Baklenko engaged in private securities transactions without prior written notice to, and approval from, his member firm, in that he participated in the sales to firm customers of limited partnership interests in an entity he and a business associate had formed for a total of $1,095,000.

Baklenko and the business associate opened an account with another member firm in their entity’s name; Baklenko failed to notify his member firm in writing that he had established the account with the other firm and he failed to notify the other firm, with which he opened the account, in writing that he was associated with a firm. Baklenko effected trades in his entity’s account at the other firm, which included securities purchases totaling approximately $176,575 and securities sales totaling approximately $57,109.

The Firm failed to have a supervisory system reasonably designed to detect and prevent the misuse of material, nonpublic information by employees through an information barriers system.

The Firm did not have WSPs addressing the creation or distribution of a watch list, which is a list of securities whose trading is subject to close scrutiny by a firm’s compliance or legal department, and the firm did not maintain any list of this nature. The firm maintained a restricted list but it was not maintained in the manner its own procedures required; securities were added to the list in a haphazard manner, often after the issuer had signed a private placement agent agreement with the firm. The list did not reflect when a security was added or deleted from the list, and did not identify the contact person.

The firm did not adequately monitor employee trading outside the firm for transactions in the restricted-list securities; the firm permitted employees to maintain securities accounts with other broker-dealers, requiring any employee to have duplicate confirmations and account statements sent to the firm. Firm employees were required to disclose their outside accounts to the firm upon hire and annually in an attestation form, but the firm failed to obtain annual attestations from some employees and did not ensure that it was receiving the required duplicate confirmations and account statements.

In addition, because the firm failed to maintain a watch list, to timely add securities to its restricted list, to record the required restricted list information, and to obtain confirmations and account statements for employee accounts, it could not reasonably monitor its employees’ trading for transactions in restricted or watch-list securities. Moreover,the firm did not have procedures to restrict the flow of material, nonpublic information and routinely shared restricted-list information with unregistered individuals who were firm owners, and occasionally shared with these unregistered individuals the details of investment banking contracts; consequently the firm’s procedures were not reasonably designed to prevent violation of securities rules prohibiting insider trading.

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.

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.

By purchasing an issuer’s stock while in knowing possession of material, non-public information, directly or indirectly, by use of means or instrumentalities of interstate commerce, Associated Person Usmani intentionally or recklessly employed a device, scheme or artifice to defraud or engaged in an act, practice or course of business which operated, or would operate, as a fraud or deceit in connection with the purchase or sale of a security. 

Prior to the public announcement of the tender offer for a security and after a substantial step or steps to commence the tender offer had been taken, Usmani purchased the issuer’s securities while in possession of material information relating to the offer, which he knew or had reason to know was non-public and had been acquired directly or indirectly from a person acting on the offering person’s behalf; the issuer of the securities sought or to be sought by the tender offer; or an officer, director, partner, employee, or other person acting on the offering person’s or such an issuer’s behalf.

Usmani failed to notify his member firm, in writing, of the existence of his personal securities accounts, in which he had a financial interest and maintained at another FINRA member firm, and failed to notify the other member firm, in writing, of his association with his member firm.

Usmani failed to respond to FINRA requests for information and documents.