Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2009
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 2009
Wanda Pittman Sears
C0720050042/December 2009
FINRA's National Adjudicatory Council (NAC) imposed the sanctions in a remand decision after Sears had appealed a NAC decision to the SEC. The NAC based its sanctions on findings thatSears effected unauthorized securities transactions in customer accounts andparticipated in outside business activities without providing written notice to her member firm.
Wanda Pittman Sears: No Fine in light of financial status; Suspended 6 months for unauthorized trading; Suspended 6 months for engaging in outside business activity (suspensions to be served concurrently)
Tags:  NAC     |    In: Outside Business Activities
Bill Singer's Comment
See this link http://www.brokeandbroker.com/index.php?a=blog&id=66 for more background on the this case.
November 2009
Lisa Ann Tomiko Nouchi and Marc Winters
E102004083705/E102004083704/November 2009

On appeal from an Office of Hearing Officers Decision (OHO), the National Adjudicatory Council (NAC) imposed the sanctions based on findings that Nouchi and Winters caused their member firmsí books and records to contain inaccurate information about customers selling Class B mutual fund shares by entering sales charge waivers for those customers that falsely represented that these customers were disabled.

Lisa Ann Tomiko Nouchi: Fined $10,000; Suspended 90 days

Marc Winters: Fined $19,882; Suspended 90 days

 

Tags:  Class B Shares    Disabled    NAC     |    In: Cases of Note : FINRA
Bill Singer's Comment

The NAC's Decision is commendable for showing a meaningful effort to truly understand the nuances of this case. There are times when the most intelligent ruling falls under the "Yes, but . . ." line of cases. This appears to have been one such instance. On Page 5 of the NAC Decision, it is noted by the Panel that

We find the nature of the customer order information that Nouchi falsified to be an aggravating factor in this case. It is essential for registered representatives to provide their firms with accurate information. See Charles E. Kautz, 52 S.E.C. 730, 734 (1996) (stating that "[t]he entry of accurate information on official Firm records is a predicate to the NASD's regulatory oversight of its members [and] lilt is critical that associated persons, as well as firms, comply with this basic requirement"). By miscoding order tickets, Nouchi deliberately ignored this fundamental responsibility. It also is aggravating that Nouchi had no good faith belief that her falsification ofthe order tickets was authorized by UBS. Indeed, Nouchi consistently has admitted throughout the proceedings that she knew her conduct was improper, and there is no evidence that she had any belief that she had authority to miscode the order tickets. In addition, we find it aggravating that Nouchi's misconduct lasted for a period of approximately six months.

There are, however, several factors that when considered together lead us to conclude that the sanctions for Nouchi's violations should fall within the lower range ofthe Guidelines. First, it appears that Nouchi's violations were motivated in part by her desire to assist her clients, some ofwhom needed monei immediately, but could not redeem the mutual funds at issue without incurring a penalty. 1 Second, Nouchi consistently accepted responsibility for her actions. I3 Third, we have considered the fact that Nouchi's 21 violative transactions generated less than $5,000 in CDSC waivers. 14 Finally, the Hearing Panel found Nouchi's expression of sincere remorse to be mitigating, and we do not disturb this finding.15

Wadsworth Investment Co., Inc. and William Frederick Wadsworth (Principal)
OS/2006003806202/November 2009
The Firm and Wadsworth
  • permitted an individual to act as an unregistered principal and permitted individuals to be registered as General Securities Representatives or Investment Company and Variable Contracts Products Representatives through the firm without being active in the firmís securities business;
  • sent written communications to customers and prospective customers containing language that failed to provide a sound basis for evaluating the claims within the communications, and that omitted material information and/or contained unwarranted statements;
  • failed to record a general securities principalís approval on mutual fund and variable annuity applications;
  • completed and signed a materially inaccurate FINRA Information Request form; and
  • provided inaccurate information to FINRA staff.
Acting through Wadsworth, the Firm failed to
  • establish and , maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with applicable securities laws and regulations;
  • conduct annual reviews of any of the business in which the firm engaged
  • review registered representativesí business-related email correspondence with customers;
  • establish any written procedures providing for the review of its registered representativesí electronic correspondence;
  • designate and specifically identify at least one principal to FINRA who would establish, maintain and enforce a system of supervisory control policies and procedures, a
  • establish, maintain and enforce written supervisory controlpolicies and procedures
  • obtain required information on new account forms, and on mutual fund and variable annuity applications.
Acting through Wadsworth, the Firm
  • maintained forms of various types that were blank except for customersí signatures;
  • filed inaccurate Financial and Operational Combined Uniform Single (FOCUS) reports setting forth the firmís net capital position that was accurate by failing to maintain accurate financial books and records; and
  • did not file an application with FINRA for approval of an ownership change until after the ownership change took place.
The Firm failed to
  • implement anti-money laundering compliance procedures, including independent testing and provide training;
  • enforce the Customer Identification Procedures;
  • retain electronic communications; and
  • failed to provide written confirmations to customers at or before the completion of securities transactions acted as an unregisteredmunicipal securities broker-dealer.
The Firm executed municipal securities transactions without creating and retaining order tickets to properly recordthe transactions, and failed to report municipal securities trades to the MSRB.

Wadsworth Investment Co., Inc.: Censured; Fined $100,000 ($77,250 jt/sev with William Wadsworth); Required to hire an independent consultant to review its policies, systems, procedures (written and otherwise) and training related to its violations of federal securities laws, FINRA and MSRB rules, and implement the consultantís recommendations.

William Frederick Wadsworth: Fined
$77,250 jt/sev with the Firm; Suspended 1 month in all capacities; Suspended 1 year in Principal capacities only.
Enforcement Actions
Tags
Email Bill Singer Connect with Bill Singer on Facebook Follow Bill Singer on Twitter Link up with Bill Singer on LinkedIn Join Bill Singer on Google+