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Has Your Broker Been Sued by FINRA?

Boca Raton, Florida Securities Lawyer Russell Forkey

The Financial Industry Regulatory Authority (FINRA) is responsible for licensing and overseeing both broker/dealers and account executives to make sure that they comply with the federal securities laws and the rules and regulations adopted by FINRA. If FINRA determines that a broker/dealer or an account executive violates these statutes or regulations, FINRA can institute an "enforcement" action against them. In a small number of these types of actions, the settlement agreement or final decision will order that certain investors be reimbursed for some or all of their losses. However, in the majority of cases, the investor will only have an opportunity to recover his or her losses, if a FINRA arbitration is filed. Consequently, investors should read the information contained herein, which has been released and published by FINRA, to see if they suffered damages as a result of any of the activity described below. If so, immediately contact the law office of Russell Forkey for your initial free consultation.

We have just added a new feature to our site. The information on this page relates to completed FINRA actions. The new page that we have added, which can be seen by following the highlighted link, provided information concerning matters that have recently been filed, by FINRA. Please read the disclosure at the beginning of the linked page.

Jason Leekarl Beckett (CRD #3186927, Registered Representative, West Columbia, South Carolina, formerly licensed with Traderight Securities) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any capacity for two months. The fine must be paid either immediately upon Beckett'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 findings, Beckett consented to the described sanctions and to the findings that he submitted an advertisement to a local newspaper, which listed an entity he owned as offering certain investments, including certificates of deposit (CDs) and fixed annuities, and that he did not submit the advertisement to his member firm for review and approval; moreover, the advertisement content included misleading statements regarding the offered investments. The findings stated that Beckett maintained a website for an entity he owned, which was accessible to the investing public, and he failed to submit the website material to his firm for review until a later date. The findings also stated that Beckett failed to obtain his firm's written approval of the website content prior to its use. The findings also included that Beckett completed an annual certification, which he provided to his firm and he answered "no" to the question asking whether he anticipated using any type of electronic communication systems such as the Internet for soliciting business. The suspension is in effect from January 18, 2011, through March 17, 2011. (FINRA Case #2009016600001)

Brian Thomas Beldyk (CRD #2035064, Registered Representative, Kennett Square, Pennsylvania, formerly licensed with LPL Financial Corporation) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Beldyk misappropriated over $462,000 from customers and converted the funds for his own use. The findings stated that either Beldyk or his member firm has fully compensated all of Beldyk's customers for their losses. The findings also stated that Beldyk created and provided false account statements to a customer's authorized representative to cover up his malfeasance, and failed to respond to FINRA requests for information. (FINRA Case #2009020090301)

Dennis O'Neal Blackstone (CRD #1517755, Registered Principal, Arlington, Texas formerly licensed with Merrill Lynch, Pierce, Fenner & Smith, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Blackstone consented to the described sanction and to the entry of findings that, as the registered representative on the joint securities account of customers at his member firm, he created a false Letter of Authorization (LOA), without the customers' knowledge or authorization, and forged their signatures to authorize a transfer of funds from their joint account at the firm to a bank account that Blackstone controlled. The findings stated that based on the forged LOA, the firm wired $28,320 from the customers' joint account to the bank account Blackstone controlled and, after receiving the funds in his bank account, Blackstone used the funds for his personal expenses. (FINRA Case #2009020488001)

Peter Joseph Bonnell III (CRD #1213039, Registered Principal, Medina, Ohio, formerly licensed with Royal Alliance Associates, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $35,000 and suspended from association with any FINRA member in any capacity for two years. The fine must be paid either immediately upon Bonnell'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 findings, Bonnell consented to the described sanctions and to the entry of findings that he engaged in an outside business activity involving a company he owned and operated, which was a marketing and advertising business through which he sought to generate leads for registered representatives and insurance agents. The findings stated that the company's primary form of marketing was mass mailings, usually employing postcards that contained false and misleading statements that Bonnell sent and caused to be sent to thousands of prospective customers. The findings also stated that Bonnell developed and directed the use of multiple false and misleading telephone operator scripts that were used in the company's call center to respond to potential investors. The findings also included that, as a result of the misleading marketing practices involving his company, Bonnell became the subject of several state regulatory actions and willfully failed to timely amend his Form U4 to disclose these actions to FINRA as required.

FINRA found that Bonnell associated with a FINRA registered member firm and acted in a registered capacity while he was subject to statutory disqualification. FINRA also found that Bonnell provided false information, failed to disclose material information, and misrepresented material information on the firm's annual compliance questionnaires concerning his outside business activity and regulatory actions. In addition, FINRA determined that Bonnell failed to provide prompt and complete written notice to the firm of his outside business activities involving another insurance marketing firm he operated after closing the other company. Moreover, FINRA found that Bonnell failed to adequately supervise certain representatives to ensure they filed accurate and timely updates disclosing state regulatory actions and outside business activity. The suspension is in effect from January 18, 2011, through January 17, 2013. (FINRA Case #2007009073001)

Gregory James Buchholz (CRD #1864780, Registered Representative, Bridgewater, Connecticut, formerly associated with Raymond James Financial Services, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Buchholz consented to the described sanction and to the entry of findings that he misappropriated approximately $1,350,000 from customers, a number of whom were retirees, by liquidating their variable annuities and/or mutual funds and then transferring the proceeds to his personal bank account, converting the proceeds for his own use and benefit. The findings stated that as part of this scheme, Buchholz falsely and fraudulently represented, at times by forging customer signatures on redemption documents, that certain customers had authorized the redemption of the securities in order to obtain the proceeds of the sale; fraudulently induced certain customers to authorize the redemption of securities, based on misrepresentations that the proceeds would be reinvested to the customers' investment accounts; and caused checks to be drawn in the customers' names and caused the checks to be sent directly either to his office or to the customers. The findings also stated that if the checks were sent directly to the customers, Buchholz convinced those clients to turn the checks over to him, making false and fraudulent representations that he would deposit the funds in their securities accounts to be reinvested; however, he did not reinvest the proceeds but instead deposited the checks into his personal bank accounts and used the proceeds for his own purpose. The findings also included that if the checks were sent directly to his office, Buchholz simply deposited the checks in his own bank accounts for his personal use and sometimes forged the customers' signatures in order to cash the checks. (FINRA Case #2010023931401)

Cynthia Ann Bulinski (CRD #1851735, Registered Representative, Annapolis, Maryland, formerly licensed with J.W. Cole Financial, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which she was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Bulinski consented to the described sanction and to the entry of findings that she made unsuitable recommendations to her elderly clients to purchase variable annuities. The findings stated that Bulinski repeatedly failed to tailor her recommendations to meet her customers' individual investment needs, and instead recommended the same variable annuity to her customers, irrespective of age, investment experience, liquidity needs, financial situation and risk tolerance. The findings also stated that Bulinski recommended elderly customers to purchase the same variable annuity with an enhanced death benefit rider, but demonstrated that she did not have reasonable basis for her recommendation because some of the customers were too old to purchase the rider and the rest gained little, if any, benefit from the rider while paying a substantial cost for it. The findings also included that Bulinski recommended unsuitable variable annuities with a rider that was inconsistent with her customers' investment objectives. FINRA found that in numerous instances, Bulinski demonstrated that she did not understand the variable annuity and inaccurately described the investment to a customer as a fixed annuity rather than a variable annuity, and with other customers, incorrectly stated the surrender period and surrender charges her customers would incur. FINRA also found that Bulinski was the subject of several written customer complaints about her lack of disclosure about surrender charges and other product details. (FINRA Case #2005002244704)

Derek Matthew Christenson (CRD #2285093, Registered Representative, Milford, Ohio, formerly licensed with Chase Investment Services, Corp.) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Christenson converted customer funds by transferring $66,000 in several transactions from a bank customer's saving account into several of his personal checking accounts, without the customer's knowledge. The findings stated that Christenson failed to respond to FINRA requests for information. (FINRA Case #2009019406701)

Benjamin Harry Cohen (CRD #4349135, Registered Representative, St. Paul, Minnesota, formerly associated with Workman Securities Corporation) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Cohen consented to the described sanction and to the entry of findings that he violated FINRA's suitability rule by failing to understand or convey to customers the cost of a rider to a variable annuity, pursuant to transactions he recommended to customers. The findings stated that Cohen incorrectly communicated the imposed fee. The findings also stated that Cohen did not understand the risks and rewards inherent in the variable annuity, with the rider feature, which he recommended to the customers. The findings also included that Cohen conducted a trade in a deceased customer's account with a purchase of $4,662 of an entity Class A mutual fund share. FINRA found that Cohen had discussed with this customer purchasing the entity's Class A shares prior to the customer's passing, and he had prepared certain paperwork for the transaction prior to the customer's death, but the purchase had not been made at the time of the customer's death. FINRA also found that Cohen, at the time of the transaction, did not consult with any representative of the deceased customer's estate and also did not notify the firm that the customer had passed away. In addition, FINRA determined that Cohen failed to appear for a FINRA on-the-record interview. (FINRA Case #2009017087301)

Richard Lawrence Coskey (CRD #54880, Registered Principal, Bloomfield Hills, Michigan, formerly licensed with Bentley-Lawrence Securities, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Coskey consented to the described sanction and to the entry of findings that notwithstanding his notice of potential ongoing violations of FINRA rules by a registered representative who worked under his direct supervision, Coskey failed to take any meaningful steps to increase his supervision of the registered representative, restrict his activities, or otherwise prevent his continued harmful mutual fund trading in firm customers' accounts. The findings stated that as a result of Coskey's failure to act, for several months, the registered representative placed trades to buy and sell mutual fund positions in customers' accounts without their prior written authorization and affected mutual fund A-share transactions that generated more than $31,500 in commissions and losses totaling more than $67,000. (FINRA Case #2009016354001)

