NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
Daniel David Misch AWC/2009016756101/December 2010
Misch borrowed $5,000 from a firm customer contrary to his member firmís compliance manual, which generally prohibited representatives from borrowing money from a customer other than an immediate family member, which the customer was not. Misch failed to respond to FINRA requests for information.
Mark Wayne Mills (Principal) AWC/2008015357301/December 2010
Mills borrowed $317,000 from elderly customers, promised to pay interest and repay the principal in full by certain dates, but failed to repay the loans. Millsí member firms were unaware of and did not approve the loans. One firm allowed lending arrangements between registered persons and customers under certain permissible arrangements and with its compliance departmentís prior written approval; the other firm prohibited its registered representatives from borrowing money from customers.
Shawn Patrick Koerner AWC/2009019876801/December 2010
Koerner borrowed $94,000 from a firm customer when his member firmís compliance manual generally prohibited representatives from borrowing money from a customer other than a financial institution or a family member; the customer was neither. Koerner failed to respond to FINRA requests for information.
Timothy James Carroll AWC/2009016531801/December 2010
Carroll executed transactions in a customer account without the customerís prior knowledge, authorization or consent; however, only one of the transactions resulted in commissions, which totaled $91.76. Carroll borrowed $500 from another customer although his member firm had procedures that generally prohibited borrowing money from customers, and it did not know of or otherwise approve the loan. Carroll falsely represented on a firm annual compliance questionnaire that he had never received loans from a customer.
Timothy James Carroll : Fined $10,000; Suspended 60 days
Tracy Marie Lamoreaux AWC/2009019285301/December 2010
Lamoreaux borrowed money from her member firmís customer without seeking the firmís permission to borrow the funds and against the firmís borrowing procedures, which required its registered representatives to request and obtain the firmís approval before borrowing money from or lending money to a customer. The firm repaid the customer the loan amount plus interest. The
Lamoreaux failed to respond to FINRA requests for documents and information, and to provide testimony.
Edward Francis Stetz Jr. (Principal) AWC/2009018333301/November 2010
Stetz borrowed a total of approximately $27,600 from customers at his member firm, and the loans were unsecured and their terms were not memorialized in writing. When the loans occurred, the firmís written policies generally prohibited representatives from borrowing money from customers, but certain exceptions existed that did not apply to Stetzí borrowing from the customers. Stetz did not obtain the firmís approval to borrow money from any of the customers, and he did not at any time disclose to the firm that he had borrowed money from them, and the borrowing arrangements did not otherwise meet the conditions set forth in NASD Rule 2370(a)(2). Stetz failed to testify on the record for FINRAís investigation.
John Christopher Romanoff 2008014858101/November 2010
Romanoff borrowed $70,000 from customers and evidenced the loan by a promissory note, even though his member firmís written procedures prohibited registered representatives from borrowing funds from firm customers. Romanoff did not notify his firm of the loan or obtain the firmís permission to borrow funds from the customers, defaulted on the promissory note and failed to repay any of the principal balance due to the customers, even though the customers complained to his firm. Romanoff provided his firm with a Financial Advisor Compliance Questionnaire which falsely represented that he had not entered into any loan with a customer. Romanoff failed to respond to FINRA requests for information.
John Christopher Romanoff : Ordered to pay $70,000 plus interest in customer restitution; Barred
Tatgenhorst failed to respond to FINRA requests for information and documents.
Tatgenhorst borrowed a total of $33,028 from his member firmís customers, signed a promissory note to the customers documenting the existence of the loans, at a time when his member firm did not have written procedures allowing borrowing money from customers and Tatgenhorst did not request or obtain permission from the firm to enter into the loan transactions, but later admitted the facts to FINRA and submitted a written statement to his firm admitting he borrowed the money from the customers. The customers filed a civil action against Tatgenhorst to recover the loan balance, which led to the court entering judgment against him in the amount of $33,028, plus interest. Tatgenhorst did not pay the judgment and his firm paid the customers $7,000 in settlement of any claims they had against the firm.
Hugh Alexander Ross Sr. AWC/2008016154401/October 2010
Ross borrowed $100,000 from firm customersóa husband and wifeócontrary to firm written procedures, and he did not obtain his member firmís written pre-approval for the loan. Ross falsely claimed to the firmís affiliate that the funds were not borrowed, and falsified a letter in support of that claim by affixing one of the customerís signature on the letter. Ross falsely certified on a firm compliance questionnaire that he had not borrowed money from customers.
