (forex) contracts, but in fact was running a fraudulent scheme. The customers invested more than $3.3 million with one entity, and for referring these customers, Riolo received more than $960,000 from his relative. Both entities were fraudulent schemes and Riolo’s relative was subsequently convicted and sentenced in court for his fraudulent activities.

Customers that Riolo referred lost a combined amount of over $120,000. In referring these customers to his cousin and receiving compensation, Riolo engaged in an outside business activity, but did not provide written notice or receive approval from his firm. Riolo falsely stated in signed monthly compliance questionnaires that he was not engaging in any outside business activity. In addition, Riolo failed to respond to FINRA requests for information and documents.

Joe and John Still  engaged in outside business activities for compensation without disclosing this to their member firm, in writing or otherwise. Joe and John Still referred or introduced prospective investors, including a customer of Joe Still’s member firm, to an individual and to the individual’s business, and failed to conduct any due diligence on the individual and his business prior to referring or introducing the prospective investors; the investors subsequently invested over $4.8 million with the individual’s business.

John Still received compensation totaling over $300,000 for the referrals and Joe Still received compensation totaling over $120,000 for the referrals and, with the exception of two checks, the referral fee checks were made payable to relatives who were not securities professionals and who had no role in referring customers to the business. John and Joe Still falsely represented on annual compliance questionnaires that they had disclosed all outside business activities.

Joe Evan Still: Fined $25,000; Suspended 18 months

John Richard Still: Barred

Meckenstock failed to reasonably supervise a registered representative at his member firm in that the registered representative participated in sales of stock that were outside the course or scope of the registered representative’s employment with the firm. Meckenstock participated in certain sales of the stock himself, and failed to record the sales on the firm’s books and records as required by NASD Rule 3040(c).

Meckenstock failed to submit a written request to participate in the sale of stock, failed to receive written approval to participate in the transactions and failed to provide written approval to the registered representative to participate in the sales.

Meckenstock failed to conduct sufficient due diligence on the offering, failed to investigate the nature of the individual with the issuer, failed to investigate his relationship with the issuer, failed to question him about any additional sales he may have made to firm customers, and failed to investigate compensation that the registered representative was promised or received from the sale of the interests in the company.

Meckenstock failed to adequately supervise the resale of stock through a registered investment adviser (IA) the representative owned, and failed to review the IA’s books and records, which would have disclosed the representative’s sale of his shares of the stock to public customers.

Meckenstock reviewed a private placement memorandum and offering for his firm and approved it as a suitable investment, but failed to ensure that the issuer had established an escrow account, thereby failing to adequately supervise the sale of the offering and causing his firm to violate Securities Exchange Act Rule 15c2-4. In addition, Meckenstock failed to evidence his supervisory review and approval of customers’ purchases of interests in numerous offerings.

Kennebeck sold to four customers securities in the form of installment plan contracts offered by a Tennessee non-profit corporation without first providing written notice of his participation in these sales to his member firm or receiving its written approval; the Tennessee non-profit corporation promised a tax deduction and fixed deferred payments at an unspecified rate of return, in exchange for each customer’s transfer of ownership of existing annuities to the non-profit corporation.

Kennebeck’s customers exchanged existing annuities with a combined accumulated value of $1,078,428.10 for installment-plan contracts. Although the non-profit corporation applied for tax-exempt status, the Internal Revenue Service (IRS) never approved its application, and consequently, customers who purchased installment-plan contracts were unable to claim a tax deduction in connection with their investments.

Kennebeck obtained information from non-profit corporation personnel, which he accepted at face value and failed to independently verify, including the non-profit corporation’s representation that it had been granted tax-exempt status as a charitable organization, and that investors could avail themselves of the touted tax deduction in connection with their investment. Kennebeck negligently misrepresented to his customers that they could take charitable tax deductions in connection with their respective investments, which was not true. In connection with his sale of the installment plan contracts, Kennebeck provided the customers with illustrations and other sales materials he received from the non-profit corporation that contained misleading and incomplete information without first presenting them for review and approval to a registered principal of his firm.

Schurr engaged in an outside business activity involving a company, which was a marketing and advertising business through which she sought to generate leads for registered representatives and insurance agents. The company’s primary form of marketing was mass mailings, usually employing postcards that contained false and misleading statements that Schurr sent and caused to be sent to thousands of prospective customers. Schurr developed and directed the use of multiple false and misleading telephone operator scripts that were used in the company’s call center to respond to potential investors.

As a result of the misleading marketing practices involving her company, Schurr became the subject of state regulatory actions and willfully failed to timely update and amend her Form U4 to disclose these actions to FINRA as required.

Schurr associated with a FINRA registered member firm and acted in a registered capacity while subject to statutory disqualification.