Bradley John Delp (CRD #1701698, Registered Representative, Rossfield, Ohio, formerly licensed with LPL Financial Corporation) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $25,000 and suspended from association with any FINRA member in any capacity for 75 days. The fine must be paid either immediately upon Delp'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 findings, Delp consented to the described sanctions and to the entry of findings that he recommended that customers participate in a Stock to Cash program under which customers pledged stock to obtain loans to purchase other products; Delp's customers obtained loans totaling approximately $3.5 million. The findings stated that customers borrowed up to 90 percent of the value of the pledged stock for a short period of time. The findings also stated that the pledged stock would be transferred to the loaning entity's securities account maintained at a clearing firm. The findings further stated that no payments were required during the term of the loan, but customers were required to pay the full principal and interest due at the end of the loan term. The findings included that documentation the loaning entity used made it appear it was retaining the securities pledged and might use them to enter into hedging transactions, but in reality, the customers conveyed full ownership to the entity, which routinely sold the securities upon receipt and often moved the money into its own bank account. The findings also included that the entity became unable to make complete payments to customers with profitable portfolios and used the proceeds from the sale of securities new customers pledged to pay off its obligations to existing customers, and money was also diverted to pay for expenses not related to its operation. FINRA found that Delp did not take adequate efforts to find out what happened to the stock conveyed to the lender and did not inquire into what would be done with the stock; failed to conduct due diligence into the lender's financial condition but relied on unverified statements the promoter made, and told his clients they could receive their stock back at the end of the loan period. FINRA also found that by failing to verify information about how the stock was held or secured and whether the lender had the ability to fulfill its obligations, Delp did not have a reasonable basis for recommending the Stock to Cash program to his customers and potential customers. In addition, FINRA determined that some of the customers, at Delp's recommendation and with his participation, initially used some or most of the proceeds to buy equity-based mutual funds along with other products in violation of Regulation U restrictions. The suspension is in effect from January 3, 2011, through March 18, 2011. (FINRA Case #2007008935005)

Joshua A. Ellis (CRD #5293249, Registered Representative, Philadelphia, Pennsylvania, formerly licensed with Lincoln Investment) submitted a Letter of Acceptance, Waiver and Consent in which he was censured, fined $7,500 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Ellis' 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 findings, Ellis consented to the described sanctions and to the entry of findings that he signed customers' applications for fixed annuities, as a favor to another registered representative not authorized to sell products a company offered, without having met with or discussed the fixed annuity product or the points on each application with the customers, or ascertained the product's suitability for each customer as required; thereby his attestations on the annuity applications submitted to his member firm and the insurer were false. The findings stated that the falsified applications were submitted to the firm under Ellis' production number, and the insurer approved the applications and issued annuity contracts based on Ellis' misrepresentations on the applications. The findings also stated that after the falsified annuity applications were discovered, Ellis' firm offered to rescind the transactions for the customers or choose another investment at no cost. The findings also included that neither Ellis nor the other representative received any compensation for the transactions. The suspension is in effect from December 20, 2010, through June 19, 2011. (FINRA Case #2009016923602)

Kim Edward Elverud (CRD #2139216, Registered Principal, Bloomington, Minnesota, formerly registered with Sumner Harrington, LTD.) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Elverud consented to the described sanction and to the entry of findings that he caused his member firm to use Internet advertisements, websites and other public communications that were misleading, did not supply fair and balanced presentations of risks and rewards, or failed to give a sound basis for evaluating information. The findings stated that Elverud failed to approve or maintain records of public communications his firm issued. The findings also stated that Elverud's firm distributed a newsletter, which Elverud wrote, about a company whose securities the firm marketed; the letter was unduly and excessively positive, and failed to disclose material facts concerning the company's financial difficulties, which caused the communication to be misleading. The findings also included that Elverud made misrepresentations to investors through letters written on firm letterhead, about the securities the company issued, and the letters misrepresented the individual offers being made as a general reinvestment option to keep the investors from redeeming their holdings in the company's securities, and omitted material information regarding the company's financial difficulties. FINRA found that Elverud caused his firm's books and records identifying personnel holding supervisory and compliance responsibilities to be inaccurate. FINRA also found that Elverud caused his firm to conduct a securities business while it was in violation of its net capital requirements. (FINRA Case #2008013429301)

Dorothy Pauline Fisher (CRD #1521956, Registered Representative, Austin, Texas, formerly associated with Woodbury Financial Services, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which she was fined $10,000 and suspended from association with any FINRA member in any capacity for one month. The fine must be paid either immediately upon Fisher's reassociation with a FINRA member firm following her 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 findings, Fisher consented to the described sanction and to the entry of findings that she made an unsuitable recommendation to a customer concerning a variable annuity exchange. The findings stated that Fisher recommended that the customer surrender an existing annuity valued at $509,193.78 and purchase another annuity. The findings also stated that Fisher handled all of the paperwork to move the funds from the first annuity to the second annuity, and, other than stating that the second annuity fund earned a greater interest rate, she did not discuss the advantages or disadvantages of moving the funds. The findings also included that Fisher did not review either the prospectus or the initial contract for the first annuity. FINRA found that Fisher was unaware that the transaction would result in a substantial surrender penalty to the customer, failed to perform adequate analysis on the first annuity, and as a result, the customer was charged surrender fees totaling $43,750. The suspension is in effect from January 18, 2011, through February 17, 2011. (FINRA Case #2008015937201)

Christopher Gregory Gibas (CRD #2263956, Registered Principal, Grand Island, New York, formerly associated with UBS Financial Services, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any supervisory or principal capacity for five months. Without admitting or denying the findings, Gibas consented to the described sanctions and to the entry of findings that he failed to reasonably supervise a registered representative at his member firm by approving variable annuity transactions the representative recommended and affected; in approving these transactions, Gibas did not adequately respond to red flags that should have alerted him that the transactions were unsuitable. The findings stated that Gibas' firm placed the representative under heightened supervision, which was formalized by a written agreement the representative and Gibas signed, and under the agreement, Gibas was required, among of things, to preapprove all the representative's annuity business and new accounts, to speak with each of the representative's customers who were 65 or older, and to help the representative diversify her business. The findings also stated that with respect to the variable annuity transactions, they were unsuitable, in that the transactions' costs outweighed the benefits, and in some of those transactions, the customers purchased a rider for which they were not eligible. The findings also included that at the time Gibas approved these transactions, there were numerous red flags regarding the representative's variable annuity transactions, including transactions appearing on exception reports, that should have alerted him to the potential unsuitability of her transactions and required follow-up more comprehensive than Gibas otherwise took. FINRA found that Gibas did not adequately carry out his other responsibilities under the firm's heightened supervision of the representative; although Gibas reviewed the representative's transactions and contacted certain elderly customers before those transactions were affected, some of the conversations with the representative's customers lasted only a few minutes, were conducted when the representative was present, before Gibas received any paperwork regarding the proposed transaction. FINRA also found that while Gibas met with the representative, as well as with other supervisory and compliance personnel at the firm, none of the steps taken proved effective in preventing the representative's unsuitable sales. The suspension is in effect from December 20, 2010, through May 19, 2011. (FINRA Case #2005002244703)

Douglas Christopher Green (CRD #1713027, Registered Principal, Lighthouse Point, Florida, formerly licensed with Crocker Securities, LLC) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Green affected trades in collateralized mortgage obligation (CMO) bonds in his member firm's proprietary trading account to conceal inventory positions and create the false appearance of profitability through the use of fictitious and prearranged trades. The findings stated that in some cases, no contra-party had agreed to the transaction at the time Green submitted an order, and in other cases, Green had agreed to repurchase the security from the contra-party at an agreed-upon price that guaranteed a profit to the contra-party, causing the beneficial ownership to remain with Green. The findings also stated that Green devised a strategy that not only hedged and concealed the positions, but circumvented trading capital and inventory limits his firm set, and created the impression of profitable trading. The findings also included that Green did so by extending the settlement dates for certain bonds and coordinating fictitious transactions with other broker-dealers. FINRA found that Green received compensation based upon the overall profitability of the firm's proprietary account, and because Green's scheme created the appearance of profitability, he received compensation based upon the apparent profits; Green received $7,353,000, which resulted in an overstatement of the firm's net capital and caused the firm to cease business. FINRA also found that Green caused the firm's books and records to be inaccurate. In addition, FINRA determined that Green failed to respond to FINRA requests for documents and information, and to appear for on-the-record testimony. (FINRA Case #2008012444201)

Resource Horizons Group LLC (CRD #104368, Marietta, Georgia) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $15,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it approved advertising materials registered representatives used during several public seminars; the firm sent invitations to members of the public, and the seminar attendees received supplemental materials designed to introduce the firm and the financial services it offered. The findings stated that the invitations failed to provide a sound basis for evaluating the facts regarding the products or services offered. The findings also stated that the supplemental materials contained exaggerated and unwarranted language, and the seminar handout had unwarranted language. The findings also included that seminar presentations failed to explain a product or strategy, discussion of equity-indexed annuities (EIAs) failed to provide a balanced presentation and omitted information, discussion of variable annuities omitted material information, presentations failed to disclose that projections are hypothetical and are not guarantees, failed to disclose risks attendant with options transactions, failed to disclose risks and rewards of real estate investment trusts (REITs) in a balanced way, discussion of expenses pertaining to mutual funds and variable annuities was misleading; discussion of annuities in Individual Retirement Accounts (IRAs) was misleading, list of benefits and features of variable annuities failed to disclose potential restrictions and costs, discussion of 1031 exchanges failed to elaborate on Internal Revenue Code restrictions, discussion of variable annuities provided an incomplete, and oversimplified presentation and representation that safety and protection are provided by diversification market index certificates of deposit, puts, and living benefits profits provided by variable annuities was promissory and exaggerated. FINRA found that the firm failed to reasonably supervise its communications with the public and its supervision was not reasonably designed to meet the requirements of FINRA Rule 2210(b)(2). FINRA also found that the firm's procedures required the supervisory principal to evidence approval by signing public communications submitted for approval and use, but the supervisory principal only initialed a coversheet that did not identify which communication was approved. In addition, FINRA determined that the firm failed to maintain records naming the registered principal who approved the public communication or the date approval was given, nor documentation establishing that a certified registered options principal approved options material or that the material had been properly submitted to FINRA's Advertising Regulation Department for pre-approval. (FINRA Case#2009017637201).

