FINRA Fraudulent Cold-Calling Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011: Corp. (CRD® #18281, Boca Raton, Florida) was expelled from FINRA® membership. The sanction was based on findings that the firm’s registered representatives cold-called potential customers from a boiler room, opened accounts for people who never agreed to be firm customers and made unauthorized trades for those purported customers, as well as for their actual customers; the firm intentionally failed to disclose to its customers that it was engaging in unauthorized trading. The findings stated that the firm’s brokers predicted substantial increases in stock prices, often to specific levels, and the firm issued false trade confirmations and made other efforts to induce potential customers to pay for unauthorized transactions in furtherance of its fraudulent scheme. The findings also stated that the firm, through its registered representatives, made recommendations to customers without obtaining the necessary information, including investment objectives, risk tolerance, financial condition and investment experience, to make suitability determinations. The findings also included that the firm, through its registered representatives, created false new account documentation, including falsified new account information forms and new account applications that set forth false, inaccurate and baseless information regarding customers’ income, net worth, investment experience, risk tolerance and social security numbers. 

FINRA found that the firm purchased securities on margin without the customers’ authorization. FINRA also found that the firm received numerous customer complaints but failed to report most of them. In addition, FINRA determined that the firm’s books and records did not accurately reflect all of its actual and contingent liabilities; failed to accurately record and report its net capital, net capital requirement and excess net capital; operated while in net capital deficiency and failed to provide notice to the Securities and Exchange Commission (SEC) of its net capital deficiencies. Moreover, FINRA found that the firm’s chief compliance officer (CCO) refused to allow FINRA staff to obtain any of its electronic books and records during a visit to the firm’s Long Island office until the following week when the staff discovered that at least one computer had been disabled and other files had been tampered with.

Furthermore, FINRA found that the staff was unable to access the hard drive of one computer maintained by a firm employee responsible for maintaining the firm’s computer systems because the hard drive had been encrypted and the employee claimed he was unable to decrypt it.  (FINRA Case #2009016159101).