South Florida Arbitration & Litigation Lawyer Blog
FINRA Negligent Supervision and Selling Away Arbitration Attorney, Russell L. Forkey, Esq.
August, 2011:
Timothy D. Camarillo (CRD #5205051, Registered Representative, San Antonio, Texas) submitted an Offer of Settlement in which he was fined $10,000, suspended from association with any FINRA member in any capacity for four months, and ordered to pay $13,000 in restitution to a customer. The fine and restitution must be paid either immediately upon Camarillo’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the allegations, Camarillo consented to the described sanctions and to the entry of findings that he 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 $13,000in commissions, without providing notice to, or receiving approval from, his member firm. The findings stated that 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 findings also stated that 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. The findings also included that 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.
FINRA found that 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. FINRA also found that because 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. In addition, FINRA determined that 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, FINRA found that 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 suspension is in effect from June 20, 2011, through October 19, 2011. (FINRA Case #2010023612301).