InterSecurities, Inc. nka Transamerica Financial Advisors, Inc. (CRD #16164, St. Petersburg, Florida) submitted a Letter of Acceptance, Waiver and Consent in which the firm was fined $50,000 and required to certify to FINRA that it has reviewed it policies, systems and procedures concerning how it determines whether new products are securities, and has determined that they are reasonably designed to achieve compliance with FINRA rules and federal securities laws, and at the same time it provides this certification, it shall provide a written description of the policies, systems and procedures that are the subject of the certification. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it allowed its registered representatives to recommend a "Stock to Cash" program, under which customers would pledge stock to obtain loans that were in some instances used to purchase other products, primarily fixed or indexed annuities, marketing it as a non-securities product, but did not monitor use of the Stock to Cash program or otherwise inquire into the program's activities. The findings stated that at the time the Stock to Cash program first came to the firm's attention, the firm erroneously concluded that the Stock to Cash program was not a securities product, and therefore did not need to be approved; the firm's registered representatives utilized the Stock to Cash program with their clients, and some firm customers entered into Stock to Cash loans, pledging securities worth more than $4.3 million and borrowing more than $4.1 million. The findings also stated that none of the customers have been deprived of any profits to which they were entitled because almost all of the loans that have come due to date were secured by stocks that lost money during the loan period. The findings also included that neither representatives nor management at the firm conducted adequate due diligence into the Stock to Cash program prior to recommending that customers use it, and the representatives never ascertained how the pledge stock would be used and incorrectly concluded that customers would retain complete ownership interest over the stock or that the stock was held by an "investmentgrade" third party with a right of recourse by the client if the holder went out of business. FINRA found that the firm failed to undertake efforts to look into the lender's financial condition, upon which customers were depending for the return of their securities or payment of their profits, and the firm never spoke with anyone associated with the lender, and never learned what the lender actually did with the stock. FINRA found that, as a result, the registered representatives did not understand the potential risk inherent in the Stock to Cash program, and conveyed inaccurate and misleading information to their customers. FINRA also found that the firm allowed its registered representatives to recommend the program to customers, but failed to supervise their activities in connection with the program. (FINRA Case #2007008935008)

NEXT Financial Group, Inc. (CRD #46214, Houston, Texas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $400,000 and ordered to pay $103,179.84, plus interest, in restitution to customers. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it did not have a reasonable system for reviewing its registered representatives' transactions for excessive trading. The findings stated that the firm relied upon its OSJ branch managers to review its registered representatives' transactions and home office compliance personnel to review its OSJ branch managers' transactions, but the firm failed to utilize exception reports or another system, and the supervisors and compliance personnel only reviewed transactions on weekly paper blotters or electronic blotters. The findings also stated that the monthly account statements and contingent deferred sales charge reports for mutual fund activity were also available for review and could be indicators of excessive trading, however, given the volume of trading certain principals reviewed, and in certain cases, the large number of representatives for which the principal was responsible, it was not reasonable to expect principals to be able to track excessive trading on a weekly sales blotter, let alone through monthly account statements or mutual fund sales charge reports. The findings also included that, due to the lack of a reasonable supervisory system, the firm failed to detect a registered representative's excessive trading, which resulted in about $102,376 in unnecessary sales charges; the firm failed to identify or follow up on other transactions that suggested other registered representatives' excessive trading in additional customer accounts. FINRA found that the firm did not have a reasonable system for ensuring that it obtained and documented principal review of its registered representatives' transactions, including sales of complicated products such as variable annuities, and the firm should have been particularly attentive to maintaining books and records that established that the transactions had been properly reviewed. FINRA also found that the firm failed to provide reasonable supervision of municipal bond markups and markdowns to ensure that its registered representatives charged its customers reasonable markups and markdowns. In addition, FINRA determined that the firm's branch office examination program was unreasonable because it was not designed to carry out its intended purpose of detecting and preventing violations of, and achieving compliance with, federal, state and FINRA securities regulations, as well as its own policies. The findings also stated that the firm failed to have a reasonable supervisory system to oversee implementation of its heightened supervision policies and procedures for its registered representatives as it failed to comply with the terms of its heightened supervision for its registered representatives regarding client complaints, regulatory actions or internal reviews, therefore it had a deficient implementation of heightened supervision policies and procedures. The findings also included that the firm failed to have a reasonable supervisory control system or to have in place Supervisory Control Procedures as required by FINRA Rule 3012, and it failed to perform adequate 3012 testing or prepare adequate 3012 reports. Moreover, FINRA found that the firm failed to have a reasonable system and procedures in place to review and approve investment advisors' private securities transactions. Furthermore, FINRA determined that the firm filed inaccurate and late Rule 3070 reports relevant to customer complaints, and did not file or amend Form U4 and Uniform Termination Notice for Securities Industry Registration (Form U5) reports in a timely manner. FINRA found that the firm's AML systems and procedures were unreasonable, as the firm failed to establish and implement an AML Compliance Program reasonably designed to achieve compliance with NASD Rule 3011. FINRA also found that although the firm utilized a money movement report, its supervisors did not detect red flags involving numerous instances of potentially suspicious activities relating to the trading of a company's stock and the transfers of proceeds relating to the trading of a stock, and thus failed to investigate and report these activities in accordance with its own procedures and the requirements of the Bank Secrecy Act and the implementing regulations. In addition, FINRA determined that over 1.3 million shares of a company's stock were traded in customer accounts a registered representative serviced; during a one-week period, the firm's only AML exception report that monitored large money movement flagged the customer's account, but the firm took no action and failed to file any SARs as appropriate. (FINRA Case #2009016272902)

Robert Charles Pollock (CRD #4490116, formerly a Registered Representative with Workman Securities Corporation, Palm Harbor, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $94,650, which includes disgorgement of $34,650 in commissions, suspended from association with any FINRA member in any capacity for one year, and ordered to pay $76,922, plus interest, in restitution to customers. The fine and restitution amounts must be paid either immediately upon Pollock'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 findings, Pollock consented to the described sanctions and to the entry of findings that he sold to customers installment plan contracts offered by a non-profit corporation that represented itself to the public as a charitable organization, but Pollock lacked a reasonable basis to recommend the purchase of the contracts to his customers given his failure to perform a reasonable investigation concerning the product. The findings stated that while Pollock reviewed information on the non-profit corporation's website and spoke to its personnel, he took their representations at face value and failed to independently verify those representations. The findings also stated that Pollock did not contact the Internal Revenue Service (IRS) to confirm the tax-exempt status or the availability of a tax deduction to investors, and did not seek to understand how the non-profit corporation arrived at its figures regarding tax benefits; Pollock also misrepresented to his customers that they could take charitable tax deductions in connection with their respective investments, which was not true. The findings also included that in connection with the solicitation of these installment plan contracts, Pollock provided his customers with illustrations and other sales materials that contained misleading and incomplete information. FINRA found that Pollock failed to provide his member firm with written notice of his participation in the above-referenced transactions or receive its written approval to participate in those transactions, and he did not present the flow chart and 1099 Statement for review to a registered principal of his firm prior to using them in connection with the sales of the installment plan contracts. The suspension is in effect from December 6, 2010, through December 5, 2011. (FINRA Case #2009019042301)

Andrew C. Powell (CRD #4826369, Registered Representative formerly registered with International Financial Solutions and J.P Turner & Company, LLC, Coral Springs, Florida) submitted an Offer of Settlement in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for six months. Without admitting or denying the allegations, Powell consented to the described sanctions and to the entry of findings that he failed to timely respond to FINRA requests for information. The suspension is in effect from December 6, 2010, through June 5, 2011. (FINRA Case #2009016221401)

Larrye Alfie Smith (CRD #1131839, Registered Principal with Questar Capital Corporation, Miami, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was censured, fined $7,500 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Smith'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 findings, Smith consented to the described sanctions and to the entry of findings that he engaged in business activities for compensation outside the scope of his business relationship with his member firm without providing the firm with prompt written notice. The findings stated that Smith sold EIAs valued at $148,850 without notifying the firm. The findings also stated that Smith used a business card the firm had not approved, distributed a seminar invitation the firm had not approved and conducted a seminar of which the firm was unaware. The suspension is in effect from December 6, 2010, through June 5, 2011. (FINRA Case #2009020119101)

Cohen & Company Securities, LLC (CRD #104002, Philadelphia, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $50,000, ordered to pay $899,251, plus interest, in restitution to customers, and required to review its supervisory system and procedures concerning its pricing of principal transactions with customers for compliance with FINRA rules and the federal securities laws, and to certify to FINRA within 90 days that it has in place systems and procedures reasonably designed to achieve compliance with laws, regulations and rules concerning charging fair prices in principal transactions with customers, including transactions in debt securities. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it charged excessive mark-ups in the sales of investment grade Collateralized Debt Obligation (CDO) securities in which it acted as principal. The findings stated that the firm sold, as principal, CDO securities to institutional customers at prices that were not fair and reasonable taking into consideration all relevant circumstances, including that the price was not reasonably related to the amount the firm contemporaneously paid for the CDO securities and that the securities had an investment grade rating as determined in accordance with NASD IM-2440-2(b)(9). The findings also stated that at the time of these transactions, the firm had failed to establish, maintain and/or enforce a supervisory system and written supervisory procedures reasonably designed to ensure that prices at which it bought debt securities from, and at which it sold debt securities to, customers in principal transactions were fair and reasonable and to otherwise achieve compliance with all applicable laws, rules and regulations pertaining to effecting principal transactions with customers. (FINRA Case #2009016281001)