Hugh Alexander Ross Sr. : Fined $10,000; Suspended 1 year
Matthew Norman OíBrien AWC/2009018063001/October 2010
signed the name of a customer of his member firm on a Letter of Authorization form and then used the form to effect a transfer of $3,000 from the customerís brokerage account to OíBrienís personal bank account without the customerís knowledge or approval;
borrowed $13,000 from the customer, who was not related to OíBrien and contrary to his member firmís written procedures prohibiting its registered persons from entering into lending agreements with customers unless the customer was an immediate family member;
executed a trade in the customerís account without the customerís knowledge or consent; and
failed to respond to FINRA requests for information and documents.
Michael Wayne Claiborne (Principal) AWC/2009017323101/October 2010
Claiborne asked a customer if he could borrow approximately $600 to pay for his travel expenses and the customer agreed, using his credit card to pay for the expenses. Claiborne failed to notify his member firm of the loan, which he repaid in full, and was contrary to his firmís procedures prohibiting registered representatives from borrowing money from customers.
Claiborne received a $1,000 check with the payee line left blank from the customer to deposit into the customerís Roth Individual Retirement Account (IRA) with the firm; Claiborne made the check payable to himself and deposited it into his personal checking account and used the proceeds for his own use and benefit, thereby converting the funds. Claiborne admitted to his supervisor that he had deposited the check into his own account and subsequently returned the funds to the customer.
Marsh borrowed $50,000 from a customer at her member firm and did not disclose to the customer that she already had borrowed $90,000 from another individual and that the debt was still largely outstanding. The Firmís procedures specifically prohibited registered representatives from borrowing money from customers; Marsh did not inform her firm of this loan, which was repaid.
Marsh repaid the $50,000 loan referenced above to the customer by transferring her membership interest in a limited liability company formed to invest in real estate projects in Costa Rica. Marsh had purchased the membership interest, which is a security for $50,000, using the funds she had borrowed from the customer.
While registered at a different member firm, Marsh borrowed $3,500 and $5,600 from another customer, and the firmís procedures specifically prohibited registered representatives from borrowing money from customers. In addition, FINRA determined that Marsh did not inform the firm of this loan, which was repaid, and falsely represented on the firmís Annual Compliance Certification Questionnaire that she had not borrowed money from a customer.
Marsh engaged in a private securities transaction without prior written notice to, or prior written approval from, her member firm.
John William Pena (Principal) OS/2007010533701/August 2010
Pena borrowed $20,000 from customers contrary to his member firmís written procedures forbidding registered representatives from borrowing funds from firm customers except in cases where the customer was an immediate family member; neither customer was a member of Penaís immediate or extended family. Pena failed to notify his firm of the loan, obtain the firmís approval prior to accepting the loan or repay the loan. Pena failed to timely and completely respond to FINRA requests for information and documents.
Wright engaged in a private securities transaction without prior written notice to, or prior written approval from, her member firm. The customer agreed to provide start-up capital for a corporation Wright founded, and the customer loaned the corporation $150,000 and received a promissory note evidencing the loan. Wright borrowed $30,000 from a firm customer contrary to her firmís procedures, which specifically prohibited registered representatives from borrowing money from customers; Wright did not inform the firm of this loan, which was repaid. Wright engaged in an outside business activity without providing prompt written notice to her firm; Wright failed to disclose her position as president of the corporation and her activities with that company.
Halleen borrowed approximately $337,000 from customers without his member firmís permission or knowledge and in violation of firm policy by telling customers that he would invest in unspecified products and in unspecified ways outside of their firm accounts, would repay them at interest rates between 5 percent and 12 percent, and provided promissory notes to some setting forth the terms. Halleen failed to repay more than $260,000 of the money he borrowed from customers. Halleen misappropriated $24,000 from a customer and refused to repay the customer when requested. Halleen failed to respond to FINRA requests for information and documents.
Charles Edward OíHara IV (Principal) AWC/2010021348701/July 2010
OíHara borrowed $8,000 from his member firmís customers contrary to firm procedures prohibiting registered representatives from borrowing money from customers. OíHara did not notify his firm of the loan, which he repaid.
Charles Edward OíHara IV (Principal): Fined $5,000; Suspended 10 business days
Haas improperly borrowed $5,500 from member firm customers and memorialized the loan with a memorandum in which he promised to repay the loan. The loans were entered into after Haas affirmed his intent to abide by the firmís code of conduct, which prohibited its representatives from borrowing money from customers with limited exceptions inapplicable here. Haas failed to repay the customers, or reimburse the firm for having done so. Haas confirmed his admission to his firmís investigator that he had asked several other customers for loans, but had been refused.
