Churning, Unsuitable Securities FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.
Carl Max Birkelbach (CRD #1177843, Registered Principal, Chicago, Illinois) and William James Murphy (CRD #1437087, Registered Principal, Midlothian, Illinois). Birkelbach was barred from association with any FINRA member in any capacity. Murphy was fined $585,174.67, as disgorgement of commissions, and barred from association with any FINRA member in any capacity. The National Adjudicatory Council (NAC) imposed the sanctions following appeal of an Office of Hearing Officers (OHO) decision. The sanctions were based on findings that Murphy exercised discretion in clients’ accounts without the customers’ or his member firm’s prior authorization. The findings stated that Murphy engaged in churning and excessive and unsuitable trading in customers’ accounts in light of their financial situation and investment objectives. The findings also stated that Murphy effected uncovered trades in a customer’s account beyond the levels the customer authorized or Murphy’s firm approved. The findings also included that Murphy created and distributed inaccurate, misleading and unbalanced written communications, including reports and sales literature, to a customer. FINRA found that Birkelbach failed to supervise Murphy’s handling of customer accounts at his member firm, and failed to properly review and prevent misleading documents from being sent from his firm. This decision has been appealed to the SEC. The sanctions, with exception of the bars, are not in effect pending consideration of the appeal. (FINRA Case #2005003610701).