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.
November 2010
Kevin Lawrence Cohen (Principal), Dennis Stanley Kaminski (Principal), Gari Craig Sanfilippo (Principal)
EAF0400630001/November 2010

Kaminski failed to supervise his member firm’s timely review of variable annuity transactions and failed to address the breakdown of the compliance department’s Trade Review Team’s review of Red Flag Blotters. Cohen and Sanfilippo created and maintained inaccurate books and records relating to the firm’s variable annuity trading. Cohen’s and Sanfilippo’s suspensions are in effect from October 18, 2010, through April 19, 2012. Kaminski has appealed to the SEC, and the sanctions are not in effect pending consideration of the appeal.

Sanctions imposed on appeal by the National Adjudicatory Council (NAC) following appeal and call for review of an Office of Hearing Officers (OHO) decision.

Kevin Lawrence Cohen: Suspended 18 months and required to requalify before acting in any capacity requiring qualification

Dennis Stanley Kaminski: Fined $50,000; Suspended 18 months and required to requalify before acting in any capacity requiring qualificationcapacity

Gari Craig Sanfilippo: Suspended 18 months and required to requalify before acting in any capacity requiring qualification

Tags:  NAC     |    In: Cases of Note : FINRA
Bill Singer's Comment

I just don't understand why FINRA persists in obfuscating aspects of cases that are appealed (or called on appeal) to its NAC.  For better or worse, the regulator should meticulously inform us in its monthly updates as to the findings by the OHO and the sanctions imposed by the OHO, AND then again the findings and sanctions modified -- to any extent -- by the NAC.

At the OHO, the Panel barred Cohen and Sanfilippo in all capacities and suspended. Kaminski was suspended for 6 months as a Principal and fined $50,000. Not that you would have known any of that from FINRA's monthly report.

Cohen and Sanfilippo appealed to the NAC and the NAC, on its own, called for the review of Kaminski's sanction. Thereafter, the NAC reduced Cohen and Sanfilippo's Bars to 18 month suspensions with a requalification.  Also, the NAC then affirmed Kaminski's $50,000 fine but increased his 6-month Principal-only suspension to an 18 month suspension in all capacities with a requalification.  

You can read the NAC Decision at http://www.finra.org/web/groups/industry/@ip/@enf/@adj/documents/nacdecisions/p121933.pdf


August 2010
CMG Institutional Trading, LLC and Shawn Derrick Baldwin (Principal)
2006006890801/August 2010

Acting through Baldwin, CMG Institutional Trading

  • participated in securities related activities without employing a qualified municipal securities principal;
  • failed to timely file quarterly lists of issuers with which it engaged in a municipal securities business;
  • failed to adopt, maintain and enforce written supervisory procedures reasonably designed to ensure that the conduct of the broker and associated persons in municipal securities activities are in compliance with Municipal Securities and Rulemaking Board (MSRB) rules and that the procedures shall codify the broker’s supervisory system for ensuring compliance;
  • had an inadequate Anti-Money Laundering (AML) compliance program, in that it failed to
    • verify customer identification information,
    • conduct independent testing of its AML program,
    • designate a person to transmit contact information to FINRA and
    • to provide AML training for two years;
  • failed to timely create and maintain a business continuity plan and engaged in securities transactions without a qualified financial and operations principal (FINOP);
  • conducted a securities business while its net capital was below the required minimum;
  • failed to prepare an accurate general ledger, trial balances and books and records; and failed to file an annual audit report and a quarterly Financial and Operational Combined Uniform Single (FOCUS) report; and
  • failed to file an application for approval of a material change in its business operations even though it participated in an offering as an underwriter on a firm commitment basis, and disseminated sales literature that contained numerous inaccuracies and misrepresentations.

Also, the firm permitted Baldwin to engage in its securities business even though his registration was inactive because he had failed to complete a continuing education course.

FINRA's National Adjudicatory Council (NAC) imposed these sanctions following appeal of an Office of Hearing Officers (OHO) decision:

CMG Institutional Trading, LLC: Expelled

Shawn Derrick Baldwin (Principal): Barred

Tags:  Unregistered Principal    WSP    MSRB    AML    NAC    FINOP    FOCUS    Material Change Of Business     |    In: Cases of Note : FINRA
Bill Singer's Comment

On August 30, 2007, FiNRA’s Department of Enforcement (“Enforcement”) filed a 14-cause complaint against CMG and Baldwin alleging the aforementioned violations of SEC, NASD, and MSRB Rules.

On September 26, 2007, CMG and Baldwin filed answers to the complaint. The Hearing Panel conducted a hearing on July 7, 2008.

On October 14, 2008, the Hearing Panel found CMG and Baldwin liable under each cause alleged in the complaint.

On November 4, 2008, the Respondents appealed the Hearing Panel’s decision. Oral argument was held on June 12, 2009. The Decision was published on May 3, 2010.

