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 2009
First Financial Equity Corporation and George Edward Fischer (Principal)
OS/2006004707201/December 2009
Acting on the firm’s behalf, Fischer
  • approved registered representatives’ participation away from the firm in raising capital for a company by selling its stock, but imposed conditions on their participation and required that the stock certificates not bear restrictive legends;
  • failed to take reasonable steps to monitor or determine compliance with these conditions, including conducting an inquiry of “red flags” that suggested violations of federal securities laws; and
  • Fischer failed to detect and prevent the representatives’ distribution of unregistered securities in their capacity as underwriters.
Although Fischer was aware these transactions constituted private securities transactions for compensation, he did not cause the firm to record the transactions on its books and records and supervise them as if they were firm transactions. Further, Fischer failed to supervise the registered representatives in a manner reasonably  designed to achieve compliance with applicable laws, rules and regulations. Acting through Fischer, the Firm failed to supervise and record the representatives’ private securities transactions.

First Financial Equity Corporation: Censured; Fined $20,000

George Edward Fischer: Fined $20,000; Suspended 15 business days in Principal capacity only

Bill Singer's Comment

As holiday time nears, pass around the fruitcake, enjoy the egg nog, and pull out your festive AML policies and procedures and make sure that they are fully implemented and being followed.  You should also cross-reference your WSPs to make sure that there aren't any differences.

Also, FINRA is apparently on a tear about fraudulent private placements.  Make sure that you have a comprehensive punch-list for such offerings, and be particularly attentive for improperly extended mini-max offerings, non-compliant escrow accounts, and receiving payments directly to the firm from customers.

November 2009
Broad Street Securities, Inc.
AWC/2006006615402/November 2009
Acting through an individual, the Firm failed to
  • establish and maintain a system to supervise a registered representative who the firm employed;
  • establish procedures addressing heightened supervision; and
  • implement heightened supervision of the registered representative.
Broad Street Securities, Inc.: Censured; Fined $10,000
Fortune Financial Services, Inc. and Brian Lee Daniels (Principal)
AWC/2008011697201/November 2009
Acting through Daniels, the Firm
  • failed to maintain and preserve all of its business-related electronic communications;
  • did not have a system, written procedures or policies relating to the retention of electronic communications in place and, as a result, failed to maintain and preserve electronic communications;
  • increased the number of registered representatives associated with the firm and failed to file an application with FINRA and obtain FINRA’s approval for the material increase in sales personnel;
  • conducted business at locations that constituted branch offices that were not registered with FINRA; and
  • failed to establish and maintain a supervisory system, and failed to establish, maintain and enforce written supervisory procedures that were reasonably designed to achieve compliance with all applicable laws, rules and regulations regarding business-related electronic communications, material business expansions, proper registration of branch offices, a principal approval of advertisements prior to use, and maintaining records of the firm’s Web sites and advertisements.
Fortune Financial Services, Inc. Censured; Fined $125,000; Prohibited for 90 days, commencing five business days after issuance of the AWC, from registering any associated persons, except for individuals who perform only compliance and/or supervisory duties. Termination of this prohibition is contingent upon satisfaction of the following undertakings:
  • The firm shall, within 10 business days after the end of the 90-day prohibition, certify in writing to FINRA that it complied with the prohibition, and,
  • within 90 days of the issuance of the AWC, the firm shall certify to FINRA in writing that the firm currently has systems and procedures in place that are reasonably designed to achieve compliance with laws, rules and regulations concerning the preservation of electronic mail communications.

Brian Lee Daniels (Principal)
: Fined $25,000; Suspended 9 months in Principal capacity only
Robert Wesley Stout
OS/E062005003202/November 2009

Registered Principal Stout failed to

  • establish, maintain and enforce adequate written supervisory procedures to ensure compliance with FINRA rules and with SEC and Federal Reserve Board rules and regulations;
  • ensure that firm customers fully paid for cash transactions within the time allotted by the Federal Reserve Board Regulation T, in that the firm failed to cancel the transactions, liquidate the transactions or freeze the accounts when customers failed to make full payment on purchase transactions in cash accounts within five full business days;
  • review, initial and maintain daily purchase and sales blotters at the main office;
  • make the determination to implement heightened supervision for individuals who met its written supervisory procedures requiring a determination;
  • establish compliance procedures for setting commissions and markups;
  • establish supervisory procedures to detect excessive commissions and markups.
  • ensure that an individual actively engaged in managing the firm’s securities business was registered as a principal or in any other capacity;
  • maintain firm records in an easily accessible place and failed to promptly produce the records; and
  • respond to FINRA requests to produce new account forms, customer confirmations and order memoranda because they were maintained at a branch office, thereby causing his firm to be in violation of SEC rules.
Robert Wesley Stout: Fined $20,000; Suspended 20 business days in Principal capacity only
Tags:  WSPs    Reg T    Heightened Supervision    Markups    Unregistered Principal         |    In: Cases of Note : FINRA
Scott & Stringfellow, LLC
AWC/2006004160701/November 2009

The Firm

  • failed to register individuals who acted in a supervisory capacity with respect to its investment banking or securities business in the appropriate registration category;
  • failed to provide written notification disclosing to its customers either its correct capacity in transactions or that transactions were executed at an average price;
  • made publicly available a report on its routing of non-directed orders in covered securities that contained incorrect information as to routing venues;
  • made available a report on the covered orders in national market system securities that it received for execution from any person which included incorrect information;
  • failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the execution time, and incorrectly reported long sale transactions as short sale transactions to the NASDAQ Market Center.

Also, the Firm's supervisory procedures failed to include the date that each designated supervisory personnel assumed responsibility for each area of supervision, and its supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning registration and TRACE.

Scott & Stringfellow, LLC: Censured, Fined $72,500 and Required to revise its written supervisory procedures regarding the date that each designated supervisory personnel assumed responsibility for each area of supervision, as well as registration and TRACE.
Enforcement Actions