AWC/2005002244303 and 2005002244302/December 2009
Festís and Thomasonís member firm required that registered representatives obtain a customerís signature on transaction documents after they were completed to evidence that the customer was aware of the disclosures in those documents. Fest had clients sign blank transaction documents, which he had Thomason complete later with inaccurate information, including inaccurate sales charges and incorrect rationale for transactions,and submitted the documents to his firm without the clientsí review.
Fest provided inaccurate and misleading information to FINRA staff during on-the-record testimony and attempted to persuade Thomason to corroborate his inaccurate testimony. Festís pattern of recommending short-term unit investment trust trading in his customerís accounts was unsuitable
Isabella fraudulently induced customers, most of whom were retired or nearing retirement, to entrust him with their retirement savings and purchase securities from him by promising that he could achieve sustained annual rates of return of at least 10 percent each and every year, which would allow for consistent annual withdrawal, ranging from 7 percent to 13.5 percent fromtheir investment portfolios without depletion of principal. Many of the customers relied on Isabellaís fraudulent representations when determining to invest their retirement funds with him, and based their decision to retire sooner than they had otherwise planned, at least in part, upon the representation that they would receive enough monthly income from their retirement accounts to live on for the rest of their lives.
Isabella made unsuitable investment recommendations and effected transactions in customersí accounts without having reasonable grounds for believing that the transactions were suitable for the customers in view of the over-concentration in equities, the related fees incurred, and in light of the customersí financial situations, investment objectives and needs. Isabellaís promised returns and withdrawal rates proved to be unsustainable, resulting in the depletion of the customersí retirement savings and forcing some to return to employment. Isabella falsified records maintained by his member firm concerning his customersí financial situations and goals, and as a result, the customers did not receive the firmís promised benefit of having an investment manager selected based on their individual needs and financial situations.
Isabella inappropriately obtained confidential contact and employment information about a companyís employees, without their knowledge, authorization or consent, from personnel in the companyís human resources and other departments, and rewarded the contacts for their assistance with gifts.
In addition, Isabella used a false professional designation on correspondence with customers.
Isabella provided false testimony during a FINRA on-the-record interview.
In connection with the sale of an annuity contract, Rutherford misrepresented to a customer that he would receive a higher return rate than what the terms of the policy offered. Rutherford provided the customer with falsified annual account statements and an altered annuity contract that reflected a higher return rate, when in fact the customer was receiving a lower rate of return. Rutherford falsified an annual account statement by increasing the account balance by over $5,000 in order to mislead the customer into believing that he received additional earnings as a result of the higher rate of return, and deposited over $5,000 of her own personal funds into the customerís account to compensate him for the disparity in return rates.
After agreeing to reimburse another customer for any early withdrawal penalties in connection with transferring money to his annuity, Rutherford falsified an annuity confirmation statement wherein the account balance was increased to cover a surrender charge that had not been credited after the customer complained that he was charged a penalty for early withdrawal.
- 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.
- 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.
- 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.
- 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.
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.
- 529 College Savings Plan
- Annual Compliance Certification
- Away Accounts
- Blank Forms
- Changes Of Address
- Class B Shares
- Clearing Agreement
- Cooperation Agreement
- Corporate Credit Card
- Debit Card
- Electronic Communications
- False Professional Designation
- False Statements
- Guaranteeing Against Losses
- Heightened Supervision
- Inaccurate Information To FINRA
- Increase The Number Of RRs
- Instant Messaging
- Joint Account
- Membership Agreement
- Minimum Contingency
- Mutual Funds
- Net Capital
- No Objections Letter
- Ownership Change
- Personal Bank Records
- Pre-arranged Trading
- Private Placement
- Private Securities Transaction
- Qualified Independent Underwriter
- Registration Of Supervisors
- Reg T
- Rule 1017
- Service Fee
- Sharing Commissions
- Shelf Offering
- Statutory Underwriters
- Supervisory System
- Surrender Charge
- Surrender Charges
- Time And Price Discretion
- Timely Amend
- Unregistered Branch Offices
- Unregistered Person
- Unregistered Principal
- Unregistered RRs
- Unregistered Securities
- Variable Annuity
- Web Sites
- Written Communications