Schurr provided false information and failed to disclose material information to the firm on firm annual compliance and outside business activity questionnaires concerning her outside business activity and regulatory actions.

In addition, Schurr failed to provide prompt and complete written notice to the firm of her outside business activities involving another insurance marketing firm when the other company was closed.

Takeuchi participated in private securities transactions by selling a viatical settlement company’s viaticals to outside investors while he was registered with his member firm. Takeuchi did not provide notice to, and receive approval from, the firm before participating in these private securities transactions; the firm also prohibited the sales of viaticals. Takeuchi earned approximately $4,400 as a result of his viatical sales and never gave the firm any notice, written or otherwise, that he had sold viaticals to outside investors.

Takeuchi repeatedly misrepresented and omitted material information to the firm concerning his sales of viaticals when he completed the firm’s annual compliance meeting questionnaires and checked “No,” implying that he had not engaged in any activity involving viatical contracts.Takeuchi made false attestation to the firm when he executed a firm document that he had not participated in the sale or solicitation of viaticals. Takeuchi knew that his written statements to the firm regarding his viatical sales were inaccurate or incomplete.

Bonnell engaged in an outside business activity involving a company he owned and operated, which was a marketing and advertising business through which he sought to generate leads for registered representatives and insurance agents. The company’s primary form of marketing was mass mailings, usually employing postcards that contained false and misleading statements that Bonnell sent and caused to be sent to thousands of prospective customers.

Bonnell developed and directed the use of multiple false and misleading telephone operator scripts that were used in the company’s call center to respond to potential investors. As a result of the misleading marketing practices involving his company, Bonnell became the subject of several state regulatory actions and willfully failed to timely amend his Form U4 to disclose these actions to FINRA as required.

Bonnell associated with a FINRA registered member firm and acted in a registered capacity while he was subject to statutory disqualification. Bonnell provided false information, failed to disclose material information, and misrepresented material information on the firm’s annual compliance questionnaires concerning his outside business activity and regulatory actions.

In addition,Bonnell failed to provide prompt and complete written notice to the firm of his outside business activities involving another insurance marketing firm he operated after closing the other company. Moreover, Bonnell failed to adequately supervise certain representatives to ensure they filed accurate and timely updates disclosing state regulatory actions and outside business activity.

Spomer engaged in an outside business activity without prior permission of his member firm by distributing unregistered securities through a non-FINRA regulated entity, and received in excess of $100,000 in compensation. Without his new member firm’s knowledge or authorization, Spomer distributed correspondence to non-firm customers who had bought the unregistered securities because the State of Texas ceased the business operations of the issuer and placed the issuer into receivership. Spomer’s letter used firm disclosure language at the bottom of the letter that gave the erroneous impression that the firm, with Spomer as agent, had issued the correspondence. Spomer failed to submit the letter to his member firm’s principal for prior approval, and failed to provide a sound basis for evaluating the security by promoting the “similar program,” and used improper promissory language to describe the product.

Spomer failed to respond to FINRA requests for information.

The Firm failed to

• establish certain elements of an adequate AML program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act and implementing regulations promulgated by the Department of Treasury;
  
• establish policies and procedures reasonably expected to detect and cause the reporting of transactions required under 31 USC 5318(g) by failing to provide branch office managers with reports that contained adequate information to monitor for potential money-laundering and red flag activity; and for the firm’s compliance department to perform periodic reviews of wire transfer activity, require either branch managers or the AML compliance officers to document reviews of AML alerts in accordance with firm procedures, identify the beneficial owners and/or agents for service of process for some foreign correspondent banks accounts, and establish adequate written policies and procedures that provided guidelines for suspicious activity that would require the filing of a Form SAR-SF;
  
• establish policies and procedures that required ongoing AML training of appropriate personnel related to margin issues, entering new account information, verifying physical securities and handling wire activity;
  
• ensure that its third-party vendor verified new customers’ identities by using credit and other database cross-references, and after the firm determined that the vendor’s lapse was resolved, it failed to retroactively verify customer information not previously subjected to the verification process;
  
• establish procedures reasonably expected to detect and cause the reporting of suspicious transactions required under 31 USC 5318(g), in that it failed to include in its AML review the activity in retail accounts institutional account registered representatives serviced;
  
• review accounts that a producing branch office manager serviced under joint production numbers;
  
• evidence in certain instances timely review of letters of authorization, correspondence, account designation changes, trade blotters, branch manager weekly review forms and branch manager monthly reviews; failed to follow procedures intended to prevent producing branch office managers from approving their own errors;
  
• follow procedures intended to prevent a branch office operations manager from approving transactions in her own account and an assistant branch office manager from reviewing transactions in accounts he serviced;
  