Cambridge Legacy Securities, L.L.C. (CRD #103722, Dallas, Texas) and Tommy Edward Fincher (CRD #1725266, Registered Principal, Mesquite, Texas) submitted a Letter of Acceptance Waiver and Consent in which the firm was censured and ordered to pay$218,400 in restitution to customers. If the firm fails to provide FINRA with proof of restitution, it shall immediately be suspended from FINRA membership until such proof has been provided. Fincher was fined $5,000 and suspended from association with any FINRA member in any principal capacity for six months. Without admitting or denying the findings, the firm and Fincher consented to the described sanctions and to the entry of findings that the firm failed to have reasonable grounds to believe that a private placement offered pursuant to Regulation D was suitable for any customer; and, acting through Fincher, its Chief Compliance Officer and registered principal, the firm failed to conduct adequate due diligence of the private placement offering before allowing its brokers to sell the security. The findings stated that Fincher was the principal responsible for conducting due diligence on the offering and approved the security as a new product available for firm brokers to sell to their customers; he allowed the firm's brokers to continue selling the security despite its ongoing failure to make overdue interest and principal payments. The findings also stated that the firm failed to have reasonable grounds for allowing the continued sale of the security even though the firm, through Fincher, was aware of numerous red flags concerning liquidity problems, delinquencies and defaults, but allowed its brokers to continue selling the security. The findings also included that the firm, acting through Fincher, failed to maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations, and failed to enforce reasonable supervisory procedures to detect or address potential red flags as it related to the offering. Fincher's suspension is in effect from January 3, 2011, through July 2, 2011. (FINRA Case #2009020319001)

USA Advanced Planners, Inc. (CRD 131282, Grand Rapids, Michigan), Michael Timothy Rodman (CRD #1260483, Registered Principal, Rancho Santa Fe, California) and Dennis Clare Tubbergen (CRD #2505625, Registered Principal, Fremont, Michigan) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and ordered to pay, jointly and severally with Rodman, partial restitution to customers in the total amount of $351,995, plus interest. Tubbergen was censured and ordered to pay $52,647 of the total partial restitution, jointly and severally. Rodman was suspended from association with any FINRA member in any capacity for 10 business days. Without admitting or denying the findings, the respondents consented to the described sanctions and to the entry of findings that the firm, acting through Rodman and Tubbergen, executed variable life settlement transactions and charged commissions that were excessive, unreasonable and unfair, taking into consideration all relevant circumstances. The findings stated that the firm failed to inform each customer who engaged in a life settlement of the amount of the commissions it received for the transactions either before or after the conclusion of the transactions. The findings also stated that because variable life settlement transactions are securities transactions, the firm was required to provide the customers with a confirmation of the transaction, which the firm failed to provide. The findings also included that the firm failed to establish and maintain a system and establish and enforce written supervisory procedures reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules related to its variable life settlement business. Rodman's suspension was in effect from December 20, 2010, through January 3, 2011. (FINRA Case #2007011559701).

Torrey Pines Securities, Inc. (CRD #17120, San Diego, California) and Nicolette Irisa Denney (CRD #1090644, Registered Principal, Temecula, California) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $17,500. Denney was suspended from association with any FINRA member in any principal capacity, other than the capacity of municipal securities principal, for 10 business days. In light of Denney's financial status, no monetary sanctions have been imposed. Without admitting or denying the findings, the firm and Denney consented to the described sanctions and to the entry of findings that Denney, acting on the firm's behalf, failed to ensure that a firm principal completed his annual certification as the firm's procedure required, and did not follow up on the principal's failure to provide information regarding both his outside business activities and the accounts for which he served as a custodian or trustee. The findings stated that Denney, acting on her firm's behalf, conducted an inspection of a firm branch office, and that inspection did not comport with the firm's written procedures and did not reasonably review the activities of that office. The findings also stated that Denney did not review the transmittal of funds between the principal's customers and a third party as the firm's written supervisory procedures required, and failed to obtain details regarding the principal's outside business activities. The findings also included that the firm failed to reasonably supervise the principal by failing to take steps to inquire into "red flags" indicating his possible misconduct; failing to follow up on his outside business activities and excessive absences from the firm; failing to timely investigate allegations that he was participating in private securities transactions away from the firm; and when the firm confirmed his selling away activities, it did not take any steps to place him on heightened supervision. FINRA found that the firm's written supervisory procedures were not reasonably designed to ensure principal review of wires from customers to third parties, so it was unaware the principal's customers were transferring large sums to a third party and that he was executing Letters of Authorization (LOAs) on behalf of multiple customers. Denney's suspension was in effect from December 20, 2010, through January 3, 2011. (FINRA Case #2007011125103)

FINRA Expels APS Financial, Bars Former President and Former Broker for Targeting an Elderly Investor with Fraudulently Excessive Mark-ups

Elderly Investor Was Overcharged $1.2 Million, Mark-Ups as High as 67 Percent

WASHINGTON - The Financial Industry Regulatory Authority (FINRA) announced recently that it has expelled APS Financial Corporation, located in Austin, Texas, barred the firm's former President, George Conwill, and barred Peter Aman, a former broker at the firm, in a scheme which overcharged an elderly investor by $1.2 million. FINRA found that Aman charged mark-ups ranging from 4.15 percent to fraudulently excessive mark-ups as high as 67 percent when executing 45 transactions for customers of APS Financial. Forty-three of these excessive or fraudulent mark-ups were related to transactions for the accounts of a single elderly investor. Aman overcharged this elderly investor by more than $1.2 million through undisclosed mark-ups, including $767,000 in fraudulently excessive mark-ups.

FINRA also barred Conwill and expelled APS Financial for rule violations relating to trading in corporate high yield bonds, collateralized mortgage obligations and collateralized debt obligations. Both APS Financial and Conwill were cited for charging excessive mark-ups and supervision violations.

"FINRA is committed to ensuring that firms charge their customers reasonable fees in connection with the purchase and sale of fixed income and other debt securities. There is no room in the securities industry for those who prey upon elderly investors," said Thomas Gira, Executive Vice President of FINRA's Department of Market Regulation.

In total, APS Financial Corporation overcharged customers on 59 transactions. Conwill approved all 53 mark-ups above 5 percent, including 42 of the 43 excessive or fraudulent mark-ups for the elderly investor's accounts.

FINRA also determined that APS Financial Corporation failed to establish and maintain an adequate supervisory system and otherwise failed to reasonably and properly supervise the firm and its registered representatives so as to detect and prevent the mark-up violations. FINRA found that Conwill, as the firm's president at the time of the violations, failed to take reasonable steps to ensure that the firm established and maintained an adequate supervisory system, and failed to reasonably and properly supervise the firm's registered representatives.

APS Financial Corporation, Aman and Conwill settled these matters without admitting or denying the allegations, but consented to the entry of FINRA's findings.

Finra moves to shut down 'boiler room' B-D

Regulator says Pinnacle Partners was hawking fraudulent Reg D offerings; also says firm destroyed documents

Finra is seeking to shut down a broker-dealer it alleges is selling fraudulent oil and gas private placements. The Financial Industry Regulatory Authority Inc. today filed a notice seeking a temporary cease-and-desist order against Pinnacle Partners Financial Corp. and its president and owner, Brian K. Alfaro.

The case involves sales of eight private placements. Finra charged that Mr. Alfaro operates a "boiler room where numerous registered representatives place thousands of cold calls weekly to solicit investments in Alfaro's captive oil and gas drilling joint ventures."

Pinnacle has raised over $10 million from over 100 investors for offerings that Finra alleges "materially misrepresented or omitted facts," according to its complaint.

The regulator's department of enforcement filed the order today with a Finra hearing panel. That panel has about two weeks to make a decision on the regulator's request to close down the operation.

The alleged fraud began in August 2008. In one offering, Mr. Alfaro deleted the following language from an investment summary offered to clients: "All currently producing wells are very marginal," according to Finra's complaint. In another placement offering, Mr. Alfaro's documentation stated that the deal had made "cash distribution to partners" of $14.3 million, when the actual figure was $1.5 million, Finra alleged.

"Pinnacle and Mr. Alfaro also provided investors with maps that omitted numerous dry, plugged and abandoned wells near their projected drilling states," the complaint alleged. "In the investment summaries, Pinnacle and Mr. Alfaro grossly inflated natural gas prices, projected natural gas reserves, estimated gross returns, and estimated monthly cash flows."

The complaint said that from January 2009 to last month, Mr. Alfaro misused customer funds to meet obligations for previous offerings, cover personal expenses and take cash payments, according to the complaint. Pinnacle and Mr. Alfaro also is charged with destroyed documents, maintained inaccurate books and records and failed to report investor complaints.

