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.
Joseph John Giuliano (Principal) AWC/2009019382101/December 2011
An individual who
subsequently became a trader with Giuliano's member firm provided
$250,000 to the firmís
parent company, without loan documentation or written agreement,
either as funds to be
traded in a firm proprietary account or be held as a security
deposit to insure the brokerdealer
against trading losses the individual might incur. Giuliano,
an owner of at least a 40-percent stake in the parent company and
the firmís chief financial
officer (CFO) and FINOP, caused the funds to be deposited into the
checking account and used some or all of the funds, without the
individualís consent or
authorization, to pay various expenses and debts of the parent
company and the firm,
thereby misusing the funds.
Lorie falsified Letters Of Authorization ("LOAs"), which caused his firmís books and records to be inaccurate, and used the LOAs to withdraw customer funds without the customerís authorization; these LOAs contained the purported signature of a customer and the customerís family members and authorized the transfer of checks totaling $21,290.60 to a mortgage company and another $15,000 check to a third-party account. The checks were issued as Lorie requested; neither the customer nor any of his family members authorized or signed the
Lorie failed to respond to FINRA requests for information.
Lonnie Lee Dusenberry AWC/2010022516401/October 2011
Dusenberry borrowed $742,500 from his customers and, in several instances, Dusenberry used the proceeds of one loan to repay an earlier loan from a different customer. Dusenberry failed to repay a total of approximately $500,000 to his customers.
The firm prohibited borrowing money from customers unless the borrowing arrangement fell within certain enumerated exceptions, such as a loan from an immediately family member; regardless of the circumstances, however, employees were required to obtain the firmís written pre-approval for all loans, and Dusenberry neither requested nor received the firmís written pre-approval for any of his loans.
In order to effect one of the loans, Dusenberry signed the customerís name to a Letter of Authorization (LOA) and submitted it to the firm, which caused the firm to transfer $30,000 from the customerís account to another customerís account. In order to effect a loan from a different customer, Dusenberry signed that customerís name to an LOA without her knowledge, authorization or consent, and submitted it to the firm, which caused the firm to transfer $32,000 from the customerís account to another customerís account.
Crump was the CCO at his member firm and utilized his position to convert approximately $14,000 from firm customersí brokerage accounts by using fictitious documents to effect unauthorized transfers of securities and cash from the customersí accounts to a trust account he established at his firm.
Crump transferred securities and cash worth approximately $4,000 from one customerís account by using a fictitious letter of authorization to effect the conversion. The findings also stated that two days before the transfer, Crump used the firmís systems to temporarily change the address on the customerís account to Crumpís attention at his work address, the effect of which was to have correspondence and other notices relating to the account sent to him at his firm.
Crump used a fictitious retirement account distribution form and a fictitious letter of authorization to effect the conversion of securities and cash worth approximately $10,000 from another customerís Individual Retirement Account (IRA) to the customerís cash account, and Crump transferred the securities and cash from the customerís cash account to the trust account he controlled. The customers did not know about or authorize the transfers.Crump used the unlawfully converted funds to pay for his personal and business expenses.
Vinas converted approximately $3.3 million from customers, mostly Mexico-based, while he was associated with member firms and served as the registered representative responsible for these customersí brokerage accounts.
Vinas asked customers to sign blank documents, including firm documents that were printed in English when none of the customers spoke or read English, but they complied with Vinasí request.
A variable credit line account was opened at Vinasí firm in the customersí name, and Vinas submitted or caused to be submitted applications requesting increases in the credit line that the firm approved, but the customers had not authorized the opening of the credit account or the subsequent credit increases, nor were they aware of the existence of the credit account. Vinas forged, or caused to be forged, customer signatures on Letters of Authorization (LOAs) and had a customer sign blank LOAs, which he submitted to his firm purportedly authorizing the transfer of customer funds without these customersí authorization or knowledge. Vinas submitted, or caused to be submitted, to another member firm fraudulent verbal LOAs without the customersí authorization or knowledge, which allowed him to wire funds from the customersí accounts. In addition, Vinas presented false account documents to the customers, which reflected fictitious account balances although he had closed the account after taking the last remaining funds from the account.
Vinas failed to respond to FINRA requests to appear and provide testimony.
Cooper forged a LOA for a customer by copying the customerís signature from another document and pasting it on the LOA. Cooper used the forged LOA to authorize the transfer of assets from the customerís account into another customerís account, which was a trust account Cooperís relativesí controlled. Based on the forged LOA, Cooperís member firm transferred securities valued at $19,632.35 from the customerís account into the other account without the customerís knowledge or authorization.
