December, 2011:

Joseph Alphonse Vitale (CRD #5223467, Registered Representative, Boca Raton, Florida)

was barred from association with any FINRA member in any capacity. The sanction was based on findings that Vitale failed to respond to FINRA requests for information. (FINRA Case #2009017585202).

December, 2011:

Evan Taber (CRD #1892751, Registered Representative, Plantation, Florida) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Taber intentionally converted or misappropriated customer funds. The findings stated that Taber discussed with a customer an investment that would yield a 15 percent rate of return and the customer gave Taber a check for $30,000 payable to the investment; Taber deposited the customer’s check into the investment checking account. The findings also stated that the customer repeatedly called Taber to determine the status of his investment, and each time Taber reassured the customer that his funds had been invested; Taber failed to inform the customer that the investment checking account was actually Taber’s personal bank account. The findings also included that Taber did not make any investment with the customer’s funds; instead, Taber used the customer’s funds for numerous business and personal expenses. FINRA found that Taber ultimately refunded the customer’s funds, but not until FINRA began its investigation into the customer’s complaint. (FINRA Case #2010021196801).

December, 2011:

Isaiah Solomon (CRD #1112800, Registered Representative, Mitchellville, Maryland) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $15,000, which includes disgorgement of $8,600 representing the financial benefits he received from sales, and suspended from association with any FINRA member in any capacity for 18 months. The fine must be paid either immediately upon Solomon’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, Solomon consented to the described sanctions and to the entry of findings that he participated in the sale of securities outside his employment at his member firm and failed to give written notice to his firm of his intention to engage in the transactions and obtain the firm’s authorization to engage in such activities; Solomon referred individuals, some of whom were his firm’s clients, to an individual and an entity so the customers could invest with the entity. The findings stated that the entity initially claimed to offer foreign exchange trading opportunities, but later claimed to offer investments in a hedge fund that would engage in various trading strategies; the customers invested approximately $750,000 with the individual and entity, and Solomon also invested with the individual and entity. The findings also stated that Solomon introduced the customers to the individual, typically during a conference call where the individual promised guaranteed returns of 12 percent per year for two years; Solomon recommended the investment to most of the customers and received $8,600 from the entity for his efforts. The findings also included that Solomon engaged in discussions with the individual and the entity about possible employment with the entity. The suspension is in effect from October 17, 2011, through April 16, 2013. (FINRA Case #2009020265401).

December, 2011:

Michael Daniel Shaw (CRD #1571907, Registered Representative, Baton Rouge, Louisiana) 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, Shaw consented to the described sanction and to the entry of findings that acting on his member firm’s behalf, he recommended and effected the sale of high-risk private placements to customers without having a reasonable basis to believe the transactions were suitable given the the customers’ financial circumstances and conditions; Shaw earned a total of $56,733 in net commissions on the transactions. The findings stated that Shaw made material misrepresentations or omissions in connection with the purchases or sales in connection with the private placements; despite the description of each product as high risk or highly speculative in the offering documents, Shaw intentionally misinformed customers that the investments were safe and secure, and represented one product as a relatively low-risk investment. The findings also stated that Shaw falsified account documents for customers, increasing net worth and changing risk profiles. The findings also included that Shaw and his firm settled with one of the customers; the firm settled with another. (FINRA Case #2010022963601).

December, 2011:

David Alan Schams (CRD #1587140, Reg. Representative, Alma, Wisconsin) 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, Schams consented to the described sanction and to the entry of findings that he accepted appointment as an alternative agent attorney-in-fact over a customer account, without his member firm’s express written consent. Schams was to receive approximately $90,000 from the customers’ estate; Schams accepted two $20,000 interest-free loans on the anticipated inheritance, without signing a promissory note evidencing the loan, contrary to the firm’s compliance policies that prohibited registered representatives from exercising or maintaining discretionary authority or power of attorney over customer accounts and borrowing money, accepting loans, issuing or transacting promissory notes or other similar forms of debt for customers without the express written consent of the firm’s compliance department. The findings also stated that Schams made material misstatements to his firm in a compliance questionnaire regarding borrowing money or accepting a loan from a client, holding any securities, stock powers, money or property belonging to a client, accepting client checks made payable to him, or endorsed to him personally or in the name of an entity, and managing or handling, in any way, the affairs of any client account on a discretionary basis. (FINRA Case #2009018293201).

