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.
Euro Pacific failed to timely report quarterly statistical information concerning most of the customer complaints it received to FINRA’s then 3070 System.
The firm failed to maintain complete complaint files and did not enforce its WSPs pertaining to customer complaint reporting, and the Uniform Applications for Securities Industry Registration or Transfer (Forms U4) for those representatives who were the subject of the complaints were not timely updated.
The firm failed to enforce its written supervisory control policies and procedures that would test and verify that the firm’s supervisory procedures were reasonably designed with respect to the firm’s activities to achieve compliance with applicable securities laws, regulations and self-regulatory organization (SRO) rules; the firm’s annual NASD Rule 3012 report for one year did not comport with these procedures, and the firm failed to implement its supervisory control procedures to review its producing managers’ customer account activity.
The firm prepared a deficient NASD Rule 3013 certification as it did not document the firm’s processes for establishing, maintaining, reviewing, testing and modifying compliance policies reasonably designed to achieve compliance with applicable securities laws, regulations and SRO rules. The firm failed to timely file a Financial and Operational Combined Uniform Single (FOCUS) Report and Schedule I Reports.
The firm failed to preserve, in an easily accessible place, electronic emails for one of its representatives for almost a year.
The firm offered and sold precious metal-related products through an entity, but failed to develop, implement and enforce adequate AML procedures related to the business; the firm did not establish and implement policies and procedures reasonably designed to identify, monitor for and, where appropriate, file suspicious activity reports (SARs) for its business processed through its k(2)(i) account. Moreover, the firm failed to implement and enforce its AML procedures and policies related to its fully disclosed business through its then-clearing firm; aspects of its AML program that the firm failed to implement and enforce included monitoring accounts for suspicious activity, monitoring employee conduct and accounts, red flags and control/restricted securities. Furthermore, the firm’s procedures provided that monitoring would be conducted by means of exception reports for unusual size, volume, pattern or type of transactions; the firm did not consistently utilize exception reports made available by its then-clearing firm, and the firm did not evidence its review of the reports and did not note findings and appropriate follow-up actions, if any, that were taken. When notified by its clearing firm of possible suspect activity, on at least several occasions, the firm did not promptly and/or fully respond to the clearing firm’s inquiries. Such review was required by the procedures for employee accounts, but the firm did not maintain any evidence that such inquiries for employee accounts were conducted. The firm’s procedures contained a non-exclusive list of numerous possible red flags that could signal possible money laundering, but the firm did not take consistent steps to ensure the review of red flags in accounts.
The firm’s AML procedures reference that SAR-SF filings are required under the Bank Secrecy Act (BSA) for any account activity involving $5,000 or more when the firm knows, suspects, or has reason to suspect that the transaction involves illegal activity or is designed to evade BSA regulation requirements or involves the use of the firm to facilitate criminal activity; because the firm was not consistently reviewing exception reports or red flags, it could not consistently identify and evaluate circumstances that might warrant a SAR-SF filing.
The firm failed to establish and implement risk-based customer identification program (CIP) procedures appropriate to the firm’s size and type of business; and the firm failed to provide ongoing training to appropriate personnel regarding the use of its internal monitoring tools as AML program required.
In addition, certain pages of the firm’s website contained statements that did not comport with standards in NASD Rule 2210; FINRA previously identified these Web pages as being in violation of NASD Rule 2210, but the firm failed to remove such pages from its website.
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.
Acting through Birkelbach, the Firm failed to adequately supervise to ensure the timely reporting of customer settlements. Birkelbach relied on an unregistered outside consultant to process Rule 3070 filings and amendments to Applications for Broker-Dealer Registration (Forms BD) and Uniform Applications for Securities Industry Registration or Transfer (Forms U4), gave the consultant inadequate instructions and guidance, and did not otherwise ensure that timely and complete filings and amendments were made.
Birkelbach neglected to instruct the consultant to process disclosures or otherwise take action to correct the deficiencies until a later date, even after FINRA advised him of the deficiencies.
Birkelbach and the firm failed to ensure the timely reporting of settlements with customers on 3070 filings and the amendment of Forms BD and Forms U4 to disclose this information.
