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.
December 2010
Julio Enrique Serrano
2009017710701/December 2010

Serrano entered into a formal “Advisor Agreement” with a financial public relations firm. The findings stated that the website issued press releases recommending specific securities to the public, with the releases implying that the recommendations were made by Serrano, whom they identified by name and CRD number as a registered person the website employed.

Serrano failed to provide written notice of this outside business activity to either of the member firms through which he was registered, and signed a disclosure document in which he specifically and falsely denied that he was engaging in any outside business activity. Serrano acknowledged in a letter to FINRA that he had failed to disclose his outside employment to his member firms and conceded in on-the-record testimony that he was obligated to disclose the outside activity to both firms.

Julio Enrique Serrano : Fined $26,000; Suspended 12 months
Tags:  Website     |    In: Research and Advertising
Bill Singer's Comment
Frankly, I'm not quite understanding FINRA's posture here. It seems to me that this matter resonates more sensibly in the basket of "Advertising" violations -- in that Serrano appeared to have contracted with a third party to publish recommendations under his name and citing his registered status. Such activity would run afoul of a number of obligations to obtain prior approval, to ensure the accuracy of representations, etc. Instead, FINRA appears to suggest that the problem here was that Serrano engaged in an outside business activity without his firm approval and then denied his activity.  Either some aspect of this case needs to be better explained or I'm missing something.
September 2010
David John DeWald
AWC/2009019041601/September 2010

DeWald participated in private securities transactions without first giving his member firm written notice of his intentions and receiving approval.

DeWald made unsuitable recommendations to customers given his complete failure to perform a reasonable investigation concerning the product and that, while reviewing the product information on the company’s website, he took its representations for face value and failed to independently verify those representations.

DeWald made negligent misrepresentations of material fact in connection with the sale of installment plan contracts; he misrepresented to customers that they could take charitable tax deductions in connection with their investments, which was not true. DeWald provided customers with sales materials containing misleading and oversimplified descriptions of the contracts, and failed to obtain a firm principal’s approval prior to their use.

DeWald failed to respond to FINRA requests for documents.

David John DeWald : Ordered to pay $124,519.03, plus interest, in restitution; Barred
Tags:  Suitability    Website         |    In: Cases of Note : FINRA
Steven Craig Vanderhoof (Principal)
AWC/2007011152601/September 2010

Vanderhoof established a corporation and a website to market an “equity repositioning strategy” to investors, with the strategy calling for investors to obtain a loan for equity in a home, through mortgage refinancing or a home equity line of credit, and invest the loan proceeds with the goal of earning more through the investments than the cost of the loan, but a prime purpose in marketing this strategy was to sell mutual funds to investors through a firm he founded.

Vanderhoof authored television advertisements that were false and misleading, and failed to provide a balanced discussion and disclose the name of the broker-dealer; and Vanderhoof failed to file the advertisements with FINRA’s Advertising Regulation department in violation of NASD Rule 2210(c)(2)(a) which required that advertisements concerning mutual funds be filed within 10 days of first use.

Vanderhoof designed and authored a website and made the publicly available website, which misleadingly failed to provide a balanced discussion of the risks associated with borrowing money through home equity loans to invest in securities, included false and misleading statements and claims and projected investment results, and was not filed with FINRA’s Advertising Regulation department.

Vanderhoof authored an information brochure, which the firm’s registered representatives sent to potential customers, that contained the same advertising content violations and was not filed with FINRA’s Advertising Regulation department. Vanderhoof approved the equity repositioning analysis for use with potential customers and caused it to be distributed to potential customers when the analysis failed to disclose the risks assumed when investors borrow money from their home to buy securities, contained statements and claims that were unwarranted or exaggerated, and made predictions or projections of investment performance.Vanderhoof failed to ensure adequate review of the equity repositioning sales materials and failed to ensure that the firm established written supervisory procedures regarding the suitability of equity repositioning recommendations.

Steven Craig Vanderhoof (Principal): Fined $10,000; Suspended 30 business days
Tags:  Website    Television    Mutual Funds     |    In: Cases of Note : FINRA
March 2010
A.B.Watley Direct, Inc.
OS/2005003391301/March 2010
The Firm's website and television advertisements contained statements and claims that were misleading, exaggerated or unwarranted, and failed to provide a sound basis for evaluating the facts in regard tothe services offered. The firm claimed in public communications that it offered low commission rates, but failed to clearly disclose that the rates were only available to customers who placed a certain amount of trades the previous month, and the claim was misleading in light of the actual commission rates and fees it charged the majority of its customers. FINRA advised the firm that its television advertisements included misleading commission rate information, but nevertheless, the firm ran the TV advertisements without altering the material. The TV advertisements did not disclose any limitations or restrictions related to the stated commission rates. The website made various misleading claims regarding the speed of execution and level of market access the firm provided to clients. The homepage included a ranking by Barron’s, but failed to provide sufficient information to evaluate the rating or criteria on which it was based.
A.B.Watley Direct, Inc. : Censured; Fined $20,000; Required to file all sales literature and advertisements with FINRA’s Advertising Regulation Department at least 10 days prior to their first use for one year from the date of this order.
Tags:  Website    television         |    In: Cases of Note : FINRA
Enforcement Actions