Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
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.
December 2011
Isaiah Solomon
AWC/2009020265401/December 2011
Solomon participated in the sale of securities outside his employment at his member firm and failed to give written notice to his firm of his intention to engage in the transactions and obtain the firm’s authorization to engage in such activities.  

Solomon referred individuals, some of whom were his firm’s clients, to an individual and an entity so the customers could invest with the entity. The entity initially claimed to offer foreign exchange trading opportunities, but later claimed to offer investments in a hedge fund that would engage in various trading strategies; the customers invested approximately $750,000 with the individual and entity, and Solomon also invested with the individual and entity. Solomon introduced the customers to the individual, typically during a conference call where the individual promised guaranteed returns of 12 percent per year for two years; Solomon recommended the investment to most of the customers and received $8,600 from the entity for his efforts. Solomon engaged in discussions with the individual and the entity about possible employment with the entity. 
Isaiah Solomon : Fiend $15,000 (includes $8,600 disgorgement of financial benefit from sales); Suspended 18 months
Tags:  FOREX    Hedge Fund     |    In: Cases of Note : FINRA
November 2011
Krittibas Ray
AWC/2010023781701/November 2011

Ray solicited prospective investors to purchase promissory notes as a vehicle to fund the start up of a hedge fund and to pay the ongoing operations of the fund; investors purchased more than $675,000 in promissory notes from Ray. Ray represented he could pay above-U.S. market interest rates based in part on the fact he could obtain these rates by investing the funds in a foreign bank; Ray failed to invest the proceeds of the notes with the foreign bank, used some of the proceeds for personal expenses and used proceeds from later sales to pay interest and repay principal amounts due on notes earlier purchasers held.

Ray made materially misleading statements and omissions of fact, including misrepresenting the use of proceeds from the sale of the promissory notes, misrepresenting how and where the proceeds were to be invested, and failing to disclose he was using the proceeds from the sale of promissory notes to pay interest and principal amounts due to earlier note holders. Ray participated in private securities transactions through the sale of promissory notes without providing written notice to his firm describing in detail the proposed transaction, his role therein and stating whether he received, or would receive compensation, and without obtaining his firm’s approval.

Krittibas Ray : Barred
Tags:  Banks    Promissory Notes    Hedge Fund     |    In: Cases of Note : FINRA
Bill Singer's Comment
October 2011
Ryan Christopher Gold
AWC/2009018050801/October 2011

Gold engaged in an outside business activity without providing prior written notice to his member firm. Prior to joining the firm, Gold entered into an agreement with a company that seeded hedge funds, to provide advisory services, and which permitted the company to publicly disclose that Gold was a member of the advisory board.

Upon his association with the firm, Gold disclosed his ownership interest in a hedge fund seeded by the company and another unaffiliated company, but failed to provide written notice concerning his ongoing affiliation with the company and continued providing it with advisory services. Because Gold terminated the agreement, he did not receive compensation from the company for his work while associated with his firm.

Ryan Christopher Gold : Fined $5,000; Suspended 45 days
Tags:  Hedge Fund     |    In: Outside Business Activities
June 2011
Scott Davis Johnson (Princiipal)
AWC/2009018077101/June 2011
Johnson was employed with a state-registered investment adviser company and after learning that performance values being reported in monthly statements to investors were inconsistent with actual performance figures to investors, he continued to forward monthly statements to investors when requested to do so. After discovering that the gain/loss values reported in the monthly statements were inconsistent with actual performance of the funds, Johnson questioned the investment adviser company’s president, who falsely stated that the statements reflected personal monetary contributions he made to the funds in the form of waived management fees. Johnson continued to forward the statements to investors without informing the recipients that the performance values represented “adjusted” values, and without attempting to confirm whether the investment adviser company’s president was actually making monetary contributions.
Scott Davis Johnson (Princiipal): Fined $5,000; Suspended 4 months
Tags:  Hedge Fund    RIA     |    In: Cases of Note : FINRA
Bill Singer's Comment

Solely based upon the explanation in FINRA's squib, I don't like the outcome here. It seems that Johnson "suspected" that something was wrong (in contradistinction to "knowing for certain") and asked the RIA's President for an explanation, which was given to him suggesting that there was a waived fee that had altered the reported numbers.  FINRA records note that Johnson had no role whatsoever in preparing the reports at issue.

FINRA records suggest During the period from September 2004 through October 2008, Johnson was employed by a Louisiana-registered investment adviser company, Greenwing Securities, Inc. ("GSF'), which served as the general manager of three hedge funds, and Johnson's job responsibility was to assist GSI's president (who made the misrepresentations at the heart of this matter) in managing the investment portfolio of one of the three hedge funds. In June 2007, Johnson became associated with NWT Financial Group, LLC ("NWT") and registered with FINRA as a General Securities Principal, a General Securities Representative, and a Registered Options Principal. With the approval of NWT, Johnson continued in his employment with GSI while associated with NWT.

Barring more, I'm not understanding how Johnson's query and subsequent conduct warrant a $5,000 fine and a four-month suspension.  If there is a stronger case here, and FINRA may well have one, then the regulator needs to spell out more specifics.

Enforcement Actions