Fox Financial Management Corporation (CRD® #134277, Carrollton, Texas) and James Edward Rooney Jr. (CRD #1857754, Registered Principal, Carrollton, Texas) submitted an Offer of Settlement in which the firm was censured and fined $40,000, and Rooney was fined $20,000 and suspended from association with any FINRA member in any principal capacity for 15 business days. Without admitting or denying the allegations, the firm and Rooney consented to the described sanctions and to the entry of findings that the firm, acting through Rooney, sold zero-coupon bonds to customers and negligently omitted material facts concerning the fund's manager, who the State of Texas had charged with forgery of a financial instrument, and was sentenced to five years deferred adjudication and had been the subject of a Temporary Order of Prohibition for selling unregistered securities by the State of Illinois. The findings stated that the firm, acting through Rooney, sold zero-coupon bonds to customers that were secured by interests in life insurance policies, and limited liability companies, which Rooney controlled and were affiliated with the firm, issued the bonds, and negligently omitted material facts to customers relevant to the criminal records of the bonds' manager and owning companies. The findings also stated that the firm, acting through Rooney, participated in private placement offerings of zero-coupon bonds limited liability companies issued, and each of the offerings claimed an exemption from registration under the Securities Act of 1933; however, the offerings were not separate and distinct, and were, therefore, subject to integration, and to the securities registration requirements of public offerings. The findings also included that the firm, acting through Rooney, sold zero-coupon bonds, failed to establish a proper escrow account by using a limited liability company not chartered as a bank as the escrow agent, and falsely represented that customer funds would not be commingled. FINRA found that Rooney failed to detect that customer funds had been commingled because he had neglected to obtain copies of the escrow account statements and to maintain such statements among the firm's records. FINRA also found that the firm's test of its system of supervisory controls was flawed because it failed to include a review of its private placement business, and Rooney stated in his annual certification of compliance that the firm had established and maintained policies and Other FINRA Actions procedures reasonably designed to ensure compliance with FINRA rules. In addition, FINRA determined that the firm failed to evidence its supervision over Rooney, in that Rooney was the only principal who had signed Subscription Agreements indicating approval of the customer's investment in an offering. The suspension is in effect from December 6, 2010, through December 24, 2010. (FINRA Case #2008011592201)

FINRA Orders Ferris, Baker Watts to Pay Nearly $700,000 for Inappropriate Sales of Reverse Convertible Notes. Firm to Pay Restitution of $189,723 for Unsuitable Sales

The Financial Industry Regulatory Authority (FINRA) announced that it has fined the former Ferris, Baker Watts LLC, acquired by RBC Wealth Management, $500,000 for inadequate supervision of sales of reverse convertible notes to retail customers as well as unsuitable sales of reverse convertibles to 57 accounts held by elderly customers who were at least 85 years old and customers with a modest net worth.

The firm was ordered to pay nearly $190,000 in restitution to the 57 account holders for net losses incurred as a result of purchasing reverse convertibles.

"Reverse convertible notes are complex investments that often entail significant risk of loss and also involve terms, features and risks that can be difficult for retail investors to evaluate," said James Shorris, FINRA Executive Vice President and Acting Chief of Enforcement. "Ferris, Baker's inadequate written procedures resulted in recommendations of sales to customers for whom the purchase of these securities was not suitable, including elderly customers and investors who had very modest assets."

Reverse convertibles are notes with a coupon interest rate set for a fixed duration - three, six or twelve months - that are tied to the performance of a particular stock. If the price of the underlying stock drops below a certain level during the duration of the reverse convertible, the customer receives a predetermined number of shares of the stock at maturity of the note.

Conversely, if the underlying security maintains its price level, at maturity, the customer receives return of the dollar amount invested and a final coupon payment. In most of the instances where customers received the underlying stock at maturity, the customer ended up with an investment loss. Reverse convertibles not only come with the risks associated with fixed income products, such as issuer default and inflation, but with the additional risk that the value of the underlying asset can significantly depreciate.

FINRA found that during the period January 2006 to July 2008, Ferris, Baker engaged in sales of reverse convertibles to approximately 2,000 retail accounts without providing sufficient guidance to its brokers and supervising managers on how to assess suitability in connection with their brokers' recommendations of reverse convertibles.

Additionally, the firm did not have a system to effectively monitor customer accounts for potential over-concentrations in reverse convertibles. The firm also made recommendations without a reasonable basis to believe that the investment was suitable for elderly customers and those with modest net worth. The firm also failed to detect and respond to indications of potential over-concentration in reverse convertibles.

In one instance, the firm sold an 86-year-old retired social worker five reverse convertibles in the amount of $10,000 each. At various times, these represented between 15 percent and 25 percent of her investment portfolio. In another instance, the firm sold a 20-year-old clerk making less than $25,000 annually five reverse convertibles in his Roth IRA and regular accounts. These securities represented 51 percent of the IRA account and 44 percent of the regular account's value.

Robert Anthony Cataldo (CRD #1056971, formerly a registered representative with UBS Financial Services, Lexington, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Cataldo consented to the described sanction and to the entry of findings that he engaged in several outside business activities without providing prompt written notice to his member firm and failed to disclose these outside activities on his firm's compliance questionnaires. The findings stated that Cataldo failed to completely respond to FINRA requests for information. (FINRA Case #2009017809101)

Everett Bryant Ellis (CRD #4046494, currently registered with BBVA Compass Investment Solutions, Inc., formerly registered with SunTrust Investment Services, Gulf Breeze, Florida) submitted a letter of Acceptance, Waiver and Consent in which he was fined $5,000, suspended from association with any FINRA member in any capacity for 15 business days, and ordered to pay $9,334.85, plus interest, in restitution to a customer. Without admitting or denying the findings, Ellis consented to the described sanctions and to the entry of findings that he recommended that a customer, to whom he had sold a variable annuity with a seven-year surrender period, surrender 50 percent of the total value of her variable annuity and invest the proceeds in municipal bond mutual funds. The findings stated that the customer incurred a surrender charge of $5,684.13 in connection with the annuity surrender and sales charges of $3,650.72 in connection with the mutual fund purchases. The findings also stated that Ellis' recommendation to the customer was unsuitable in light of the customer's age and financial situation; and considering both the costs associated with the surrender of the variable annuity and purchase of the mutual fund, he had no reasonable basis for his recommendation to switch from the variable annuity to the mutual funds. The suspension was in effect from November 15, 2010, through December 6, 2010. (FINRA Case #2008014615501)

Benjamin Burl Abbott III (CRD #5317757, formerly registered with Edwards Jones, Mount Dora, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for one year. The fine must be paid either immediately upon Abbott'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 findings, Abbott consented to the described sanctions and to the entry of findings that he maintained personal margin accounts at his member firm and met initial margin calls in his personal margin accounts by liquidating the position that created the margin call because he did not have sufficient equity in the account to pay for the securities purchased on margin, nor did he deposit sufficient funds to meet the margin calls. The findings stated that Abbott placed an unauthorized short sell order of a company's stock, at a total cost of $90,331.71, in a customer's account, and the trade was marked "unsolicited" although the customer had not authorized a short sale of the stock or any other specific transaction. The findings also stated that Abbott maintained that he made an error and meant to enter an order for a short sale for a smaller number of shares, but the customer did not authorize this trade transaction either. The findings also included that the firm canceled the transaction, resulting in a market loss of proximately $20,000, which the firm absorbed. FINRA found that, in connection with joint accounts he held with his relative at the firm, Abbott knowingly entered information that overstated his net worth and annual income on new account forms. FINRA also found that Abbott entered the false information on the new account forms so he could engage in trading activity the firm would not have allowed if he disclosed his true net worth and annual income. In addition, FINRA determined that Abbott's actions resulted in the creation of false books and records The suspension is in effect from November 1, 2010, through October 31, 2011. (FINRA Case #2008015676801)

Next Financial Group, Inc. was recently fined $400,000 by FINRA and required to pay $102,000 in restitution to clients based on the fact that FINRA concluded that the company did not have a reasonable system in place to review the transactions of its registered representatives for excessive trading. FINRA noted that one representative was found to be churning client accounts and that Next's oversight system, which relied on compliance and branch managers, fell short of its responsibility to detect and half the activity. Due to the lack of a reasonable supervisory system, the firm failed to detect excessive trading by a registered representative in five accounts, resulting in about $102,000 in unnecessary sales charges.

John William Pena (CRD #2780628, Registered Principal formerly licensed with the Concord Equity Group, Margate, Florida) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Pena consented to the described sanction and to the entry of findings that he borrowed $20,000 from customers contrary to his member firm's written procedures forbidding registered representatives from borrowing funds from firm customers except in cases where the customer was an immediate family member; neither customer was a member of Pena's immediate or extended family. The findings stated that Pena failed to notify his firm of the loan, obtain the firm's approval prior to accepting the loan or repay the loan. The findings also stated that Pena failed to timely and completely respond to FINRA requests for information and documents. (FINRA Case #2007010533701)

Dean Allen Raber (CRD #2214667, Registered Principal formerly licensed with PFS Investments, Sarasota, Florida) was barred from association with any FINRA member in any capacity and ordered to pay $14,000, plus interest, in restitution. The sanction was based on findings that Raber misappropriated $44,000 from an individual and $10,000 from a customer, both of whom had entrusted him with their funds for investment purposes. The findings stated that rather than investing the funds as he represented, Raber used the funds for his own use and benefit. The findings also stated that Raber's member firm repaid $30,000 of the individual's funds and reimbursed the customer in full. The findings also included that Raber failed to respond to FINRA requests for information. (FINRA Case #2008016254501)

