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.
Eddie Wayne Sawyers AWC/2008015712501/November 2010
Sawyers recommended to certain customers whose accounts he serviced at his member firm that they open online brokerage accounts at another broker-dealer, not affiliated with his firm, and that they give Sawyers discretionary authority over those accounts. The firmís customers opened online brokerage accounts, but they did not give Sawyers written authority to trade in the accounts.
Sawyers conducted transactions on his firmís customersí behalf in the online brokerage accounts without notifying his firm in writing or verbally that he intended to use discretionary authority in the online brokerage accounts, and did not notify the online broker-dealer, in writing, that he was associated with a member firm. Sawyers took steps to conceal these activities from his firm and from the online broker-dealer by not using his own name in connection with the accounts, using a computer that was not his firmís computer and a non-firm email address to set up the online-brokerage accounts and maintaining an exclusive email account to communicate about trade confirmations and monthly account statements with customers.
Sawyers falsely attested in his firmís compliance questionnaire that he had not maintained any outside brokerage accounts that the firm had not approved in writing, and that he had not participated in any outside business activities that the firm had not approved in writing. Sawyers failed to timely respond to FINRA requests for information and failed to timely appear for a FINRA on-the-record interview.
Gazmen recommended that his member firmís customer use part of her available funds to purchase a variable universal life insurance (VUL) policy through him, and recommended that the customer open an account at another firm. Gazmen assisted the customer in opening a margin account with the other firm and was given trading authority over the account for which he made all of the investment decisions and entered the trades directly, but was not compensated in any way for managing the account. Gazmen was not licensed to recommend the sale of individual securities to a customer or to engage in the purchase or sale of individual securities on a customerís behalf, he did so in handling the customerís account at the other firm. Gazmen failed to give notice to his firm of his proposed role in handling the customerís account, as the firm and FINRA rules required.
Ethelbert Pacis Gazmen : Fined $10,000; Suspended 30 days
Keener made unsuitable trade recommendations in a customerís accounts by recommending purchases resulting in an overconcentration of non-investment grade bonds and other equities for a senior couple with no previous investment experience. Keener mismarked order tickets for purchases for these customers and other customers as ďunsolicitedĒ when they were ďsolicited.Ē Keener exercised discretion with verbal, but not written, authorization, in customersí accounts, and although Keener frequently spoke to these customers, he did not speak to them every time he entered a transaction in their accounts. Keener did not have the customersí or his member firmís written authorization to engage in such discretionary trading.
Robert Norman Gest Jr. (Supervisor) OS/2007011348301/August 2010
recommended risky and illiquid CMO positions to his customers, and intentionally and/or recklessly made misrepresentations of material facts and omitted to disclose material facts to customers in connection with their CMO investments;
failed to provide his customers with material information concerning the bonds as contained in prospectuses, prospectus supplements or any offering circulars relating to the particular CMO tranches purchased that document various applicable risk factors that an investor should consider before investing;
recommended CMO positions to customers without investigating and understanding the products and without reasonable grounds to believe that CMO investments were suitable, as he lacked an understanding of the material characteristics of, and risks associated with, the CMOs offered;
lacked reasonable grounds to believe the CMO program and CMO investments were suitable for his customers based upon their disclosed investment experience, investment objectives, financial situation and needs, and he did not have reasonable grounds to believe that the use of margin was suitable for customer CMO purchases;
exercised discretionary authority in customer accounts without his customersí prior written authorization and his member firmís prior written acceptance of the accounts as discretionary; and
willfully failed to timely update his Form U4 with material facts.
Robert Norman Gest Jr. (Supervisor): No Fine in light of financial status; Suspended 18 months
Jaffe was the broker of record for a customerís nondiscretionary account at his member firm and exercised discretion in the customerís account in multiple transactions without written authorization. Jaffe completed annual certifications for his firm, in which he attested that he had not exercised full or partial trading authorization over any client account without having obtained the required approvals.