• establish procedures for the approval and supervision related to employee use of personal computers and, during one year, permitted certain employees to use personal computers the firm did not approve or supervise,
  
• include a question on thefirm’s annual acknowledgement form for one year that required its registered representatives to disclose outside securities accounts and the firm could not determine how many remained unreported due to the supervisory lapse;
  
• follow policies and procedures requiring the pre-approval and review of the content of employees’ radio broadcasts, television appearances, seminars and dinners, and materials distributed at the seminars and dinners; representatives conducted seminars that were not pre-approved by the firm’s advertising principal as required by its written procedures; the firm failed to maintain in a separate file all advertisements, sales literature and independently prepared reprints for three years from date of last use; and a branch office manager failed to review a registered representative’s radio broadcast. A branch office manager failed to maintain a log of a registered representative’s radio broadcasts and failed to tape and/or maintain a transcript of the broadcasts and there was no evidence a qualified principal reviewed or approved the registered representative’s statements. Branch office managers did not retain documents reflecting the nature of seminars, materials distributed to attendees or supervisory pre-approval of the seminars; retain transcripts of a representative’s local radio program and TV appearances or document supervisory review or approval of materials used; and retain documents reflecting the nature of a dinner or seminar conducted by representatives or materials distributed;
  

• record the identity of the person who accepted each customer order because it failed to update its order ticket form to reflect the identity of the person who accepted the order; and

• to review Bloomberg emails and some firm employees’ instant messages

The Firm distributed a document, Characteristics and Risks of Standardized Options, that was not current, and the firm lacked procedures for advising customers with respect to changes to the document and failed to document the date on which it was sent to certain customers who had recently opened options accounts. Also, the firm’s compliance registered options principal did not document weekly reviews of trading in discretionary options accounts.

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 principal’s 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, Ta’s “tweets” 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.

Kirk engaged in outside business activities without providing prompt written notice to his member firm. Kirk had a contract with an insurance company to sell EIAs, which was approved, but the firm subsequently informed Kirk in writing that the approval to sell EIAs through the insurance company had been cancelled. Despite receiving this notice, Kirk sold EIAs through the insurance company without providing prompt written notice to his firm, and received commissions of approximately $14,500.

Kirk incorrectly answered on his firm’s required compliance questionnaire that he was not currently engaged in any outside business activities, when at the time, he maintained his contractual relationship with the same insurance company through which he sold the EIAs.

Zamecki was the registered principal at his member firm responsible for reviewing and approving the firm’s registered representatives’ private securities transactions and outside business activities. Zamecki failed to supervise a registered representative’s private securities transactions. The registered representative disclosed his outside business sales of secured real estate notes to the firm and discussed them with Zamecki, at which time the representative stated that attorneys for the note issuer had determined that the notes were not securities; in reality, the notes were securities. Zamecki allowed the registered representative to continue selling the notes without inquiring further into the matter and thereby failed to enforce the firm’s written supervisory procedures.

The representative made numerous sales of the notes to various investors, and Zamecki did not review, approve or otherwise supervise these sales. The representative completed an Outside Business Questionnaire in which he disclosed his sales of the notes; after reviewing the form, Zamecki questioned the representative in detail about the nature of the notes, determined that the notes could be securities and prohibited the representative from engaging in any further sales of the notes.

Acting on the firm’s behalf, NAME REDACTED 

• failed to ensure that a firm principal completed his annual certification as the firm’s procedure required,
• did not follow up on the principal’s failure to provide information regarding both his outside business activities and the accounts for which he served as a custodian or trustee, and
• conducted an inspection of a firm branch office, and that inspection did not comport with the firm’s written procedures and did not reasonably review the activities of that office.

NAME REDACTED did not review the transmittal of funds between the principal’s customers and a third party as the firm’s written supervisory procedures required, and failed to obtain details regarding the principal’s outside business activities.

The firm failed to

• reasonably supervise the principal by failing to take steps to inquire into “red flags”  indicating his possible misconduct;
• follow up on the principal's outside business activities and excessive absences from the firm;
• timely investigate allegations that he was participating in private securities transactions away from the firm; and when the firm confirmed his selling away activities, it did not take any steps to place him on heightened supervision.

The Firm's written supervisory procedures were not reasonably designed to ensure principal review of wires from customers to third parties, so it was unaware the principal’s customers were transferring large sums to a third party and that he was executing Letters of Authorization (LOAs) on behalf of multiple customers.

Torrey Pines Securities, Inc.: Censured; Fined $17,500

NAME REDACTED: No Fine in light of financial status; Suspended from association with any FINRA member in any principal capacity, other than the capacity of municipal securities principal, for 10 business days.