Birkelbach Investment Securities, Inc.: Censured; Fined $10,000, jointly and severally with Carl Birkelbach
Carl Max Birkelbach: Censured; Fined $10,000, jointly and severally with Birkelbach Invst.; Fined additional $15,000; Suspended 30 days in all capacities; Suspended 90 days in Principal capacity only; Required to requalify by examination as a principal.
While conducting a securities business, the Firm failed to maintain the required minimum net capital. The firm’s financial books and records, including the firm’s trial balances and net capital calculations, were inaccurate; the firm improperly netted payroll advances against its monthly payroll accrual, improperly included amounts held in a brokerage account as an allowable asset even though the firm did not have a Proprietary Accounts of Introducing Broker/Dealer (PAIB) agreement, failed to accrue some expenses and took a larger deduction for a fidelity bond deductible than it was permitted.
The Firm failed to report to FINRA statistical and summary information for complaints. NASD Rule 3070 reporting was inaccurate in that firm reports for these complaints included erroneous complaint dates, incorrect product codes, inaccurate problem codes and/or identified the wrong registered representative. In connection with some of its registered employees, the firm failed to amend or ensure the amendment of Uniform Applications for Securities Industry Registration or Transfer (Forms U4) to disclose customer complaints and the resolution of those complaints, and the firm also filed late Forms U4 amendments.
The Firm failed to have an adequate system to preserve instant messages (IM) sent or received by registered representatives of the firm; the firm did not archive IMs in a non-erasable, non-rewritable format.
The Firm failed to establish and maintain a supervisory system or WSPs reasonably designed to detect and prevent the charging of excessive commissions on mutual fund liquidation transactions.
The Firm failed to put in place any supervisory systems or procedures to ensure that customers were not inadvertently charged commissions, in addition to the various fees disclosed in the mutual fund prospectus, on their mutual fund liquidation transactions. The firm’s failure to take such action resulted in commissions being charged on transactions in customer accounts that generated approximately $64,110 in commissions for the firm.
The firm had inadequate supervisory systems and procedures to ensure that a firm principal reviewed, and the firm retained, all email correspondence for the requisite time period; the firm failed to review and retain securities-related email correspondence sent and received on at least one registered representative’s outside email account, and the firm did not have a system or procedures in place to prevent or detect non-compliance.
The firm failed to conduct an annual inspection of all of its Offices of Supervisory Jurisdiction (OSJ) branch offices.
The Firm failed to comply with various FINRA advertising provisions in connection with certain public communications, including websites, one billboard and one newsletter, in that a registered principal had not approved websites prior to use; websites did not contain a hyperlink to FINRA’s or Securities Investor Protection Corporation (SIPC)’s website; one website, the billboard and the newsletter failed to maintain a copy of the communication beginning on the first date of use; and sections of websites that concerned registered investment companies were either not filed, or timely filed, with FINRA’s Advertising Regulation Department. In addition, websites contained information that was not fair and balanced, did not provide a sound basis for evaluating the facts represented, or omitted material facts regarding equity indexed annuities, fixed annuities and variable annuities. Moreover, websites contained false, exaggerated, unwarranted or misleading statements concerning mutual B shares; the firm’s websites and the billboard did not prominently disclose the firm’s name, and a website, in connection with a discussion of mutual funds, failed to disclose standardized performance data, failed to disclose the maximum sales charge or maximum deferred sales charge and failed to identify the total annual fund operating expense ratio, and a website, in a comparison between exchange-traded funds (ETFs) and mutual funds failed to disclose all material differences between the two products.
Furthermore,the firm failed to report, or to timely report, certain customer complaints as required; the firm also failed to timely update a registered representative’s Uniform Termination Notice for Securities Industry Registration (Form U5) to disclose required information. The firm failed to create and maintain a record of a customer complaint and related records that included the complainant’s name, address, account number, date the complaint was received, name of each associated person identified in the complaint, description of the nature of the complaint, disposition of the complaint or, alternatively, failed to maintain a separate file that contained this information.