December, 2011:

Guy Eugene Richardson (CRD #2926034, Reg. Representative, Topeka, Kansas) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Richardson failed to respond to FINRA requests for information. The findings stated that Richardson made similar misrepresentations to customers, all of whom wished to make conservative investments, about a certain corporate bond fund that he recommended to them. The fund did not provide a guaranteed dividend yield or rate of return; its objective, as stated in the fund’s prospectus, was to seek maximum current income through investment in a diversified portfolio of high-yield debt securities. In fact, the fund’s semi-annual report stated that the fund invested in junk bonds for which investors pay a premium because of the increased risk of loss, and that the bonds can be subject to greater price volatility than higher quality debt securities. Relying on Richardson’s recommendations, the customers invested approximately $317,000 in the fund. In addition, FINRA determined that Richardson made these misrepresentations without attempting to verify what he told the customers. Moreover, FINRA found that in an on-the-record interview with FINRA, Richardson testified that he believed at the time he made the misrepresentations that the fund did carry a guaranteed dividend yield, and that he recommended the fund to the customers because they wanted a higher return than was available in bank-sponsored products. Richardson admitted further that he did not review the fund’s prospectus or other documents available to him to verify his understanding of its dividend yield, and that he did not fully understand the product. (FINRA Case #2008016382401).

December, 2011:

Thomas Heflin Redmond Jr. (CRD #4116004, Reg. Representative, Carmel, Indiana) 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, Redmond consented to the described sanction and to the entry of findings that he made unsuitable investment recommendations to a customer. The findings stated that Redmond recommended that she invest 47.5 percent of her available funds in highrisk investments, including $100,000 in an oil and gas offering by an entity; the SEC later charged the entity, its affiliates and control persons with operating a $485 million offering fraud scheme. The findings also stated that Redmond knew the customer was an elderly widow with minimal investment experience, and was looking to preserve her assets and invest conservatively, so his recommendation was unsuitable. The findings also included that Redmond failed to follow the customer’s instructions in connection with the purchase of a variable annuity by failing to elect the minimum income benefit rider on the variable annuity. FINRA found that Redmond forged customers’ signatures on subscription agreements to purchase interests in an entity’s offering. Redmond signed the customers’ names without their express authorization or consent. FINRA also found that Redmond made misrepresentations to a customer while soliciting him to invest in an entity’s offering; Redmond falsely claimed that he had personally invested a third of his assets in the offering when he had not invested in the offering. (FINRA Case #2009020417501).

December, 2011:

Steven Mark Peaslee (CRD #2285838, Registered Principal, Alexandria, Louisiana) 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, Peaslee consented to the described sanction and to the entry of findings that he participated in private securities transactions by soliciting individuals to invest approximately $399,850 in an offering of a company he owned and controlled without providing written notice of his intent to participate in the sale of an offering to his member firm, and failed to obtain his firm’s written approval before engaging in such activities. The findings stated that Peaslee’s firm did not permit registered representatives to participate in the sale of private equity offerings. The offering’s purpose was to capitalize an entity through which Peaslee operated his securities business, which he wholly owned. The findings also stated that the offering purported to be issued in compliance with Rule 506 of Regulation D of the Securities Act of 1933 (Reg. D), but Reg D documents were not filed with the SEC. The findings also included that Peaslee did not receive any written representation from any of the investors that they met the requirements to be an accredited investor. FINRA found that Peaslee negligently made untrue statements of material facts and/or omitted to state material facts in a PPM and subscription agreement for the offering. In reliance on Peaslee’s misrepresentations, the customers and the non-customer invested in the offering. FINRA also found that Peaslee failed to establish an escrow account in the name of the issuer, his business entity, and no investor funds from the offering were ever held in an escrow account; rather, Peaslee deposited investor funds into the entity’s operating account and immediately began making withdrawals. In addition, FINRA determined that Peaslee distributed investor funds before the minimum contingency was satisfied, thereby rendering the representations in the offering documents false and misleading. (FINRA Case #2009020134201).

