January and February 2011 Filed FINRA Enforcement Actions

Boca Raton, Florida FINRA Arbitration Fraud and Mismanagement Attorney Russell L. Forkey, Esq.

Recently Filed FINRA Enforcement Actions:

We have recently added a new feature to our site. Instead of only providing information concerning completed FINRA enforcement actions, we are now providing information provided, by FINRA, relative to FINRA complaints issued in the months reference below. Please keep in mind that the issuance of a disciplinary complaint represents FINRA's initiation of a formal proceeding in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Because these complaints are unadjudicated, you may wish to contact the respondents before drawing any conclusions regarding the allegations in the complaint.  Moreover, we may inadvertently not update how the complaint was resolved.  Therefore, you should keep this in mind.

However, if you feel that you have suffered damage as a result of this same activity, immediately call the law office of Russell L. Forkey for your free initial consultation.

In you desire to view completed actions, you can follow the highlighted link.

Complaints Filed in February 2011 by FINRA

Daniel Edward Becerril II (CRD #4489715, Registered Representative, Huntington Beach, California) was named as a respondent in a FINRA complaint alleging that a prospective customer gave Becerril $11,500 to invest in a mutual fund on her relative's behalf, and although he fraudulently misrepresented that he was going to invest her funds in the mutual fund, he misused the customer's funds by depositing the funds into a bank account he controlled. The complaint alleges that when the customer inquired about the status of her funds, Becerril attempted to assuage her concerns by making misrepresentations and failing to disclose certain material facts to her. The complaint further alleges that Becerril also provided the customer with a document, which falsely represented that his firm's New Business department had received her funds which were to be invested within a short time frame. In addition, the complaint alleges that the customer was not satisfied with Becerril's explanations and documentations, and requested that Becerril return her funds, which he did not return until after she had made a regulatory complaint against him. Moreover, the complaint alleges that Becerril knowingly, willfully or recklessly made misrepresentations of material facts, and omitted to disclose material facts in connection with his offer and sale of mutual fund investment to the customer. Furthermore, the complaint alleges that Becerril failed to produce documents FINRA requested. (FINRA Case #2009018944001)

Raymond Thomas Blunk (CRD #2011245, Registered Representative, Carmel, Indiana) was named as a respondent in a FINRA complaint alleging that he recommended that customers participate in a Stock to Cash program under which customers pledged stock to obtain loans to purchase other products; Blunk's customers obtained loans totaling approximately $1.7 million. The complaint alleges that the pledged stock would be transferred to the loaning entity's securities account maintained at a clearing firm; which were typically a short period of time, were for up to 90 percent of the value of the stock with no payments required during the term of the loan; however, customers were required to pay the full principal and interest due at the end of the loan term. The complaint also alleges 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 moved the money into its own bank account. The complaint further alleges 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. In addition, the complaint alleges that Blunk failed to find out what happened to stock conveyed to the lender and assumed the lender was a broker/dealer holding the stock for his customers in custodial accounts. Moreover, the complaint alleges that when Blunk tried to find out more information, intermediaries refused to provide more information but Blunk still entrusted his clients' securities to the lender. Furthermore, the complaint alleges that as a result of this failure to conduct due diligence, Blunk violated the requirement of having a reasonable basis for recommending the Stock to Cash program to customers and potential customers. (FINRA Case #2007008935009)

Brendan Walter Coughlin (CRD #4917244, Registered Principal, Dallas, Texas) and Henry Deimel Harrison (CRD #4919907, Registered Principal, Dallas, Texas) were named as respondents in a FINRA complaint alleging that they were co-founders, managing partners and registered principals of a member firm that marketed and sold preferred stock interests in a series of private placements offered by the firm's affiliated issuer, a nonregistered entity; and Coughlin and Harrison were also founders of the affiliated issuer. The complaint alleges that the offerings offered series of non-convertible redeemable cumulative preferred stock and each claimed an exemption from the registration pursuant to Rule 506 of Regulation D of the federal securities laws. The complaint also alleges that Coughlin and Harrison conducted each offering through a syndicate of participating retail broker-dealers and the offerings were sold nationwide to customers through these retail broker-dealers, raising approximately $485 million; the retail broker-dealers received fees and/or commissions for soliciting investors in these offerings. The complaint further alleges that Coughlin and Harrison employed wholesalers who assisted the retail broker/dealers with product training and in providing sales and marketing materials designed to encourage individual investors to purchase the offerings. In addition the complaint alleges that Coughlin and Harrison participated in the drafting, preparation, approval and/or dissemination of various materially false and misleading statements contained in the private placement memoranda the affiliated issuer issued. Moreover, the complaint alleges that Coughlin and Harrison failed to disclose the sources of funds used to pay distributions and dividends to investors, and affirmatively represented that the source of dividend payments was production revenue when that was not the case. Furthermore, the complaint alleges that, contrary to an attorney's advice that prior disciplinary history had to be disclosed in the private placement memoranda for the offerings, Coughlin and Harrison failed to disclose prior disciplinary history of the affiliated issuer's founder and owner, which was in connection with his offering of unregistered securities, and they failed to disclose the founder's ownership and involvement in the management of the affiliated issuer. The complaint also alleges that the firm's accounting department, acting on instructions from Coughlin and Harrison, transferred tens of millions of dollars of investors' funds, to the founder of the firm's affiliated issuer ostensibly to acquire oil and gas interests, with little, if any, documentation of the purpose of the transfers, the improper financial dealings with the founder, and the undocumented loans and transfers were not disclosed to investors. (FINRA Case #2009017497202)

