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.
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.
Gregory Arthur Niebler OS/2007009405201/November 2010
Niebler received approximately $358,000 from an elderly customer, for whom he was appointed power of attorney, in the form of personal checks written directly to him or his credit card companies to pay down his credit card debt; at least $172,900 of that amount was received after the customer had been diagnosed as incompetent and suffering from dementia and Alzheimerís disease.
Niebler invoked his power of attorney to sign the customerís name to certain of the checks. Niebler falsely denied to his firm on compliance questionnaires that he had received any gifts valued in excess of $100 from any of his customers when he was receiving substantial amounts of money from the customerís bank account, and failed to report that he had obtained the customerís power of attorney to his firm. In effecting the transfer of funds from the customer to himself or his credit card company, Niebler acted contrary to his duty as a power of attorney, in that he failed to act in the customerís best interest and did not have the customerís explicit written authorization to transfer money to himself.
Ronald Gabriel Klebba AWC/2008014974201/November 2010
Klebba financially exploited elderly women by convincing them to grant him general power-of- attorney and to sign a document waiving any conflict of interest that Klebba might have. Klebba also had the elderly women name him as
beneficiary on assets,
a joint owner on bank accounts,
joint tenant on a warranty deed for real estate.
Klebba also had the elderly women give him a $50,000 gift from the proceeds of the sale of a condominium.
Klebbaís acts directly violated his employerís rules prohibiting registered representatives from being the beneficiary of a contract policy or from accepting a grant of power-of-attorney from customers.
Totoy converted $1,000 from an elderly customer by using an automatic teller machine (ATM) card to withdraw the funds from the customerís account without her knowledge or consent. Totoy admitted that he made the withdrawals and later returned the funds to the bank. Totoy failed to respond to FINRA requests for information and to appear for a FINRA on-the-record interview.
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.
Robert Edward Groux Sr. AWC/2008012755301/July 2010
Groux recommended to elderly customers that they invest approximately $300,000, which was 90 percent of their liquid net worth and 100 percent of their account value, in a basket of illiquid, risky alternate investments, including real estate investment trusts and equipment leasing partnerships. Groux did not have reasonable grounds for believing that the recommendation was suitable based upon the facts the customers disclosed as to their financial situation and needs.
Robert Edward Groux Sr.: No Fine in light of financial status; Suspended 15 business days
Hancock obtained access to funds an elderly bank customer held in one or more bank accounts and caused the withdrawal of approximately $11,320 from the accounts. Hancock obtained a portion of the funds by causing early withdrawals from a time deposit account and used the funds for his personal benefit. Hancock returned the misappropriated funds by causing the deposit of $11,320 into the accounts from which the funds were taken.
While exercising control over the trust account for the benefit of an elderly customer, and while acting with the requisite scienter, Perlman excessively traded the account in a manner that was inconsistent with the customerís investment objectives, financial situation and needs. Perlman recommended transactions to the customer without having reasonable grounds for believing that such transactions were suitable in light of the frequency of such transactions, the level of margin used in the account, and the customerís financial situation, investment objectives and needs. Perlmanís trading, for the life of the account, resulted in losses of approximately $551,000 and generated gross commissions of approximately $118,000 and margin interest of approximately $9,300.
McEwen converted $32,528.56 from a customer by falsely informing her that a check McEwenís member firm sent to her pursuant to a consent order with the Missouri Securities Division for unsuitable variable annuity sales to the elderly was sent to her by mistake and actually represented commissions the firm owed him. McEwen instructed the customer to deposit the check into her bank account and then make a check payable to him in the same amount; after the customer followed these instructions, McEwen cashed the check and deposited the funds into his personal bank account. McEwen converted an additional $11,000 from the customer by depositing checks intended for investment into his personal bank account and failed to purchase investments on the customerís behalf.
McEwen failed to appear for FINRA on-the-record testimony.
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.
Nestor converted $760,000 from elderly customers by forging the customerís or trusteeís signatures on wire transfer forms without their consent or authorization, and causing the unauthorized withdrawal of funds from the customersí accounts to a third-party account. Nestor failed to respond to FINRA requests for information.
Registered Principal Fence was responsible for the supervision of a representative and failed to take appropriate action to supervise the activities of the representative who was engaged in excessive and unsuitable trading in bonds and mutual funds in elderly customersí accounts. The representative made these recommendations without having a reasonable basis for believing that they were suitable based on the customersí investment objectives, financial situation and needs. Fence failed to take appropriate action to supervise the representative that was reasonably designed to prevent his violations and to achieve compliance with applicable rules.
Karen L. Fence : Fined $5,000; Suspended 6 months in Principal capacity only
Registered Principal Kahn sold preferred stock shares of a company to investors, in the approximate amount of $127,000, without prior written notice to, and written approval from, his member firm. One investor was an elderly individual who invested $96,000 that she borrowed from a variable annuity that she had purchased through Kahn several years earlier. The company had paid her approximately $11,000 in annual interest when her Individual Retirement Account (IRA) custodian informed her that the companyís preferred shares had no value and were worthless. Kahn executed and submitted his firmís Private Securities Transactions Certification, in which he falsely certified that he had not participated in any manner in private securities transactions since his employment with the firm.
Etienne misrepresented facts to an elderly customer who gave him $100,000 to invest in a Real Estate Investment Trust Investment Account purportedly through Etienneís personal business, when no such security investment existed. Etienne used the customerís funds for his personal expenses while providing the customer with monthly account statements that falsely indicated that her funds had been invested. Etienne provided the customer with a one-time payment of $22,000, purportedly representing interest earned on the investment. Etienne willfully failed to disclose material facts on his Form U4.
Lawrence Lathan Powell Jr. AWC/2008012476501/January 2010
Powell misappropriated $48,780 from elderly customersí accounts. While employed with his member firmís affiliate bank as a personal banker, Powell caused the bank to issue debit cards in the customersí names without their knowledge or authorization, accessed their accounts using the fraudulently obtained debit cards and withdrew funds, and facilitated the withdrawal of funds by others, from the customersí accounts, Powell failed to appear for FINRA on-the-record interviews.
Before my second career as a lawyer, I was the third generation of my family in the wine and liquor industry. In 1981, I started law school; and in 1982, I was hired as a law student in Smith Barney, Harris & Upham's Legal Department. After I graduated law school, I was a regulatory lawyer with the American Stock Exchange and then with the NASD (now... Read On