December, 2011:

Alan Stuart Pattee (CRD #3002976, Registered Representative, Lake Worth, Florida) submitted a Letter of Acceptance, Waiver and Consent in which was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Pattee consented to the described sanction and to the entry of findings that he forged homeowner signatures on uniform mitigation verification inspection forms (UMVI forms) in connection with inspections performed by a qualified inspector regarding construction information; the form is submitted to the homeowner’s insurance company in connection with insurance pricing. The findings stated that Pattee forged the signatures to accommodate his clients, who were either not at home at the time of the inspection or were his longtime clients. The findings also stated that Pattee acted as an officer for a company formed to conduct inspections to determine homeowner policy premiums, for compensation, without providing prompt written notice to his member firm for this outside business activity. The findings also included that Pattee completed securities annual compliance online certifications for his firm representing that he had complied with the requirements of NASD Rule 3030 and for the certifications, certified that no changes were needed to his Form U4 or that he had requested appropriate changes to the Form U4 regarding outside business activities. (FINRA Case #2010023232101).

December, 2011:

Timothy Michael McGinn (CRD #813935, Registered Principal, Schenectady, New York) and David Lee Smith (CRD #427284, Registered Principal, Saratoga Springs, New York) were barred from association with any FINRA member in any capacity. The sanctions were based on findings that Smith misused investor funds when he sold approximately $89 million in income notes issued by four limited liability companies (Income Note LLCs) he controlled. Smith told the investors that the Income Note LLCs would place their funds in a broad array of public and private investments. Contrary to Smith’s representations, he diverted most of the invested funds for the benefit of business entities that he and McGinn owned or in which they had a financial interest. Smith also loaned approximately $590,000 of funds directly to himself. The findings also stated that Smith made misrepresentations and omissions of material facts relating to the Income Note LLCs when he recommended to investors that they participate in the private offerings and purchase the income notes. In addition to falsely representing that the Income Note LLCs would place their funds in private and public investments, Smith stated that the member firm would charge an annual 2 percent commission or fee. In actuality, the proceeds of the investments were diverted to entities McGinn and Smith owned, which were illiquid and in poor financial condition with little or no revenues, and the firm charged recurring annual commissions or fees amounting to approximately 8 percent of the investors’ purchases. Smith failed to inform investors that the Income Note LLCs would invest in, and make loans to, entities in which he and McGinn maintained a financial interest, and that the majority of the funds would be invested in illiquid, non-public companies. The findings also included that Smith directed the sales efforts by which customers purchased the Income Note LLCs. The notes were not registered with the SEC and were not eligible for exemption from registration, but the offerings falsely claimed to be exempt from the registration requirement pursuant to Rule 506 of the Securities Act of 1933, Regulation D.

