Camarillo entered into a contract with a company to sell its private placements, and sold approximately $370,000 of these private securities to his customers, receiving over $13,000 in commissions, without providing notice to, or receiving approval from, his member firm.
Camarillo’s firm’s written procedures, which he attested to reading and understanding, instructed employees to provide notice to the firm’s compliance department and to seek the firm’s written approval prior to engaging in any securities transactions not executed through the firm. The company provided Camarillo with sales literature, and without submitting the brochure to his firm for approval, he distributed the brochure to his customers; the brochure contained several unwarranted, exaggerated and misleading statements, omitted material facts and ignored risk while guaranteeing success.
Camarillo did not have a reasonable basis to recommend that his customers purchase the securities, had no experience selling these types of products and did not conduct proper due diligence. Camarillo did not sufficiently understand the products offered through the company or how the investments were managed; all of Camarillo’s customers who invested in the products informed Camarillo that they were seeking preservation of capital and viewed the investments as a retirement investment. Camarillo did not investigate the claims made in the sales literature that the returns were guaranteed, he had no basis to recommend the investment to customers seeking preservation of capital, and his recommendations to invest in the company were unsuitable.
Camarillo’s customers lost tens of thousands of dollars by relying on his recommendation, because even after partial reimbursement from the company’s court-ordered receivership, Camarillo’s customers only recouped 69 percent of their investment. Moreover, the products, as marketed, were securities, the sale of which required Camarillo to possess a Series 7 license; at the time he sold the securities, Camarillo held only a Series 6 license.
The Firm failed to properly supervise and properly register its foreign finders; and it had no written procedures concerning its use of foreign finders.
The Firm terminated the registrations of all its foreign associates and made them foreign finders; thereafter, the firm employed foreign finders and no foreign associates. Many of the firm’s foreign finders were previously registered foreign associates at the firm who worked on the premises of the firm’s affiliated broker-dealer. As registered sales representatives and foreign associates for the firm, they acted as general securities representatives engaging in securities activities for non-U.S. residents, citizens or nationals.
Whenthe firm’s foreign associates’ registrations were terminated with FINRA and re-affiliated as foreign finders, their job functions were supposed to be limited to those of a foreign finder. As such, the firm’s foreign finders’ sole involvement with the firm should have been the initial referral of non-U.S. customers; however,all of the firm’s foreign finders serviced customer accounts, processed new account documents and letters of authorization (LOAs) for customers containing confidential client information and serviced customer accounts -- these activities went well beyond the initial referral of non-U.S. customers to the firm.
Also, given the expanded roles of the firm’s foreign finders, they should have been registered as foreign associates; however, the firm failed to register any of its foreign finders as foreign associates.
A concerned customer visited the firm’s affiliate’s branch office and explained that a foreign finder of the firm had provided him with an account statement that differed from the statement he recently received from the firm’s clearing firm. In response,the Firm immediately instituted an internal investigation into all accounts the foreign finder had introduced to the firm. The firm discovered that unauthorized statements had been provided to customers by its rogue foreign finder. Those unauthorized statements inflated market values and net worth. Further, the rogue foreign finder altered correspondence that he forwarded to customers by making the documents incorrectly appear as if the firm had authorized them.
The firm contacted and interviewed every customer the rogue foreign finder introduced to the firm, which revealed that some of the customers had received false statements; and that the false statements inflated customers’ account values by over $2 million U.S. dollars. The investigation led to the rogue foreign finder’s termination, foreign finders being discontinued, written supervisory procedures being added, the firm’s supervisory system being enhanced and substantial compensation paid to affected customers. The Firm claimed that it inspected the offices of its foreign finders, including the rogue foreign finder, to ensure that they were properly supervised, but failed to document or memorialize the office inspections and other supervisory activities in any way.