Stephen Alan Jaffe : Fined $5,000; Suspended 1 month
Thomas George Fullerton (Supervisor) AWC/2007011920701/2009018009501/August 2010
Fullerton intentionally or recklessly excessively traded customersí accounts and recommended the transactions without having reasonable belief that such transactions were suitable in view of the size and frequency of the transactions, the nature of the accounts, and the customersí financial situation, investment objectives and needs. Each of the customers was retired and elderly, and the accounts under Fullertonís control represented a substantial percentage of the customersí life savings and net worth, and each customer relied upon the account for income. Fullerton exercised discretionary power in each customer account without the customersí prior written authorization and without obtaining his member firmís written acceptance of the account as discretionary.
Michael Phillip Dunham (Principal) AWC/2008016130001/June 2010
Dunham exercised discretion in customersí account, without written authorization from the customers and his member firmís acceptance of the accounts as discretionary.
Dunham attempted to settle a customerís anticipated complaint without notifying the firm of the customerís concerns or the fact that he had paid her a total of $20,000 to settle, even though he did not have his firmís permission to settle customer complaints. The customer did not cash the checks Dunham gave her and subsequently filed a complaint with the firm regarding the margin balance in her account.
Michael Phillip Dunham (Principal): Fined $10,000; suspended 20 business days
Ralph Charles Johnson (Principal) AWC/2008013469901/June 2010
Johnson effected discretionary transactions in a customerís securities account. Johnson had a verbal agreement with the customer to exercise discretion in the account, but he did not obtain prior written authorization from the customer and his member firmís acceptance of the account as discretionary.
Ralph Charles Johnson (Principal): Fined $5,000; Suspended 10 business days
Krauss effected discretionary transactions in a customerís securities account. Krauss had a verbal agreement with the customer to exercise discretion in the account, but he did not obtain prior written authorization from the customer and his member firmís acceptance of the account as discretionary.
Stephen Paul Krauss : Fined $10,000; Suspended 30 business days
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.
Raymond James & Associates, Inc. AWC/2008015756901/March 2010
The Firm did not cause the exercise of time and price discretion to be reflected on an order ticket for applicable orders entered into its electronic Order Management System (OMS), or another firmís OMS, causing the firm to violate FINRA recordkeeping provisions. The Firm implemented a change to its electronic OMS, satisfying the specificity requirements of NASD Rule 2510(d)(1), but did not implement a similar change to another OMS that its financial advisors used for larger orders. By not conducting adequate supervisory reviews of data relating to the exercise of time and price discretion, and by not having a system or procedure in place to produce certain order ticket data in connection with regulatory requests for order tickets, the firm failed to exercise reasonable supervisionby not having adequate systems or procedures in place to cause it to be in compliance with the order ticket
Raymond James & Associates, Inc. : Censured; Fined $100,000; Required to review its practices and procedures concerning its compliance with NASD Rule 2510(d)(1) to include a determination of
* whether any order entry system the firm uses permits a registered representative or other associated person to exercise discretion as to the price at which or the time when an order given by a customer for the purchase or sale of a definite amount of a specified security shall be executed, and
* whether it has systems and procedures in place that are reasonably designed to cause an exercise of time and price discretion in that security to be reflected on the order ticket.
The firm shall develop written policies and procedures and cause changes to be made to its (or its agents) operational systems reasonably designed to cause the firm to be in compliance with NASD Rule 2510(d)(1).
Benjamin Gideon Geller AWC/2007011920901/January 2010
Registered Supervisor Geller exercised discretion and effected numerous transactions in a customerís account without obtaining written authority. When Geller placed the trades, he designated them as ďunsolicitedĒ although the trades were ďsolicited,Ē causing his member firm ís books and records to be inaccurate.
Benjamin Gideon Geller: Fined $5,000; Suspended 90 days
Registered Principal Airington consented to the described sanctions and to the entry of findings that he executed transactions in a public customerís account using time and price discretion that the customer had previously verbally granted him, without reconfirming with the customer his desire to execute the transactions. Airington executed the transactions without the customerís prior written authorization and without his member firm ís acceptance of the account as discretionary.
Jessie Everett Airington: Fined $5,000; Suspended 10 business days in all capacities
The SEC charged 15 broker-dealers with violating certain recordkeeping provisions of the Securities Exchange Act and with failing reasonably to supervise with a view to preventing and detecting those violations. Additionally, the SEC charged affiliated advisor DWS Investment Management Americas, Inc. with violating certain recordkeeping provisions... Read On