Richard A. Garaventa (CRD #3101772, Associated Person, Dannemora, New York) was named as a respondent in a FINRA complaint alleging that he misappropriated over $2.5 million from his member firm, firm customers and a firm counterparty for his own benefit. The complaint alleges that Garaventa entered, or caused to be entered, numerous false journal entries into his member firm's electronic system to transfer and credit at least $59,349 of unreconciled customer funds approximately $120,395 from an SEC settlement fund intended for customers, approximately $1,786,052 from different firm sources, including the firm's fee and foreign exchange accounts, leftover balances from corporate actions and accumulated ADR fees, commingled with funds from other sources, approximately $320,422 of a $1,000,000 overpayment by a firm counterparty, and $228,301 from other undetermined sources by entering numerous false journal entries into the firm's electronic system to transfer those funds to other suspense accounts that he was using to misappropriate funds. The complaint further alleges that Garaventa then entered or caused to be entered into the firm's electronic system check requests to be issued to a shell corporation he created against the accounts he was using to misappropriate funds by having firm employees who reported to him enter check requests on his behalf, which Garaventa later approved and by using the identification number and password of another firm employee who reported to him to enter check requests. The complaint further alleges that, as a result of Garaventa's false journal entries and check requests, his firm's books and records were falsified. In addition, the complaint alleges that Garaventa failed to respond to FINRA requests for information. (FINRA Case #2009017072301)

Hsin-Chuan Hsu aka Henry Hsu (CRD #1655196, Registered Representative, Marlboro, New Jersey) was named as a respondent in a FINRA complaint alleging that he fraudulently caused the transfer of profitable trades that were originally billed to the accounts of firm's customers into his relatives accounts, resulting in profits to one of the relative's account of approximately $47,118 and profits to the other relative's account of approximately $2,625. The complaint alleges that Hsu caused these fraudulent transfers by submitting trade correction forms known as Non-Market Error Trade Correction forms to the firm's wire room, and forged some of the forms by placing photocopies of firm managers' signatures on the forms without their knowledge or approval, and submitted the forms to the wire room for processing. The complaint also alleges that the firm became aware of Hsu's transfer of profitable trades and related forgeries, and is in the process of making restitution to the affected customers. (FINRA Case #2008015805401)

Paul James Marshall (CRD #1889692, Registered Supervisor, Atlanta, Georgia) was named as a respondent in a FINRA complaint alleging that he obtained the option to purchase shares of a company after he obtained bank financing for the company and offered to purchase shares for a member firm customer. The complaint alleges that the customer wired $38,200 to a bank account Marshall controlled to purchase the shares, but Marshall failed to exercise the option, did not forward the funds to the company and did not return the money to the customer because he made the unilateral decision that a joint business venture between himself and the customer owed him the money. The complaint also alleges that Marshall used the money for his personal expenses and not for the customer's benefit. The complaint further alleges that Marshall borrowed $25,000 from the customer contrary to his firm's written supervisory procedures that did not permit registered representatives from borrowing from customers. In addition, the complaint alleges that Marshall wrote a check payable to the customer's business for $25,000 to pay back the loan, but it was not honored due to Marshall's lack of funds in his bank account. Moreover, the complaint alleges that Marshall failed to completely respond to FINRA requests for information. (FINRA Case #2008014285801)

Brian Reuben Mitchell (CRD #5205677, Registered Representative, Streetsboro, Ohio) was named as a respondent in a FINRA complaint alleging that he engaged in an outside business activity selling legal and identity theft services, for compensation, and failed to provide prompt written notice to his member firm. The complaint alleges that Mitchell caused $36.95 to be withdrawn from an insurance customer's checking account to pay for legal services without the customer's or his relative's knowledge and consent, thereby misusing customer funds. The complaint also alleges that Mitchell failed to respond to FINRA requests for information and documentation. (FINRA Case #2009017279501)

Miguel Angel Murillo (CRD #4875997, Registered Representative, Bayshore, New York) was named as a respondent in a FINRA complaint alleging that he recommended excessive transactions in a customer's account that were unsuitable in light of the customer's financial situations, needs and investment objectives. The complaint alleges that Murillo controlled and directed the trading in the customer's account, in that he recommended and executed all the transactions in the account, and the vast majority of the transactions in the customer's account were affected through the use of margin and resulted in the customer incurring additional costs in the form of margin interest. The complaint also alleges that the customer was unable to evaluate Murillo's recommendations, did not understand what margin meant, and was unable to exercise independent judgment concerning the transactions in the account due to his lack of investment knowledge and limited English skills. The complaint further alleges that although the customer signed a pre-completed margin agreement, along with other pre-completed new account forms Murillo sent to him, the customer did not understand margin and did not realize that Murillo was effecting trades on his account on margin. In addition, the complaint alleges that, owing to the customer's lack of investment knowledge and inability to decipher his monthly account statements, the customer was unaware that he had a margin balance and did not understand the risk of the margin exposure in his account. (FINRA Case #2008014728701)