Brookstone Securities, Inc. (CRD # 13366, Lakeland, Florida), Richard Joseph Buswell (CRD #4770105, Registered Representative, Lafayette, Louisiana) and Herbert Steven Fouke (CRD #5523938, Registered Representative, Lafayette, Louisiana) were named as respondents in a FINRA complaint alleging that the firm, acting through Buswell and Fouke, made misrepresentations and/or omissions of material fact in connection with the sale of unsecured bridge notes and warrants. The complaint alleges that Buswell and Fouke, acting on the firm's behalf, told purchasers of the bridge notes that they were guaranteed without any reasonable basis given the description of the placement agent's limited role in the Private Placement Memorandum (PPM) and disclosed no risks regarding the financing or financial health of the placement agent or the issuer of the bridge notes and warrants. The complaint also alleges that Buswell and Fouke provided unwarranted price predictions to customers regarding the future price of common stock for which warrants would be exchangeable. The complaint further alleges that Buswell and Fouke, acting on the firm's behalf, guaranteed the payment at maturity of promissory notes although the PPM made clear that the placement agent had no commitment to provide financing for the private placement or a later public offering. In addition, the complaint alleges that Buswell and Fouke, acting on the firm's behalf, recklessly or knowingly failed to disclose the risk that the financing would not occur and recklessly or knowingly failed to disclose the other risks outlined in the PPM. The complaint alleges that Buswell and Fouke, acting on the firm's behalf, guaranteed to customers that they would receive back their principal investments plus returns, failed to inform investors of any risks associated with the investments and did not discuss the risks outlined in the PPM that could result in investors losing their entire investment. The complaint also alleges that the firm, acting through Buswell, made misrepresentations and/or omissions of material fact in connection with the sale of the private placement of firm units consisting of Class B common stock and warrants to purchase Class A common stock to customers; the PPM for the firm self-offering stated that the investment was speculative, involving a high degree of risk and was only suitable for persons who could risk losing their entire investment, and the PPM also stated that the investment was illiquid, contrary to Buswell's representations. The complaint further alleges that Buswell represented to customers that he would invest their funds in another private placement, and in direct contradiction, invested the funds in the firm's private placement. In addition, the complaint alleges that the firm, acting through Buswell and Fouke, recommended and effected the sale of securities without having a reasonable basis to believe that the transactions were suitable given the customers' financial circumstances and conditions; Buswell recommended a trading strategy that relied upon frequent trading, use of margin and concentration of the accounts in a small number of financial stocks. The complaint alleges that Buswell exercised discretion in customers' accounts without the customers' prior written authorization or the firm's acceptance of the accounts as discretionary. The complaint also alleges that the firm, acting through its chief executive officer (CEO) and its president, failed to reasonably supervise Buswell, and failed to follow up on red flags 28 Disciplinary and Other FINRA Actions that should have alerted them to the need to investigate Buswell's sales practices and determine whether trading restrictions, heightened supervision or discipline were warranted. The complaint further alleges that the firm, acting through its CEO, president and chief compliance officer, failed to establish, maintain and enforce supervisory procedures reasonably designed to prevent violations of NASD Rule 2310 regarding suitability; the firm's procedures were also inadequate to prevent and detect unsuitable recommendations resulting from excessive trading, excessive use of margin and over-concentration. The complaint alleges that the firm's new account application process was flawed so that a reviewing principal was unable to obtain an accurate picture of customers' financial status, investment objectives and investment history when reviewing a transaction for suitability. The complaint also alleges that the firm's procedures failed to identify specific reports that its compliance department was to review and provided no guidance on the actions or analysis that should occur in response to the reports. (FINRA Case #2009017275301)

Kevin Lawrence Cohen (CRD #4527236, Registered Principal, Stuart, Florida), Dennis Stanley Kaminski (CRD #1013459, Registered Principal, Wellington, Florida), and Gari Craig Sanfilippo (CRD #4151931, Registered Principal recently licensed with GWN Securities, Contemporary Solutions, Wellington, Florida) were each suspended from association with any FINRA member in any capacity for 18 months and required to requalify before acting in any capacity requiring qualification. In addition, Kaminski was fined $50,000. The National Adjudicatory Council (NAC) imposed the sanctions following appeal and call for review of an Office of Hearing Officers (OHO) decision. The sanctions were based on findings that Kaminski failed to supervise his member firm's timely review of variable annuity transactions and failed to address the breakdown of the compliance department's Trade Review Team's review of Red Flag Blotters. The findings stated that Cohen and Sanfilippo created and maintained inaccurate books and records relating to the firm's variable annuity trading. Cohen's and Sanfilippo's suspensions are in effect from October 18, 2010, through April 19, 2012. Kaminski has appealed to the SEC, and the sanctions are not in effect pending consideration of the appeal. (FINRA Case #EAF0400630001)

Ronald Gabriel Klebba (CRD #1935556, Registered Representative recently licensed with Met Life Securities, Canton, Georgia) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FIINRA member in any capacity. Without admitting or denying the findings, Klebba consented to the described sanction and to the entry of findings that he financially exploited elderly women by convincing them to grant him general power of- attorney and to sign a document waiving any conflict of interest that Klebba might have, name him as beneficiary on assets, name him as a joint owner on bank accounts, name him as joint tenant on a warranty deed for real estate and to give him a $50,000 gift from the proceeds of the sale of a condominium. The findings stated that Klebba's acts directly violated his employer's rules prohibiting registered representatives from being the beneficiary of a contract policy or from accepting a grant of power-of attorney from customers. (FINRA Case #2008014974201)

Joshua Kohn (CRD #2419594, Registered Representative last licensed with Wachovia Securities, Deerfield Beach, Florida) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Kohn consented to the described sanction and to the entry of findings that he failed to appear for a FINRA on-the-record interview and failed to contact FINRA to reschedule the interview. (FINRA Case #2009020974501)

John Christopher Romanoff (CRD#3097147, previously registered with Summit Brokerage Services, Inc. and Raymond James & Associates, Inc., Cape Coral, Florida) was barred from association with any FINRA member in any capacity and ordered to pay $70,000, plus interest, in restitution to customers. The sanctions were based on findings that Romanoff borrowed $70,000 from customers and evidenced the loan by a promissory note, even though his member firm's written procedures prohibited registered representatives from borrowing funds from firm customers. The findings stated that Romanoff did not notify his firm of the loan or obtain the firm's permission to borrow funds from the customers, defaulted on the promissory note and failed to repay any of the principal balance due to the customers, even though the customers complained to his firm. The findings also stated that Romanoff that Romanoff provided his firm with a Financial Advisor Compliance Questionnaire which falsely represented that he had not entered into any loan with a customer. The findings also included that Romanoff failed to respond to FINRA requests for information. (FINRA Case #2008014858101)

Jason Michael Mutascio (CRD #4156832, previously Registered Representative with Brewer Financial Services and Newbridge Securities , Aventura, Florida) was named as a respondent in a FINRA complaint alleging that he falsified multiple third-party wire request forms, submitted the falsified forms to his member firm, and obtained and exercised control over at least $52,500 in funds from a customer's account without the customer's knowledge or authorization. The complaint alleges that Mutascio's submission of the falsified wire requests caused his firm's books and records to be inaccurate. The complaint also alleges that Mutascio failed to appear and provide a FINRA on-the-record sworn statement. (FINRA Case #2009017814901)

Newbridge Securities Corporation (CRD #104065, Fort Lauderdale, Florida) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $600,000, and required to have its president and Chief Executive Officer (CEO) each register for eight hours of AML training within 60 days of issuance of the AWC, provide FINRA with evidence of registrations within 10 days of registration, have the individuals attend and complete the training within six months of issuance of the AWC and provide FINRA with evidence of completion of training within 10 days of completion. The firm is prohibited from effecting any purchase transactions in penny stocks for either proprietary or customer accounts, and shall not engage in market making of such stocks, for one year following acceptance of the AWC. The firm shall hire an independent consultant to review the firm's systems relating to timely and accurate filing of Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5), disclosure events and customer complaints under NASD Rule 3070 and, within 60 days after delivery of a written report, adopt and implement the consultant's recommendations or propose alternative procedures in writing to the consultant and FINRA. Within 30 days after issuance of the consultant's final written report, the firm shall provide FINRA with a written implementation report certified by a firm officer. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it facilitated the manipulative trading of the stock of a company created as the result of a reverse merger; a group of control persons and promoters used accounts at the firm to execute pre-arranged in-house agency cross and wash transactions that were intended to generate volume and support or increase the price of the stock. The findings stated that the firm permitted control persons to sell unregistered securities through firm accounts, and the sales were not made in compliance with any applicable exemption from registration. The findings also stated that the firm failed to adequately supervise the registered representatives who participated in the sales of unregistered securities; failed to take adequate measures to ensure that the registered representatives assigned to the accounts did not engage in the sale of unregistered securities; failed to take steps to ensure that the registered representative ascertained whether the securities being sold were registered, how and from whom the customers had obtained their shares, whether and when the shares were paid for, and whether the transactions were subject to any exemption from registration; and failed to adequately supervise registered representatives who participated in the manipulative trading. The findings also included that the firm did not have adequate systems or controls to implement and enforce its policies, particularly adequate systems to detect improper cross, wash and other manipulative trading. FINRA found that the firm's AML procedures required the firm to investigate red flags indicating suspicious activity or trading, and to investigate and take appropriate steps, including limiting account activity, contacting a government agency or filing a SAR, but the firm failed to follow its AML program in regard to the manipulative trading, unregistered distributions and other suspicious activities. FINRA also found that the firm failed to report, or timely report, customer complaints reportable under NASD Rule 3070(c). In addition, FINRA determined that the firm failed to file Forms U4 or U5 to report disposable events and failed to timely amend a Form U4 to report a disclosable event. (FINRA Case #2007007151704)