Robert Joseph Oftring (Principal) AWC/2009019996501/June 2011
Oftring was responsible for supervising a former registered representative of his member firm and failed to take appropriate action to reasonably supervise her to detect and prevent her violations and achieve compliance with applicable rules in connection with a customerís account. Among other things, Oftring failed to take reasonable steps to follow up on certain indications of potential misconduct that should have alerted him to the representativeís violations.
The representative engaged in excessive, short-term trading in the customerís account, which resulted in losses of approximately $60,000; the account was subject to frequent margin calls and transfers from a third-party account to satisfy margin calls in the account, and once, the representative transferred funds back to the third-party account by forging the customerís signature on an LOA.
Oftring was aware of
the active trading in the customerís account and knew that the representative was effecting securities transactions in the account while it had a negative balance, but he never stopped the representative from trading and never contacted the customer to discuss the activity; and
and approved the transfer of funds between the customerís account and the third-party account, and accepted the representativeís explanation for the same without contacting the customers involved in the transfers.
Robert Joseph Oftring (Principal): FIned $5,000; Suspended 6 months in Principal capacity only
Kang made loans totaling at least $294,000 to a firm customer who was also a close personal friend. The loans were in the form of cash and checks to the customer and undertaken to assist the customer in meeting her business obligations.
Although the customer had signed promissory notes, she died and Kang has not been fully repaid. At the time she made the loans, Kang was aware that her member firm did not permit loans from or to customers unless they were immediate family members; however, Kang did not obtain pre-approval from her firm prior to lending monies to the customer, nor did she otherwise inform the firm of the loans.
Shah made unauthorized foreign currency trades in a customer bank account, resulting in margin calls being generated for the account and consequently the customerís other bank accounts were frozen, preventing the customer from transferring funds from those accounts. Shah made unauthorized money transfers from another customerís bank account to satisfy, in part, the margin calls for the first client and to be able to transfer funds at its request.
In order to effect the unauthorized fund transfers, Shah forged a signature and created falsified Letters of Authorization (LOAs) by cutting a bank directorís signature from an account opening document and pasting it on a fabricated LOA. Shah fabricated documents regarding another clientís obligation to meet capital calls and falsely created a memorandum representing that the capital calls had been met.
Shah falsely told the customerís beneficial owner that all outstanding calls had been met and to ignore notices he too was receiving. To make the memorandum appear authentic, Shah fabricated an internal email address for a fictitious employee and sent the memorandum to the beneficial owner to make him believe that the calls had been met.
Shah failed to respond to FINRA requests to provide on-the-record testimony and to provide a signed statement.
Dennis OíNeal Blackstone (Principal) 2009020488001/AWC/February 2011
As the registered representative on the joint securities account of customers at his member firm, Blackstone created a false Letter of Authorization (LOA), without the customersí knowledge or authorization, and forged their signatures to authorize a transfer of funds from their joint account at the firm to a bank account that Blackstone controlled. Based on the forged LOA, the firm wired $28,320 from the customersí joint account to the bank account Blackstone controlled and, after receiving the funds in his bank account, Blackstone used the funds for his personal expenses.
Antonio Herrero-Rovira (Principal) 2008013833601/January 2011
Herrero-Rovira converted approximately $203,000 in customer funds by forging customersí signatures on Letters of Authorization (LOAs) and firm checks issued pursuant to the LOAs, and depositing the checks into his personal bank account or othersí account without the customersí knowledge or authorization.
Herrero-Rovira converted an additional $16,000 from a customer by causing a check payable to the customer in that amount to be withdrawn from the customerís account without the customerís knowledge or authorization, and forging the customerís check endorsement.
Herrero-Rovira failed to respond to FINRA requests for information.
Lyndall Conway Medearis Jr. (Principal) AWC/2008014825001/January 2011
Medearis became an additional credit card holder on a customerís credit card accounts which were revolving lines of credit. Medearis made charges to the cards totaling approximately $134,000, effectively borrowing this amount through the credit card transactions, and subsequently made payments to cover the charges.
Medearisí member firmís written procedures prohibited registered representatives from borrowing money from or loaning money to customers unless the customer was a member of the registered representativeís immediate family and the registered representative had requested and received prior written permission from the firm. Medearis borrowed an additional $132,000 from the customer in separate transactions, and Medearis never informed his firm.
Medearis loaned $6,420.33 to a customer who was a member of his immediate family but failed to obtain the firmís prior written permission before entering into the loan arrangement with the customer.
Lyndall Conway Medearis Jr. (Principal): Fined $10,000; Suspended 90 days
In a recent FINRA regulatory settlement, a Barclays research analyst got a job offer from an issuer he was covering. FINRA makes the case that the job offer posed a conflict and should have been disclosed to the employer. Fair enough -- I agree; however, when considering FINRA's charges against the analyst, I was reminded of a similar scenario involving... Read On