The firm failed to ensure that all covered persons, including the firm’s president and CEO, completed the Firm Element of Continuing Education (CE). The firm’s 3012 and 3013 reports were inadequate, in that the 3012 report for one year was inadequate because it failed to provide a rationale for the areas that would be tested, failed to detail the manner and method for testing and verifying that the firm’s system of supervisory policies and procedures were designed to achieve compliance with applicable rules and laws, did not provide a summary of the test results and gaps found, failed to detect repeat violations including failure to conduct annual OSJ branch office inspections, advertising violations, customer complaint reporting, and ensuring that all covered persons participated in the Firm Element of CE. FINRA also found that the firm’s 3013 report for that year did not document the processes for establishing, maintaining, reviewing, testing and modifying compliance policies to achieve compliance with applicable NASD rules, MSRB rules and federal securities laws, and the manner and frequency with which the processes are administered. In addition, the firm also failed to enforce its 3013 procedures regarding notification from customers regarding address changes.
Gallagher acted as a principal of his member firm without being registered as such and the firm allowed Gallagher to act in an unregistered capacity.
Gallagher failed to adhere to the heightened supervisory requirements FINRA imposed and the agreements he entered into with three states; because of his controlling role at the firm and the transitory nature of supervision at the firm, he was able to sidestep the heightened supervision requirements. The firm failed to ensure that Gallagher’s heightened supervisory requirements from the states and FINRA were being followed, and failed to have a system to adequately monitor Gallagher’s compliance.
Gallagher was responsible for the firm adhering to the requirements to establish, maintain and enforce written supervisory control policies and ensuring the completion of an annual certification certifying that the firm had in place processes to establish, maintain, review, test and modify written compliance policies and WSPs to comply with applicable securities rules and regulations. The firm failed to conduct the analysis required to determine whether, as a producing manager, Gallagher should have been subjected to the heightened supervision requirements.
The firm failed to establish, maintain and enforce written supervisory control policies and procedures and failed to identify at least one principal who would establish, maintain and enforce written supervisory control policies and procedures. In addition, through Gallagher, the firm, failed to ensure that an annual certification was complete, certifying it had in place processes to establish, maintain, review, test and modify written compliance policies and WSPs to comply with applicable securities rules and regulations.
Moreover, FINRA found that the firm failed to report customer complaints against Gallagher and one customer-initiated lawsuit in which he was listed as a defendant.
Furthermore, the firm failed to make the necessary and required updates to Forms U4 and U5 for representatives to reflect customer complaints, arbitrations and lawsuits within the required 30 days.
Thefirm failed to conduct and evidence an independent test of its AML program, and failed to conduct and evidence an annual training program of its CE program for its covered registered persons.
While testifying at a FINRA on-the-record interview, Gallagher failed to respond to questions.
Gallagher willfully failed to timely amend his Form U4 with material facts. Gallagher appealed the decision to the NAC and the sanction is not in effect pending the appeal.
Vision Securities Inc.: Censured; Fined $60,000
Daniel James Gallagher: Barred
Poe borrowed a total of $125,000 from an elderly customer of his member firm without seeking or obtaining his firm’s approval for any of these loans.
Poe and the elderly customer memorialized the loans by executing a promissory note in which Poe promised to repay the $125,000 that he had borrowed; Poe has not repaid any portion of the loans.
Poe completed the firm’s annual sales questionnaire and falsely answered “no” in response to a question that asked whether he had received loans from any of his clients or family members who have accounts at the firm within the preceding 12 months. The Firm terminated Poe and, on a Uniform Termination Notice for Securities Industry Registration (Form U5), reported that Poe had been under internal review for violating firm policy by borrowing money from a client.
Subsequently, Poe caused his Form U5 to be amended to include a comment addressing the internal review in which Poe stated, among other things, that the loan at issue was made by the elderly customer, who he had known since adolescence and served as a mentor and pseudo-grandfather. FINRA found that Poe had not known the customer since adolescence and had met the customer several years earlier when he had solicited him to become a client.
Iskric misused his member firm’s funds by using the firm’s corporate credit card for personal purposes, including purchases of gift cards from various retailers. The amount of unauthorized charges was in excess of $10,000.
While registered with a different member firm, Iskric failed to timely update his Form U4 with material information.
Prestige, acting through Kirshbaum and at least one other firm principal, were involved in a fraudulent trading scheme through which the then-Chief Compliance Officer (CCO) and head trader for the firm concealed improper markups and denied customers best execution.