Douglas Kyle Haas : Fined $15,000; Suspended 2 years
John Paul Coen (Principal) AWC/2008016448101/July 2010
Coen borrowed approximately $2,700,000 from a customer and used the loan to trade in his personal brokerage account and cover a margin call. Coen wired $300,000 that he borrowed from the customer to an account another firm customer controlled, claiming that the money was a loan to the customer.
Coen borrowed approximately $270,000 from another firm customer for whom he managed the brokerage accounts for entities the customer controlled.
Coenís firm did not permit loans from or to customers, and Coen did not request or obtain his firmís pre-approval (either verbally or in writing) prior to borrowing or lending monies from or to customers, nor did he otherwise inform his firm of the loans.
John Paul Coen (Principal): Fined $50,000; Suspended 18 months
Richard Elmer Gilbert (Principal) AWC/2008014574101/July 2010
Gilbert borrowed money from investors, including firm customers, to raise funds for a residential real estate development company he owned and controlled, and in connection with the borrowing, Gilbert participated in securities transactions when he issued promissory notes totaling approximately $1,095,072, which he signed on his companyís behalf. Gilbertís member firm prohibited borrowing from customers, and Gilbert failed to provide his firm with written notice of his intention to engage in private securities transactions and failed to receive his firmís written permission.
Richard Elmer Gilbert (Principal): No Fine in light of financial status: Suspended 1 year (After consideration of sanctions previously imposed by the State of Michigan of six months for the same conduct, FINRA determined to give Gilbert credit for serving six months of the suspension, but he is required to serve six months of the suspension.)
Derieg served as an elderly customerís attorney-in-fact pursuant to a power of attorney (POA) designation, and became a co-successor trustee and a beneficiary of the customerís living trust. Deriegís member firm generally prohibited representatives from accepting fiduciary appointments, except in connection with family. Derieg completed his firmís associate annual attestations, in which he failed to disclose that he was named as a co-successor trustee of the elderly customerís restated trust, that he was a beneficiary of her trust and life insurance policy, or that he was designated as an attorney-in-fact under the power of attorney should the customer become incapacitated.
Derieg improperly borrowed money from the customer when his firmís written procedures prohibited registered representatives from borrowing money from customers, other than family members, and only then with management approval, and Dereig did not notify the firm of the loans or obtain its prior approval.
Derieg engaged in unauthorized transactions in the customerís investment portfolio that were unsuitable in light of the customerís deteriorating medical condition, her resulting financial situation and need for preservation of principal.
Ramsey served as a registered representative for an elderly customer who executed a power of attorney, giving Ramsey broad authority over her financial affairs. The customer asked Ramsey to invest $600,000 in a variable annuity, and then, without the customerís knowledge or authorization, Ramsey used the power of attorney to obtain approximately $482,000 in withdrawals from the annuity, which, after taxes were deducted, totaled approximately $373,750. Checks for $373,750 were issued in the customerís name and sent to Ramseyís office. Ramsey deposited some of the money into the customerís checking account, but converted some of the funds for his personal use without the customerís knowledge or authorization.
Separately, Ramsey borrowed $275,000 from the customer and, in total, owes the customer approximately $500,000.
Dedric Hillery Gill III AWC/2009017234001/May 2010
Gill engaged in private securities transactions by referring public customers to invest $266,600 in privately held companies without prior written notice to his member firm. Gill borrowed from and loaned firm customers a total of $115,000 contrary to his firmís procedures prohibiting its registered persons from lending money to, or borrowing money from, its customers. Gill failed to respond to a FINRA request for documents and to appear for an on-the-record interview.
Stellick completed an online application to open a brokerage account for a customer at a FINRA member firm with which he was not associated and completed the application by obtaining the customerís signature on a separate page and submitting it to the executing member firm.
Stellick effected options transactions in the customerís account at the executing member firm, but in light of the customerís stated risk tolerance, Stellick did not have reasonable grounds for believing that the transactions were either qualitatively or quantitatively suitable for the customer. Stellick exercised discretion with respect to the options transactions effected in the customerís account and never received written authorization from the customer, nor did he receive the executing member firmís written approval. Stellick never notified his member firm, either orally or in writing, about the account he opened for the customer, or about any transactions he effected in that account. Stellick never informed the executing member firm about his control over the customerís account and his status as an associated person of his firm.