FINRA found that Smith sent letters to income note investors containing material misrepresentations and omissions concerning their investments. One letter informed certain Income Note LLCs holders that their annual interest rates of return would be reduced because of market conditions, and Smith falsely represented that the firm would suspend further collection of fees from the Income Note LLCs but it continued to collect them, totaling approximately $6.7 million. Another letter informed all Income Note LLC holders that they would be unable to redeem notes on a particular day because of conditions in financial credit markets and the resultant liquidity crises. Smith also falsely represented that the firm would forfeit all annual fees and commissions in order to improve the liquidity of the Income Note LLCs, but it continued to charge fees and commissions. In both letters, Smith failed to disclose to the note holders that the poor financial condition of the Income Note LLCs was caused in part by his decision to lend or invest most of the investors’ funds in illiquid entities that he and McGinn owned and controlled, had few or no revenues, and were in financial distress. FINRA also found that the firm, through Smith, failed to establish and maintain a supervisory system, and failed to establish, maintain and enforce WSPs reasonably designed to achieve compliance with the applicable FINRA rules and securities laws related to suitability, disclosure and verification of investor accreditation status. For approximately five years, the firm’s principal source of revenues was from private placements, including the Income Note LLCs. The subscription contracts potential investors submitted in income note offerings were inadequate because they did not contain information about the investors’ liquid net worth, but the firm relied on them to review and approve individual investments; many investor documents were incomplete, and many were altered after they were submitted by the investors to make it appear that the investors had a higher net worth and qualified as accredited investors. The firm did not have, and Smith did not implement, procedures for reviewing customer documents reasonably designed to allow the firm to identify any potential alterations and to take appropriate action, and did not have a procedure for spot-checking customer documents and contacting customers directly to ascertain if the documents were accurate. Despite the fact that the PPM for the income notes and subscription agreements provided that only accredited investors would be eligible to invest, Smith approved and accepted investments from approximately 250 non-accredited investors. FINRA found that McGinn and Smith provided false documents to FINRA in response to requests for information relating to loans from certain business entities they controlled. McGinn and Smith submitted copies of promissory notes relating to the loans, dated to appear that they had been previously signed; each note contained a certification attesting that it had been executed and delivered on the date specified. The certifications were false, as McGinn, Smith and a registered representative actually prepared, dated and signed the notes after the FINRA request for documents. (FINRA Case #2009017984501).

December, 2011:

Walter Louis Howerton (CRD #251564, Registered Principal, Modesto, California) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $12,500 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Howerton’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, Howerton consented to the described sanctions and to the entry of findings that he made unsuitable options recommendations in a customer’s account. The findings stated that Howerton began implementing a naked put selling strategy he recommended in the customer’s account in order to generate income. The findings also stated that over the next three years, Howerton recommended numerous naked put sale transactions in the customer’s account; the strategy was generally profitable until it began to result in losses and the customer was forced to close her positions at a substantial loss. The findings also included that Howerton did not have reasonable grounds to believe that the recommendations to sell naked puts were suitable for the customer based on her financial situation and needs; among other relevant considerations, the customer did not have the resources to withstand the magnitude of losses she risked, and ultimately incurred, by selling the naked put options.

The suspension is in effect from October 17, 2011, through April 16, 2012. (FINRA Case #2009020560901).

December, 2011:

Jason Sean Harrison (CRD #2628373, Registered Representative, Pearland, Texas) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $15,000 and suspended from association with any FINRA member in any capacity for one year. The fine must be paid either immediately upon Harrison’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, Harrison consented to the described sanctions and to the entry of findings that he engaged in private securities transactions without providing notice, written or otherwise, to his member firm. The findings stated that Harrison facilitated investments in bonded life contracts an entity issued to his firm’s customers by bringing the investment opportunity to the customers’ attention and referring them to the entity’s salesperson. The customers subsequently invested a combined total of $150,000 with the entity, and Harrison received fees in the amount of $18,000 from the entity for the referrals, which were paid in the form of checks made payable to Harrison’s relative. The findings also stated that prior to referring his firm’s customers to the entity, Harrison had been told that the firm had prohibited its registered representatives from offering and selling the entity’s products due to concerns that the firm had about the products. The findings also included that Harrison ignored the prohibition, made several customer referrals to the entity, and collected undisclosed referral fees. The entity’s investment subsequently defaulted and all of the customers’ funds were lost. FINRA found that Harrison engaged in an outside business activity in that he received $2,500 in undisclosed compensation for a customer referral to a life settlement issuer business, without having provided notice to his firm.

The suspension is in effect from October 31, 2011, through October 30, 2012. (FINRA Case #2009018648901).