As part of this scheme, the CCO falsified order tickets and created inaccurate trade confirmations, and the hidden profits were captured in a firm account Kirshbaum and another firm principal controlled; some of the profits were then shared with the CCO and another individual.
The trading scheme took advantage of customers placing large orders to buy or sell equities. Rather than effecting the trades in the customers’ accounts, the CCO placed the order in a firm proprietary account where he would increase or decrease the price per share for the securities purchased or sold before allocating the shares or proceeds to the customers’ accounts; this improper price change was not disclosed to, or authorized by, the customers, and this fraudulent trading scheme generated approximately $1.3 million in profits for the firm’s proprietary accounts. Kirshbaum was aware of and permitted the trading. In an account that Kirshbaum and another firm principal controlled. 47 percent of the profits from the scheme were retained. In furtherance of the fraudulent trading scheme, the CCO entered false information on the corresponding order tickets regarding the share price and the time the customer order ticket was received, entered and executed; the corresponding trade confirmations inaccurately reflected the price, markup and/or commission charged and the order capacity.
In addition, acting through Kirshbaum, Prestige entered into an agreement to sell the personal, confidential and non-public information of thousands of customers to an unaffiliated member firm in exchange for transaction-based compensation from any future trading activity in those accounts. In connection with that agreement, Kirshbaum provided the unaffiliated member firm with the name, account number, value and holdings on spreadsheets via electronic mail. Furthermore, Kirshbaum granted certain representatives of that firm live access to the firm’s computer systems, including access to systems provided by the firm’s clearing firm, which provided access to other non-public confidential customer information such as Social Security numbers, dates of birth and home addresses. Prestige and Kirshbaum did not provide any of the customers with the required notice or opportunity to opt out of such disclosure before the firm disclosed the information, as Securities and Exchange Commission (SEC) Regulation S-P requires.
Acting through Kirshbaum, Prestige failed to establish and maintain a supervisory system, and establish, maintain and enforce written supervisory procedures to supervise each registered person’s activities that are reasonably designed to achieve compliance with the applicable rules and regulations regarding interpositioning, front-running, supervisory branch office inspections, supervisory controls, annual compliance meeting, maintenance and periodic review of electronic communications, NASD Rule 3012 annual report to senior management, review and retention of electronic and other correspondence, SEC Regulation S-P, anti-money laundering (AML), Uniform Application for Securities Industry Registration or Transfer (Form U4) and Uniform Termination Notice for Securities Industry Registration (Form U5) amendments, and NASD Rule 3070 reporting. FINRA found that the firm failed to enforce its procedures requiring review of its registered representatives’ written and electronic correspondence relating to the firm’s securities business. In addition, the firm failed to establish, maintain and enforce a system of supervisory control policies and procedures that tested and verified that its supervisory procedures were reasonably designed with respect to the activities of the firm and its registered representatives and associated persons to achieve compliance with applicable securities laws and regulations, and created additional or amended supervisory procedures where testing and verification identified such a need. Moreover, the firm failed to enforce the written supervisory control policies and procedures it has with respect to review and supervision of the customer account activity conducted by the firm’s branch office managers, review and monitoring of customer changes of address and the validation of such changes, and review and monitoring of customer changes of investment objectives and the validation of such changes. Furthermore, firm failed to establish written supervisory control policies and procedures reasonably designed to provide heightened supervision over the activities of each producing manager responsible for generating 20 percent or more of the revenue of the business units supervised by that producing manager’s supervisor; as a result, the firm did not determine whether it had any such producing managers and, to the extent that it did, subject those managers to heightened supervision.
Acting through one of its designated principals, Prestige falsely certified that it had the requisite processes in place and that those processes were evidenced in a report review by its Chief Executive Officer (CEO), CCO and other officers,and the firm failed to file an annual certification one year. The findings also included that the firm failed to implement a reasonably designed AML compliance program (AMLCP). Although the firm had developed an AMLCP, it failed to implement policies and procedures to detect and cause the reporting of suspicious activity and transactions; implement policies, procedures and internal controls reasonably designed to obtain and verify necessary customer information through its Customer Identification Program (CIP); and provide relevant training for firm employees—the firm failed to conduct independent tests of its AMLCP for several years. Acting through Kirshbaum and another firm principal, the firm failed to implement policies and procedures reasonably designed to ensure compliance with the Bank Secrecy Act by failing to enforce its procedures requiring the firm to review all Section 314(a) requests it received from the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN); as a result, the firm failed to review such requests. In addition, Kirshbaum and another principal were responsible for accessing the system to review the FinCEN messages but failed to do so. Moreover, FINRA found that the firm permitted certain registered representatives to use personal email accounts for business-related communications, but failed to retain those messages.