Guy Steven Amico (CRD #1723157, Registered Principal currently licensed with Newbridge Securities Corporation, Wellington, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $100,000, suspended from association with any FINRA member in any principal capacity for four months and required to complete eight hours of AML training. Amico is to register for AML training within 60 days of issuance of the AWC and provide evidence to FINRA of the registration within 10 days of registration; attend such training within six months of issuance of this AWC and provide FINRA with evidence of completion of training within 10 days of completion of the training program. Without admitting or denying the findings, Amico consented to the described sanctions and to the entry of findings that as his member firm's president, he failed to adequately supervise the firm's chief compliance officers (CCOs) and AML compliance officers (AMLCOs). The findings stated that Amico knew, or should have known, of substantive violations of FINRA rules and the potential inadequacy of firm compliance personnel through FINRA exit conference reports that the firm failed to properly report customer complaints and other reportable matters, failed to make Form U4 or Form U5 amendments to report disclosable events, or failed to timely amend Forms U4 or U5. The findings also stated that Amico received FINRA exit conference reports regarding violations of the BSA and FINRA AML rules. The findings also included that Amico received SEC written findings identifying suspicious penny stock transactions, AML program issues and reporting deficiencies. FINRA found that as the president and owner of the firm, Amico was responsible for the firm's compliance with regulatory requirements imposed on the firm and knew, or should have known, that the firm's CCOs and AMLCOs were not performing the compliance functions designated to them. FINRA also found that Amico knew through FINRA exit conference reports and SEC written findings that the firm, through the CCOs and AMLCOs, was not in compliance with BSA requirements and NASD Rule 3011, was not making necessary filings under NASD Rule 3070 and Article V, Sections 2 and 3 of FINRA's By-Laws, and that one of the CCOs/AMLCOs had a disciplinary history but failed to take affirmative steps to ensure that they were performing the AML and reporting functions delegated to them. The suspension is in effect from September 20, 2010, through January 19, 2011. (FINRA Case #2007007151705)

Richard Albert Bush (CRD #2457963, Registered Principal lasted registered with Newbridge Securities Corporation, Coral Springs, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any principal capacity for six months. The fine must be paid either immediately upon Bush'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 findings, Bush consented to the described sanctions and to the entry of findings that, in his capacity as Director of Compliance in his member firm's trading department (DCTD), he failed to adequately supervise registered representatives who sold unregistered securities on certain clients' behalf in violation of Section 5 of the Securities Act of 1933. The findings stated that Bush failed to take adequate steps to ensure that the registered representatives ascertained whether the securities being sold were registered, how and from whom the customers obtained their shares, whether and when the shares were paid for, and whether the transactions were subject to any exemption from registration. The findings also stated that as his firm's Designated Securities Compliance Officer (DSCO), Bush was responsible for evaluating and supervising designated securities (penny stock) transactions to evaluate whether they were part of a "pump-and-dump" or other fraudulent scheme; evaluating and investigating suspicious transactions when numerous shares were deposited and immediately sold; conducting background checks on customers who were expected to engage in a significant amount of designated securities transactions to determine whether the customer had a criminal or securities disciplinary background, or had an affiliation with the issuer; meeting with customers to ensure his firm had the requisite knowledge about customers' background and trading intentions; and reporting to the firm's CCO and AMLCO any findings regarding issuers or customers and to certify monthly that he had reviewed, approved and monitored all accounts that conducted a significant amount of transactions in designated securities. The findings also included that Bush failed to take identifiable steps to ascertain relevant information regarding customers' disciplinary history and how they obtained the shares being deposited, and did not believe that customers' background or numerous transactions constituted red flags. The suspension is in effect from September 7, 2010, through March 6, 2011. (FINRA Case #2007007151702)

Robin Fran Bush (CRD #1994431, Registered Principal formerly registered with Newbridge Security, Coral Springs, Florida) submitted a Letter of Acceptance, Waiver and Consent in which she was fined $10,000, suspended from association with any FINRA member in any principal capacity for one year and required to complete eight hours of AML training prior to reassociation with a member firm or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Bush consented to the described sanctions and to the entry of findings that acting in her capacity as her member firm's AMLCO, she failed to implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations thereunder. The findings stated that Bush failed to ensure her firm's overall compliance with NASD Rule 3011 by detecting and investigating suspicious activities or other activities in which red flags of money laundering were present and, when appropriate, filing SARs. The findings also stated that as her firm's CCO, Bush failed to adequately supervise firm AMLCOs and ensure they were performing their functions pursuant to the firm's AML program and written procedures, and failed to ensure they were properly investigating suspicious activities, recommending and filing SARs or documenting the rationale for concluding that a SAR was unnecessary. The findings also included that Bush failed to adequately supervise the firm's DSCO to ensure he was taking adequate investigative steps to ascertain whether certain customer transactions were part of a manipulative or fraudulent scheme, conducting adequate criminal or securities disciplinary background checks, and conducting adequate due diligence to ascertain whether customers engaging in significant designated securities transactions had any affiliations with the issuers; in fact, many customers had criminal or securities disciplinary backgrounds or had close ties to issuers whose shares they were trading. FINRA found that as her firm's CCO, Bush failed to ensure her firm reported, and timely reported, customer complaints to FINRA. FINRA also found that Bush failed to ensure her firm filed, and timely filed, Forms U4 and U5 with FINRA to report disclosable events. The suspension is in effect from September 7, 2010, through September 6, 2011. (FINRA Case #2007007151701)

Scott Howard Goldstein (CRD #1630008, Registered Principal currently registered with Newbridge Securities Corporation, Delray Beach, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $100,000, suspended from association with any FINRA member in any principal capacity for one year and required to complete eight hours of AML training. Goldstein must register within 60 days of issuance of the AWC for the AML training and provide FINRA with proof of evidence of registration within 10 days of registration, attend such training within six months of issuance of the AWC and provide FINRA with evidence of completion of training within 10 days of completion. Without admitting or denying the findings, Goldstein consented to the described sanctions and to the entry of findings that, as his member firm's CEO, he knew, or should have known of substantive violations of FINRA rules and the potential inadequacy of firm compliance personnel.The findings stated that the firm's AML compliance program, as its CCOs and AMLCOs administered, did not fully comply with the requirements of the BSA and regulations thereunder, and therefore violated NASD Rule 3011. The findings also stated that Goldstein knew through FINRA exit conference reports, firm responses to the reports and the SEC's written findings, that the firm, through its CCOs and AMLCOs, was not in compliance, and FINRA expressly identified firm customers who had problematic backgrounds and/or engaged in suspicious transactions but Goldstein did not take affirmative steps to ensure that the CCOs/AMLCOs were performing the AML functions delegated to them. The findings also included that Goldstein knew that one of the CCOs/AMLCOs had a FINRA disciplinary history and had engaged in supervisory deficiencies.FINRA found that the firm, through its CCOs/AMLCOs, failed to report numerous customer complaints reportable under NASD Rule 3070(c) and other reportable events under 3070(b), failed to make Forms U4 or U5 amendments to report disclosable events in numerous instances, and failed to timely amend a Form U4 or U5 in numerous other instances. FINRA also found that Goldstein knew through FINRA exit conference reports, firm responses to the reports and SEC written findings that the firm, through the CCOs/AMLCOs, was not making the necessary filings but did not take any affirmative steps to ensure that they were performing reporting functions. The suspension is in effect from September 20, 2010, through September 19, 2011. (FINRA Case #2007007151706)

George Peter Savickas (CRD #1015582, Registered Representative, Cape Coral, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 30 business days. The fine must be paid either immediately upon Savickas' 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 findings, Savickas consented to the described sanctions and to the entry of findings that he received checks totaling $50,000 made payable to his insurance business from a customer and used the money to pay operating expenses for his insurance business, without his member firm's knowledge 30 Disciplinary and Other FINRA Actions and consent. The findings stated that the firm's written supervisory procedures require review and written approval of any loans between a registered representative and a customer before the loan is made. The findings also stated that Savickas did not disclose the loan to the firm nor receive the firm's approval of the loan.

Darren Joseph Dietrich (CRD #1814017, Registered Representative formerly registered with Brookstone Securities, Inc. and National Securities Corporation, Plant City, Florida)was named as a respondent in a FINRA complaint alleging that he effected trades in his member firm customer's account without the customer's prior knowledge, authorization or consent. The complaint alleges that Dietrich's unauthorized trades resulted in a total profit of $4,450 in the customer's account, and Dietrich earned a totaled of $933 in net commissions. The complaint also alleges that Dietrich failed to respond to FINRA requests to provide testimony. (FINRA Case #2009016660701)

FINRA Fines HSBC $375,000 for Unsuitable Sales of Inverse Floating Rate CMOs to Retail Customers and Related Supervisory Failures Firm Paid Customers Restitution of $320,000 : The Financial Industry Regulatory Authority (FINRA) has fined HSBC Securities (USA) Inc. $375,000 for recommending unsuitable sales of inverse floating rate Collateralized Mortgage Obligations (CMOs) to retail customers. HSBC failed to adequately supervise the suitability of the CMO sales and fully explain the risks of an inverse floating rate or other risky CMO investment to its customers. FINRA's investigation found that HSBC recommended the sale of CMOs, including inverse floating rate CMOs, to its retail customers. As a result of HSBC not implementing an adequate supervisory system and procedures relating to the sale of inverse floating rate CMOs to retail customers, six of its brokers made 43 unsuitable sales of inverse floaters to retail customers who were unsophisticated investors and not suited for high-risk investments. In addition, HSBC's procedures required a supervisor's pre-approval of any sale in excess of $100,000; FINRA found that 25 of the 43 CMO sales were in amounts exceeding $100,000 and that in five of these instances, customers lost money in their inverse floating rate CMO investments. HSBC has paid these customers full restitution totaling $320,000."Firms must adequately train their brokers on all of the products that they are selling and must reasonably supervise them to ensure that every security recommended is suitable for the particular customer," said James S. Shorris, FINRA Executive Vice President and Acting Chief of Enforcement. "The losses incurred by HSBC's customers likely would have been avoided had the firm sufficiently trained its brokers on the suitability and risks of inverse floating rate CMOs and reasonably supervised their brokers to ensure that they were making suitable recommendations."