Stellick borrowed $326,000 from his customers in violation of the written procedures of the firms with which he was associated.
Harper engaged in a pattern of mutual fund switching in customersí accounts without having reasonable grounds for believing that the transactions were suitable for the customers. Harper placed buy and sell orders of mutual funds in customersí accounts without the customersí prior written authorization and his member firmís prior written acceptance of the accounts as discretionary. Harper failed to timely amend his Form U4 to disclose a settlement with a customer for $23,041.02 in connection with his mutual fund switching.
White borrowed $100,000 from a customer on an unsecured basis, when his member firmís policies prohibited representatives from borrowing money from a customer. Moreover, the borrowing arrangement did not meet the conditions set forth in NASD Rule 2370(a)(2). White did not disclose to his firm that he had borrowed money from a customer.
Benjamin Yost White: Fined $15,000; Suspended 60 days
Joseph Peter Stephens AWC/2007011815501/April 2010
Stephens accepted a $210,000 loan from a customer without his member firmís knowledge and consent, and in contravention of his firmís written supervisory procedures that generally prohibited associated persons from borrowing money from, or loaning money to, any firm customer.
Joseph Peter Stephens: Fined $5,000; Suspended 60 days
Bradley borrowed approximately $480,000 from customers generally involving real estate investment, without his member firmís knowledge. Bradley promised customers returns of 20 to 25 percent and repayment within a month or two. He told the customers that he was using the funds for various purposes, but ultimately did not use the funds for the stated purposes, and used funds borrowed from customers to repay other customers. Bradley repaid only some customers a total of more than $155,000.
Registered Principal Sylla violated his firmís written procedures by borrowing $100,000 from a firm customer through an entity that Sylla and other individuals had established. Syllaís firm specifically prohibited such loans.
Kevin Joseph Sylla: Fined $10,000; Suspended 1 year
Hackett borrowed $9,000 from a customer in contravention of his member firmís written procedures forbidding registered representatives from borrowing funds from customers, except in certain limited circumstances, which did not apply to the loan from this customer. Hackett failed to repay the loan and the customer was forced to file a civil action in the county court to enforce the terms of the loan agreement.Hackett failed to respond to FINRA requests for information, documents and to appear for on-the-record testimony.
Bradley Adam Sustrin (Supervisor) AWC/2009016760902/February 2010
Sustrin borrowed $5,000 from a customer without his member firmís prior approval. When the loan was made, Sustrinís firm did not have written procedures that allowed its representatives to borrow money from customers.
Bradley Adam Sustrin (Supervisor): No Fine in light of financial status; Suspended 10 business days in all capacities
Paul Ernest Yankie (Principal) AWC/2008012237201/February 2010
Yankie participated in a private securities transaction and failed to give prior written notice to, and receive prior written approval from, his member firm to engage in the transaction. Also, Yankie borrowed $60,000 from a public customer contrary to his member firmís general prohibition from borrowing money from customers (the firm permitted borrowing from an immediate family member, which this customer was not).Yankie failed to respond to FINRA requests for documentsand to appear for an on-the-record interview.
Gray borrowed $230,000 from firm customers contrary to her member firmís written procedures forbidding registered representatives from borrowing fundsfrom customers except in limited instances not applicable to Grayís loans, and without her member firmís written approval, which she did not request nor receive. Gray failed to respond to FINRA requests for information.
Sally Jean Gray: Barred; Ordered to pay $205,000 plus interest in customer restitution
Tischler borrowed $67,000 from a public customer contrary to his member firmís prohibition of registered representatives borrowing money from customers. Tischler completed, signed and submitted annual firm compliance questionnaires in which he failed to disclose the loans from the customer.
Tischler withdrew his appeal to the NAC.
Scott Ryan Tischler: Fined $5,000; Suspended 1 year
Registered Supervisor Clifford borrowed $150,000 from customers in violation of his member firmís policy and without disclosing his activities to the firm . Cliffordís member firm settled with the clients for $156,611.24. Clifford failed to respond to FINRA requests for documents and information.
FINRA, FinCen, Networks, Authorities, Priorities, Statements, Guidance, AML, CFT, BSA, and NBFI (BrokeAndBroker.com Blog)http://www.brokeandbroker.com/6108/finra-fincen/Now we take that one step from the sublime to the ridiculous. FINRA actually believes that it is somehow furthering its regulatory mission when it publishes a Regulatory Notice about Fin... Read On