Furthermore, the firm failed to maintain and preserve all of its business-related electronic communications as required by Rule 17a-4 of the Securities Exchange Act of 1934, and failed to maintain copies of all of its registered representatives’ written business communications. The firm failed to file summary and statistical information for customer complaints by the 15th day of the month following the calendar quarter in which the firm received them. The findings also included that the customer complaints were not disclosed, or not timely disclosed, on the subject registered representative’s Form U4 or U5, as applicable.The Firm failed to provide some of the information FINRA requested concerning trading and other matters.
Prestige Financial Center, Inc. : Expelled
Lawrence Gary Kirshbaum (Principal): Barred
In his capacity as the vice president of compliance, McKee failed to supervise certain aspects of his member firm’s securities business.
Acting on his firm’s behalf, McKee failed to
Thee firm’s 3012 report for one year was inadequate because it failed to provide a rationale for the areas that would be tested, failed to detail the manner and method for testing and verifying that the firm’s system of supervisory policies and procedures were designed to achieve compliance with applicable rules and laws, and did not provide a summary of the test results and gaps found. The 3012 report also failed to detect repeat violations including, the failure to conduct annual Office of Supervisory Jurisdiction (OSJ) branch office inspections, advertising violations, customer complaint reporting and ensuring that all covered persons participated in the Firm Element of Continuing Education.
The firm's 3013 report for one year did not document the processes for establishing, maintaining, reviewing, testing and modifying compliance policies to achieve compliance with applicable NASD rules, MSRB rules and federal securities laws, and the manner and frequency with which the processes are administered. In addition, the firm failed to enforce its 3013 procedures regarding notification from customers regarding address changes.
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.
Acting through Lapkin, the Firm failed to enforce its heightened supervisory procedures for a representative placed on heightened supervision based on his prior disciplinary history. Lapkin was responsible for implementing the heightened supervision plan, which required review of the representative’s correspondence on a daily basis, review of all of the representative’s transactions prior to execution, quarterly reviews with the representative of his business, and quarterly review of the representative’s journal of all conversations that resulted in any business. Lapkin did not perform any of the required steps and the firm failed to take any steps to ensure that he followed the plan. The firm, acting through Lapkin, allowed a representative to continue using a website, which is deemed an advertisement pursuant to NASD Rule 2210, that promoted investments to be made through the firm, even though it violated the content standards of the rule. The website failed to provide a sound basis for evaluating the investment products being promoted, and contained exaggerated, incomplete and oversimplified statements comparing alternative investments to traditional investment products. Also, the website further made unsubstantiated claims by identifying investments as “premier” alternative investments and stating that alternative investments can help dampen volatility and provide protection in down markets without providing a credible basis for these claims. In addition, the website also compared alternative investments to publicly traded investments, but failed to disclose all of the material differences between the investments, including the risks associated with the alternative investments.
Acting through Lapkin, the Firm allowed its representatives to sell shares of a fund through a flawed PPM that failed to disclose that the fund’s manager had been terminated from his member firm because, according to his Uniform Termination Notice for Securities Industry Registration (Form U5), he had misreported, falsely input and reported late into the firm’s internal booking systems for bond transactions, and that the fund manager had misreported numerous nondeliverable forward transactions, causing false profits on his profit and loss statements. Lapkin was aware of the content of the fund manager’s Form U5 and knew that the PPM was silent about it. This omission was material because, as disclosed in the PPM, the fund’s trading decisions relied primarily on the fund manager’s knowledge, judgment and experience.
Puritan Securities, Inc. nka First Union Securities, Inc.: Censured, Fined $10,000 (A lower fine was imposed after considering, among other things, the firm’s revenues and financial resources.)
Nathan Perry Lapkin: Fined $10,000; Suspended in Principal capacity only for 15 business days.
