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.
Harry (Tito) Hernandez AWC/2009020091201/December 2011
Hernandez engaged in unapproved outside business activities by referring
bank customers, whose
bank loan applications had been denied, to independent outside
without providing prompt written notice to his firm. Hernandez
received compensation from the mortgage companies in the amount of
at least $61,280 for
Harry (Tito) Hernandez: Suspended $5,000; Suspended 60 days
John Daniel Abbruzzese AWC/2010021144501/December 2011
Abbruzzese recommended that a customer purchase a variable annuity with the proceeds of his relativeís Individual Retirement Account (IRA). The customer had executed the application for a qualified annuity and shortly thereafter it was determined that the customer could not use the funds to purchase a qualified annuity.
Abbruzzese copied the customerís signature, without his authorization, knowledge or consent, from an earlier letter, and pasted it on the variable annuity application to authorize the change from a qualified annuity to a non-qualified annuity.
Abbruzzese recommended that another customer purchase a variable annuity. The customer had entered into a reverse mortgage on her home and was referred to Abbruzzese to invest some of the proceeds to generate income for her retirement. Abbruzzese completed the variable annuity application and represented that the source of the funds was the sale of real estate, rather than a reverse mortgage, because his member firm did not permit brokers to recommend reverse mortgages. By including inaccurate information on the customerís variable annuity application, Abbruzzese prevented the firm from maintaining accurate books and records and from assessingthe suitability of his recommendations to the customers.
Abbruzzese failed to timely respond to FINRA requests for information and documents untilhe appeared for on-the-record testimony.
John Daniel Abbruzzese: FIned $15,000; Suspended 18 months
Finkin's customer submitted an application to the firm for a mortgage, term loan, and
line of credit, and as part of the application process, the firm retained an
outside law firm to engage in negotiations on the term of the loans with the
customerís counsel. Finkin sent fabricated emails to
various individuals involved in the negotiations, including the customerís
counsel, and each of the emails instructed the recipients to contact Finkin
with any questions or concerns; Finkin sent the emails from his personal email
account in a way that made the messages appear to the recipient to be from a
paralegal at the outside law firm, and not Finkin. Finkin failed to comply with a FINRA request for a document.
Head conveyed false and exaggerated account values to customers verbally and with falsified documents; and borrowed $20,000 from a customer and has repaid only $1,000 to the customer, contrary to the firmís written procedures prohibiting representatives from borrowing from customers without branch manager or other supervisor approval and the written approval of the firmís compliance department. Head did not request or obtain permission from her firm to borrow money from the firmís customer.
Head settled and/or offered to settle a customer complaint without her firmís knowledge or authorization. Head sent an unapproved and materially false letter to a bank by preparing, signing and mailing a letter to a bank stating that a customerís assets totaled over $4 million in order to assist the customer in obtaining a mortgage loan; although the firmís procedures required that outgoing correspondence be reviewed and approved before mailing. Head neither sought nor obtained approval for the letter.
Head exercised discretion in customer accounts without written authorization; Head neither sought nor obtained authorization from customers or her firm to exercise discretion in their accounts.
Head mischaracterized solicited trades in customersí accounts as unsolicited, causing her firmís books and records to be inaccurate. In addition,
Head repeatedly sent emails and text messages to customers from her personal email accounts, which violated her firmís policies forbidding the use of personal email accounts and mandating that business-related electronic communications with customers occur within the firmís network. Headís use of her personal email account prevented the firm from reviewing her email and text messages, and delayed the discovery of her misconduct in customersí accounts.
Head submitted false and evasive information to FINRA in response to a written request for information; and subsequentlyfailed to appear or otherwise respond to FINRA requests for testimony.
Jo Ann Marie Head: Barred; Ordered tp pay $19,000 restitution
William Charles Davis AWC/2009018726501/September 2011
Davis participated in private securities transactions by introducing customers of his member firm and another individual to a principal of a mortgage processing company without giving written notice to, and receiving approval from, his member firm before participating in the private securities transactions outside the regular scope of his employment with the firm.
Davis engaged in an unapproved outside business activity by working as a loan originator with the same mortgage processing company without notifying his firm or requesting its approval. Davis did not request or receive permission from his firm to engage in this outside business activity. Davis earned $12,500 in compensation from the company while employed at his firm.
William Charles Davis: Fined $10,000; Suspended 4 months
Craig Harold Schwarten AWC/2008012927502/March 2011
Schwarten made an unsuitable recommendation to a customer, in light of the customerís financial situation and needs, for the purchase of a private placement offering. Schwarten recommended that the customer take equity out of her home through a refinanced mortgage and use $100,000 of the proceeds to purchase the private placement offering.
Schwarten failed to appear for a FINRA on-the-record interview.
Edward Howard Schrufer Jr. (Principal) AWC/2008013198902/March 2011
Schrufer made unsuitable recommendations to customers to use the accumulated equity in their homes to generate cash to invest.Schruferís recommendations that the customers borrow the money against their homes to invest in securities were made without reasonable grounds for believing that the recommendations were suitable based upon the financial situations and needs the customers disclosed. The customers took ďcash outĒ mortgages and invested hundreds of thousands of dollars in securities, for which Schrufer received advisory fees and commissions of approximately $15,300. The customers disclosed to Schrufer that they lacked the funds necessary to purchase the securities Schrufer recommended without liquefying their home equity, and that they had insufficient assets and income to cover the monthly mortgage payments without the uncertain returns from the investments Schrufer recommended.
Schrufer told the customers that the investments they would make using the proceeds of their cash-out mortgages would generate enough income to make their monthly mortgage payments, even though Schrufer knew that there was a risk that the investment returns might not be sufficient to pay the mortgages over time. Schruferís statements to the customers that their investments would generate sufficient income to make the additional mortgage payments were misleading.
Edward Howard Schrufer Jr. (Principal): Fined $30,600 (includes $15,300 commission/fees disgorgement); Suspended 1 year
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