A CMO is a fixed income security that pools mortgages and issues tranches with various characteristics and risks. CMOs make principal payments throughout the life of the security with the maturity date being the last date by which all of the principal must be returned. The timing of the return of principal payments can vary depending on interest rate changes. One of the more risky CMO tranches is the inverse floater, a type of tranche that pays an adjustable rate of interest that moves in the opposite direction from movements of an interest rate index, such as LIBOR. Since 1993, FINRA has advised firms that inverse floating rate CMOs "are only suitable for sophisticated investors with a high-risk profile." FINRA found that HSBC did not provide its brokers with sufficient guidance and training regarding the risks and suitability of CMOs. In particular, the firm did not inform its registered representatives that inverse floaters were only suitable for sophisticated investors with a high-risk profile. In addition, the firm did not provide its registered representatives with information regarding the risks associated with the specific inverse floaters that were available to be sold. FINRA also found that HSBC failed to comply with a FINRA rule, adopted in November 2003, which requires firms to offer certain educational materials before the sale of a CMO to any person, other than an institutional investor. The educational materials must include, among other things, the characteristics and risks of CMOs, in general, and the specific characteristics and risks associated with the different tranches of a CMO. During the relevant time period, HSBC did not advise its registered persons that they were required to offer written educational material to their customers before they sold them CMOs. Although HSBC provided its brokers with a CMO brochure, the brokers did not offer the brochure to every CMO investor, nor did they know that they were required to give the materials to all potential CMO investors before selling them a CMO. Moreover, the brochures did not comply with FINRA's content standards. In particular, the brochure failed to discuss inverse floaters and failed to include a section on risks associated with purchasing CMOs. In concluding this settlement, HSBC neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

Diane Louise Luft Barriga (CRD #1022433, Registered Representative formerly registered with International Asset Advisory and Summit Brokerage Services, Inc, Parkland, Florida) submitted a Letter of Acceptance, Waiver and Consent in which she was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Barriga consented to the described sanction and to the entry of findings that she failed to respond to a FINRA request for information and documents. (FINRA Case #2009019349701)

Renee Lynn Coil (CRD #3044399, Registered Representative, Tierra Verde, Florida) submitted a Letter of Acceptance, Waiver and Consent in which she was suspended from association with any FINRA member in any capacity for one month. In light of Coil's financial status, no monetary sanctions were imposed. Without admitting or denying the findings, Coil consented to the described sanction and to the entry of findings that she failed to determine the surrender fees related to variable annuity exchanges she recommended to a customer, and the customer agreed to the exchanges based on his understanding that there was no penalty associated with the exchanges. The findings stated that Coil failed to perform adequate analysis on the variable annuities to determine their surrender periods and the customer was charged surrender fees totaling $26,286.84. The findings also stated that if the customer had held the variable annuities for two additional months, he would not have incurred the fees. The findings also included that Coil failed to ensure that the imposition of the surrender fees was accurately disclosed on her member firm's variable annuity switch form. The suspension is in effect from August 16, 2010, through September 15, 2010. (FINRA Case #2008014756401)

John Allan Jones (CRD #2558599, Registered Principal formerly licensed with Cambridge Legacy Securities and Wellstone Securities, Roswell, Georgia) submitted an Offer of Settlement in which he was fined $25,000 and suspended from association with any FINRA member in any capacity for four months. The fine must be paid either immediately upon Jones' 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. In light of Jones' financial status, a $25,000 fine was imposed. Without admitting or denying the allegations, Jones consented to the described sanctions and to the entry of findings that, acting with others, he participated in a fraudulent scheme to solicit investments in an unregistered hedge fund and its general partner. The findings stated that Jones engaged in a variety of fraudulent and deceptive sales practices and disregarded his duties and obligations of fair dealing to his customers. The findings also stated that Jones knew, or was reckless in not knowing, that the hedge fund was engaging in a highly speculative trading strategy involving futures contracts and that information the hedge fund manager supplied, which Jones used, contained materially false and misleading statements and omissions, including a pending Commodity Futures Trading Commission (CFTC) fraud action against the hedge fund manager, the fund's theoretical and unproven performance figures, the highly speculative nature of the hedge fund's trading strategy, and the significant risks associated with an investment in the hedge fund and its general partner. The findings also included that Jones ignored many "red flags," including those in the hedge fund's Private Placement Memorandum (PPM). FINRA found that Jones solicited his customers without conducting a reasonable investigation to determine whether the hedge fund and its general partner were suitable investments and without regard as to whether his customers were capable of evaluating and bearing the risks associated with such investments. The suspension is in effect from August 2, 2010, through December 1, 2010. (FINRA Case #2005001398602)

Stephen Alan Jaffe (CRD #1340770, Registered Representative currently licensed with Oppenheimer & Co., formerly licensed with Wells Fargo Advisors, North Miami Beach, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for one month. The fine must be paid either immediately upon Jaffe'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 findings, Jaffe consented to the described sanctions and to the entry of findings that he was the broker of record for a customer's nondiscretionary account at his member firm and exercised discretion in the customer's account in multiple transactions without written authorization. The findings stated that Jaffe completed annual certifications for his firm, in which he attested that he had not exercised full or partial trading authorization over any client account without having obtained the required approvals. The suspension was in effect from July 6, 2010, through August 5, 2010. (FINRA Case #2009018230901)

Jeffrey Scott Levine (CRD #5448799, Registered Representative formerly licensed with Suntrust Investment Services and Wachovia Securities, Jacksonville Beach, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Levine consented to the described sanction and to the entry of findings that he withdrew a total of $6,000 from customer accounts and misappropriated the funds for his own use. The findings stated that the customers did not authorize Levine to make the withdrawals. The findings also stated that Levine failed to respond to FINRA requests for information. (FINRA Case #2009019348201)

Jose Luis Luna (CRD #4566784, Registered Representative formerly licensed with Latam Investment Services, Aventura, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Luna consented to the described sanction and to the entry of findings that he failed to provide further investigative testimony to FINRA. (FINRA Case #2010022784701)

FINRA Hearing Panel Fines Mutual Service Corp. More than $1.5 Million for Supervisory Failures, Falsifying Records Relating to VA Exchanges

A Financial Industry Regulatory Authority (FINRA) hearing panel has fined Mutual Service Corporation (MSC) of West Palm Beach, FL, more than $1.5 million for failing to conduct timely reviews of variable annuity transactions, falsifying various books and records of the firm to make it appear that the variable annuity transactions were reviewed in a timely manner, and providing false and misleading information to FINRA during its investigation. The hearing panel sanctioned six current and former MSC personnel for their roles in the wrongdoing.

Three current or former employees - Denise Roth, a manager in MSC's operations department; Gari Sanfilippo, a former senior compliance examiner; and Kevin Cohen, a former compliance examiner - were permanently barred from the securities industry for falsifying the books and records of the firm. MSC's former Chief Administrative Officer and Executive Vice President, Dennis S. Kaminski; its Director of Operations, Susan Coates; and its former Chief Compliance Officer and Vice President, Michael Poston each were sanctioned for their supervisory failures. Kaminski and Coates each were fined $50,000 and suspended for six months from associating with any securities firm in a principal capacity. Poston was fined $20,000 and suspended from serving in a principal capacity for seven months.

Cohen and Sanfilippo have appealed the ruling to FINRA's National Adjudicatory Council (NAC), while the NAC unilaterally has called Kaminski's case for review of the sanctions. Sanctions against all three have been stayed pending a ruling from the NAC.

The hearing panel found that MSC has a history of failing to supervise sales and exchanges of variable annuities adequately. As part of a settlement with FINRA in 2001, MSC agreed to implement procedures to provide dedicated, heightened oversight of variable annuities transactions. Specifically, the firm created a "trade review team" (TRT) to review variable annuity exchange transactions that appeared on the firm's "red flag" blotter exception report, which captured exchange transactions that required further scrutiny.

According to the hearing panel, between March and June 2004, there was a "complete meltdown of MSC's supervisory system for the review of variable annuity transactions." During those months, Kaminski and Poston directed MSC compliance personnel to stop reviewing transactions that appeared on the firm's red flag blotter. Despite having oversight responsibility for all variable transactions and being aware of the supervisory failures, Coates failed to act decisively to correct the situation.

While the backlog of transaction reviews was developing, Kaminski, Poston and other MSC managers met in May 2004 with FINRA staff regarding the firm's review of variable annuity transactions. The hearing panel found that the MSC representatives misled FINRA about the firm's supervisory efforts relating to the red flag blotters and failed to mention that MSC had suspended review of the blotters. The hearing panel also found that the MSC representatives misled FINRA about the use of a prototype exception report that had not actually yet been utilized.

During the time that the review of the red flag blotter was suspended, 597 transactions that appeared on the red flag blotter between March 15 and June 1, 2004, were not reviewed by TRT in a timely fashion. Those transactions were not reviewed until August to October 2004.

To make it appear that these TRT reviews had been done in a timely manner, Roth, Sanfilippo and Cohen ensured that the trade review forms and the red flag blotters for the transactions were backdated to within one or two days of the transaction. In addition, the hearing panel found that Cohen created 49 fake letters in October 2004 and placed them in the firm's files to make it appear that a newly developed variable annuity exception report had been in use since January 2004. In actuality, this exception report was not used by the firm until October 2004. The hearing panel found that MSC, Roth, Sanfilippo and Cohen intentionally falsified MSC's records to deceive FINRA staff and termed those violations "egregious."

During the course of FINRA's investigation, after FINRA staff learned of MSC's failure to timely review the red flag blotters, FINRA requested documents and information relating to the backlogged transactions. The hearing panel found "incontrovertible evidence that MSC did not respond completely and truthfully to the request for information." Instead, MSC produced documents that had been changed to eliminate the backdating.

In determining MSC's sanction, the hearing panel cited several aggravating factors. It considered first the firm's disciplinary history of deficient supervision of variable annuity transactions, but found more disturbing the fact that MSC deceived FINRA staff regarding the status of its supervisory system and procedures. The hearing panel found that MSC's supervisory and record keeping violations were "egregious."

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For more than 30 years, Florida securities, commodities and precious metals law attorney Russell L. Forkey has focused his legal career on pursuing resolution and financial recoveries for customers who have lost money as a result of broker fraud, misrepresentation, mismanagement or other wrongful acts.

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