The Firm and Hsu failed to preserve electronic communications related to the firm’s business when Hsu and another registered representative of the firm sent and received electronic communications related to the firm’s business using personal email accounts that were not linked to the firm’s email preservation system; the firm’s failure to preserve electronic communications was considered willful.
Hsu and the firm failed to comply with AML rules and regulations in that they failed to access the Financial Crimes Enforcement Network (FINCEN) and review records, failed to develop and implement a written AML program reasonably designed to achieve compliance with the BSA and implementing regulations, and failed to properly conduct annual independent tests of its AML program for several years. Hsu signed and submitted certifications to FINRA that contained inaccurate information regarding preservation of emails in compliance with SEC Rule 17a-4. Hsu willfully failed to amend his Form U4, to disclose material information.
Pyramid Financial Corp.: Fined $55,000 jointly and severally with Hsu
John Hsu a/k/a Juan Hsu (Principal): Fined $55,000 jointly and severally with Pyramid; Fined an additional $10,000; Suspended 45 business days in all capacities; Barred as a Principal only.
Guelinas converted at least $500,000 from the brokerage accounts of senior citizen customers of her member firm by signing, without authorization, wire transfer requests which resulted in the conversion of the funds from the customers’ accounts to outside bank accounts she controlled and to third parties; the customers did not authorize the transfers. Without authorization, Guelinas signed
on senior citizen customers’ behalf.
Guelinas arranged and participated in real estate investments with senior citizen customers of her member firm and received compensation.
Also, Guelinas received compensation from a rental apartment she owned and failed to disclose the real estate investments, the compensation from the investments or the rental income to her member firm.
Finally, Guelinas failed to disclose material information on her Form U4.
Bauer failed to disclose material information to her member firms and never completed a Form U4 amendment to answer relevant questions until after her firm terminated her.
The Firm failed to file required amendments to Uniform Applications for Securities Industry Registration or Transfer (Forms U4), filed late Forms U4 amendments and filed inaccurate Forms U4. The Firm filed late amendments to Uniform Termination Notices for Securities Industry Registration (Forms U5), filed inaccurate Forms U5 and filed a Form U5 that failed to disclose a customer complaint against a registered representative.
The firm
Colletti filed, or caused to be filed, an initial Form U4 with a member firm on which he willfully failed to disclose material information.
The Livingstons willfully failed to disclose material information on their Forms U4 and failed to appear to give testimony in response to FINRA requests.
Brian William Livingston and Michael Andrew Livingston: Barred
Mattia authorized an email to be sent from him to his member firm’s Office of General Counsel that contained statements concerning the resolution of a customer complaint against a firm registered representative that he knew, or should have known, were false and caused the firm to improperly report the resolution on the representative’s Form U4.
The client settlement had been improperly reported as withdrawn even though the client’s accounts had been credited with $9,198 and Mattia had personally agreed to settle the complaint. Even if Mattia believed the email might be accurate, he should have made a reasonable inquiry into the status of the complaint prior to authorizing the email to be sent, and he would have discovered that the complaint had not been withdrawn.
Associated Person Dosenberg willfully failed to disclose material information on his Form U4 and failed to respond to FINRA requests for information.
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.
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.
Sanford wrote personal checks against a number of her accounts maintained at her member firm while she knew, or should have known, that she had insufficient funds to cover payment on the checks. The checks were linked to her financial management account, addressed to herself and in response to or preceded by the firm’s giving her notice that she had to deposit funds to cover checks on a margin call. In almost each instance, after receiving notice that she had to deposit funds into one of her accounts, Sanford responded by writing and depositing an insufficient funds check into that account, and then writing additional checks or effecting account transfers to prevent the first check from being dishonored. Sanford wrote checks from an account she knew, or should have known, had a negative balance, and deposited them into the same account resulting in an inflated account balance; the amount of the insufficient funds checks totaled an aggregate of approximately $109,000.
Sanford willfully failed to disclose material information on her Form U4.
Berry serviced a brokerage account a relative held but did not have power of attorney or discretionary authorization over the account. Berry failed to report his relative’s death to his member firm, and after leaving the firm, he removed funds from the account totaling $70,000 by requesting checks be drawn on the account, sent to her listed address, which was the same as Berry’s home CRD address, and deposited the checks in a joint checking account he shared with his relative. When Berry submitted a written withdrawal request to the firm for $10,000, the firm discovered that the signature did not match the signature on file for the customer and froze the brokerage account after Berry acknowledged his relative’s death with the firm’s customer relations staff.