See the 2010 NAC Decision at http://www.finra.org/web/groups/industry/@ip/@enf/@adj/documents/nacdecisions/p121380.pdf

See the 2008 Office of Hearing Officers Decision at http://www.finra.org/web/groups/industry/@ip/@enf/@adj/documents/ohodecisions/p117583.pdf

I commend both the OHO and the NAC decisions to you as they are well-written and reasoned, and set forth in a comprehensive manner the allegations, findings, and rationale.  An excellent effort by FINRA.

Michael Frederick Siegel
C05020055/August 2010
Siegel recommended and effected sales of securities to customers without having reasonable grounds for believing that the recommendations and resultant sales were suitable for such customers, and participated in private securities transactions without prior written notice to, and approval from, his member firm.
Michael Frederick Siegel : Fined $30,000; Suspended for two consecutive 6 month terms
Tags:  Suitability    NAC    Federal Appeal     |    In: Private Securities Transactions
Bill Singer's Comment

The United States Court of Appeals for the DC Circuit imposed the sanctions following appeal of an SEC decision affirming a FINRA National Adjudicatory Council decision.

I commend the DC Circuit decision to your review because it states some of the most damning language that has yet to surface in a federal court's review of NASD/FINRA and SEC conduct.  Frankly, the language is startling in its pointed criticism.

Note this language in the DC Circuit Decision:

In his petition for review to this court, Siegel’s principal argument is that, because the SEC failed to properly assess the “cause” of the losses suffered by the Landrys and Downers, the agency’s decision to uphold NASD’s awards of restitution was an abuse of discretion. We agree. NASD General Principle No. 5, which the SEC purported to apply in this case, describes restitution as a “traditional remedy used to restore the status quo ante where a victim otherwise would unjustly suffer loss”; and it states that restitution may be ordered when a party “has suffered a quantifiable loss as a result of a respondent’s misconduct.” General Principle No. 5, FINRA Sanction Guidelines at 4 (“Principle 5”). The SEC completely failed to articulate any meaningful standards governing the level of causation required under Principle 5.

This case involves wealthy and sophisticated customers who were under no press of time to decide whether to invest; customers who invested specifically in furtherance of a desire to speculate; and a broker who did not profit from his wrongdoing and who has been fined and suspended for his violations. There is nothing in the SEC’s decision to indicate why, in these circumstances, awards of restitution are appropriate under Principle 5. Indeed, the SEC’s decision is incomprehensible insofar as it attempts to amplify any meaningful causal connection between Siegel’s putative bad acts and the Downers’ and Landrys’ losses. And the SEC has cited no precedent, and we have found none, supporting restitution in a case of this sort. The SEC’s judgment is fatally flawed for two reasons: First, the SEC’s judgment is not supported by reasoned decisionmaking. Second, the SEC cites to no controlling precedent that includes reasoned decisionmaking supporting restitution under Principle 5 in a case of this sort. We therefore vacate the restitution order.

We reject Siegel’s remaining challenges. Substantial evidence supports the SEC’s findings that Siegel violated NASD’s rules barring selling away and unsuitable recommendations. And the SEC did not abuse its discretion in imposing fines and consecutive six-month suspensions for Siegel’s separate violations of Rules 3040/2110 and Rules 2310/2110.

. . .

In failing to articulate a comprehensible principle governing the level of causation required by Principle 5, the SEC decision borders on whimsical or rests on notions of strict liability. In either event, the decision offers no reasonable construction of the causation requirement under Principle 5. This is far short of reasoned decisionmaking. As the Supreme Court has explained, the “evil of a decision” of this sort is that it “prevent[s] both consistent application of the law by subordinate agency personnel . . . and effective review of the law by the courts.” Allentown Mack, 522 U.S. at 375. The SEC’s decision in this case clearly fails for want of reasoned decisionmaking.

Principle 5 states, in relevant part (emphasis added):

Where appropriate to remediate misconduct, Adjudicators should order restitution and/or rescission. Restitution is a traditional remedy used to restore the status quo ante where a victim otherwise would unjustly suffer loss. Adjudicators may determine that restitution is an appropriate sanction where necessary to remediate misconduct. Adjudicators may order restitution when an identifiable person, member firm[,] or other party has suffered a quantifiable loss as a result of a respondent’s misconduct, particularly where a respondent has benefitted from the misconduct.

Adjudicators should calculate orders of restitution based on the actual amount of the loss sustained by a person . . . as demonstrated by the evidence. Orders of restitution may exceed the amount of the respondent’s ill-gotten gain. Restitution orders must include a description of the Adjudicator’s method of calculation.


http://www.sec.gov/litigation/opinions/2010/34-62324.pdf (SEC Order Setting Aside Restitution, June 18, 2010)

http://www.sec.gov/litigation/opinions/2008/34-58737_appeal.pdf (DC Circuit Opinion, January 12, 2010)

Enforcement Actions