South Florida Arbitration & Litigation Lawyer Blog
FINRA Arbitration Fraud and Arbitration Attorney, Russell L. Forkey, Esq.
July, 2011:
Ryan Jeffrey Kirkpatrick (CRD #4459488, Registered Representative, Granbury, Texas) was fined $25,000, suspended from association with any FINRA member in any capacity for six months, and ordered to disgorge $91,466, which represents the commissions earned on the sales of unregistered securities. The fine and disgorgement shall be due and payable upon Kirkpatrick’s return to the securities industry. The sanctions were based on findings that Kirkpatrick sold millions of unregistered shares of stock for accounts opened at his member firm on his customers’ behalf, realizing approximately $9.3 million in proceeds for the customers without taking the necessary steps to determine whether his customers’ unregistered shares could be sold in compliance with Section 5 of the Securities Act of 1933. The findings stated that Kirkpatrick signed new account forms for the customers, did not review them in depth, neither met nor spoke with the customers, and communicated with them solely via email and instant message. The findings also stated that Kirkpatrick failed to conduct the necessary due diligence prior to the entity’s stock sales from the customers’ accounts; the circumstances surrounding the entity’s stock and the firm’s customers presented numerous red flags of a possible unlawful stock distribution. The findings also included that the sales through one of the customers’ accounts at Kirkpatrick’s firm realized approximately $5.8 million in proceeds for the customer, and another customer realized approximately $3.5 million in proceeds; the total commissions generated for these sales were $481,398 of which Kirkpatrick received commissions totaling $91,466. FINRA found that Kirkpatrick admitted that he did not determine if a registration statement was in effect with respect to the customers’ entity shares, or if there was an applicable exception; instead he relied on the issuer’s transfer agent to determine if the entity stock the customers deposited could be sold. FINRA also found that Kirkpatrick did not review the customers’ incoming stock questionnaires, nor did he request or review the stock certificates, which indicated information about how and from whom the shares were purchased, whether the customer was affiliated with the issuer and whether the stock was restricted. In addition, FINRA determined that Kirkpatrick noticed that the accounts seemed to have the same trading pattern, yet he failed to investigate and failed to make any effort to determine the source of the customers’ shares. The suspension is in effect from May 16, 2011, through November 15, 2011. (FINRA Case #2006004666601).