The Firm amended Berry’s Form U5 to reflect an internal review of his withdrawals and his failure to advise the firm of his relative’s death.
The NAC imposed the sanctions following appeal of an OHO decision.
The sanctions were based on findings that acting through Uselton, the Firm
The firm and Uselton
Uselton also provided false information and failed to provide testimony at a FINRA on-the-record interview, and he failed to timely update his Uniform Application for Securities Industry Registration or Transfer (Form U4) with material facts.
Legacy Trading Co., LLC: Expelled; jointly and severally fined $907,035.01, plus interest.
Mark Alan Uselton: Barred; jointly and severally fined $907,035.01, plus interest.
NEXT Financial Group did not have a reasonable system for reviewing its registered representatives’ transactions for excessive trading. The firm relied upon its OSJ branch managers to review its registered representatives’ transactions and home office compliance personnel to review its OSJ branch managers’ transactions, but the firm failed to utilize exception reports or another system, and the supervisors and compliance personnel only reviewed transactions on weekly paper blotters or electronic blotters.
The monthly account statements and contingent deferred sales charge reports for mutual fund activity were also available for review and could be indicators of excessive trading, however, given the volume of trading certain principals reviewed, and in certain cases, the large number of representatives for which the principal was responsible, it was not reasonable to expect principals to be able to track excessive trading on a weekly sales blotter, let alone through monthly account statements or mutual fund sales charge reports.
Due to the lack of a reasonable supervisory system, the firm failed to detect a registered representative’s excessive trading, which resulted in about $102,376 in unnecessary sales charges; the firm failed to identify or follow up on other transactions that suggested other registered representatives’ excessive trading in additional customer accounts.
The Firm did not have a reasonable system for ensuring that it obtained and documented principal review of its registered representatives’ transactions, including sales of complicated products such as variable annuities, and the firm should have been particularly attentive to maintaining books and records that established that the transactions had been properly reviewed. The firm failed to provide reasonable supervision of municipal bond markups and markdowns to ensure that its registered representatives charged its customers reasonable markups and markdowns. In addition, the firm’s branch office examination program was unreasonable because it was not designed to carry out its intended purpose of detecting and preventing violations of, and achieving compliance with, federal, state and FINRA securities regulations, as well as its own policies.
The firm failed to have a reasonable supervisory system to oversee implementation of its heightened supervision policies and procedures for its registered representatives as it failed to comply with the terms of its heightened supervision for its registered representatives regarding client complaints, regulatory actions or internal reviews, therefore it had a deficient implementation of heightened supervision policies and procedures.
The firm failed to have a reasonable supervisory control system or to have in place Supervisory Control Procedures as required by FINRA Rule 3012, and it failed to perform adequate 3012 testing or prepare adequate 3012 reports. Moreover,the firm failed to have a reasonable system and procedures in place to review and approve investment advisors’ private securities transactions.
Furthermore, the firm filed inaccurate and late Rule 3070 reports relevant to customer complaints, and did not file or amend Form U4 and Uniform Termination Notice for Securities Industry Registration (Form U5) reports in a timely manner.
The Firm's AML systems and procedures were unreasonable, as the firm failed to establish and implement an AML Compliance Program reasonably designed to achieve compliance with NASD Rule 3011. Although the firm utilized a money movement report, its supervisors did not detect red flags involving numerous instances of potentially suspicious activities relating to the trading of a company’s stock and the transfers of proceeds relating to the trading of a stock, and thus failed to investigate and report these activities in accordance with its own procedures and the requirements of the Bank Secrecy Act and the implementing regulations.
In addition, over 1.3 million shares of a company’s stock were traded in customer accounts a registered representative serviced; during a one-week period, the firm’s only AML exception report that monitored large money movement flagged the customer’s account, but the firm took no action and failed to file any SARs as appropriate.
Acting through Burchard, his Firm failed to
Burchard failed to reasonably supervise the activities of a registered representative and registered principal to ensure that she performed the supervisory responsibilities Burchard delegated to her.