December, 2011:

Alan David Goddard Jr. (CRD #3019681, Reg. Representative, Boca Raton, 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 capacity for 45 days. The fine must be paid either immediately upon Goddard’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, Goddard consented to the described sanctions and to the entry of findings that he was actively engaged in a member firm’s investment banking and securities business as a principal without proper registration. The findings stated that Goddard signed selling agreements and consulting agreements with issuers on the firm’s behalf as an officer of the firm and worked closely with the firm’s outside counsel to establish the terms of selling agreements and private placement offerings that the firm conducted. Unbeknownst to Goddard, the firm’s CCO amended the firm’s Application for Broker-Dealer Registration (Form BD) to list Goddard as the firm’s CEO. The findings also stated that during Goddard’s entire association with the firm, he was only registered as a general securities representative; Goddard took the Series 24 examination but failed. Goddard erroneously believed that he could function in the capacities set forth above without a principal’s license.

The suspension was in effect from October 17, 2011, through November 30, 2011.

(FINRACase #2009016157802).

December, 2011:

Mike Givilancz Jr. (CRD #2141251, Registered Representative, Weslaco, Texas) 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, Givilancz consented to the described sanction and to the entry of findings that he failed to provide testimony FINRA requested in connection with an investigation of Givilancz’ possibly obtaining loans from customers. The findings stated that Givilancz, through his attorney, informed FINRA that he would not appear for scheduled testimony on the date scheduled or on any date in the future. (FINRA Case #2010024973901).

December, 2011:

Joseph John Giuliano (CRD #1411255, Registered Principal, Boca Raton, 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, Giuliano consented to the described sanction and to the entry of findings that an individual who subsequently became a trader with his member firm provided $250,000 to the firm’s parent company, without loan documentation or written agreement, either as funds to be traded in a firm proprietary account or be held as a security deposit to insure the brokerdealer against trading losses the individual might incur. The findings stated that Giuliano, an owner of at least a 40-percent stake in the parent company and the firm’s chief financial officer (CFO) and FINOP, caused the funds to be deposited into the parent company’s checking account and used some or all of the funds, without the individual’s consent or authorization, to pay various expenses and debts of the parent company and the firm, thereby misusing the funds. (FINRA Case #2009019382101).

Theft, Unauthorized Fees and Commission Fraud, Misrepresentation and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

December, 2011:

John Christopher Garner (CRD #2842338, Registered Representative, Charleston, West Virginia) 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, Garner consented to the described sanction and to the entry of findings that when each of his customers invested in a mutual fund or annuity, he requested separate checks, one made out to the clearing firm and the other made payable to the bank at which Garner held a personal account. The first check represented the principal amount to be invested in the underlying product and was processed in the normal course through the member firm, and the other check purportedly represented Garner’s fee, which he endorsed and deposited into his personal account for personal use. The findings stated that when requesting and depositing the purported fee checks, Garner did not disclose to his member firm that he was collecting these payments from his customers, and the firm’s policies did not permit him to request or accept such payments. The findings also stated that Garner arranged for a customer to give him a check for approximately $15,000 and told the customer that he would invest the money on her behalf over time pursuant to a dollar cost averaging strategy, although the firm had a policy prohibiting registered representatives from personally holding customer funds for later investment. The findings also included that Garner never invested any of the approximately $15,000 for the customer’s benefit but converted the money for his own use.

FINRA found that upon discovery of Garner’s conversion, he paid the amounts taken as supposed fees and for the false investment strategy to his firm, which, in turn, provided the funds to the clients whose funds had been converted. (FINRA Case #2010022244401).

December, 2011:

David Leroy Carlson (CRD #1071647, Registered Representative, Simi Valley, California) 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, Carlson consented to the described sanction and to the entry of findings that he facilitated securities investments away from his member firm. The findings stated that Carlson facilitated investments titled Secured Investment Notes through a company which totaled approximately $1.7 million, and he earned approximately $77,000 on the sales. The findings also stated that Carlson neither provided written notice to, nor obtained approval from, his firm prior to facilitating the investments. The findings also included that the company through which the investments were made was ultimately determined to be a fraudulent scheme, although Carlson has not been implicated in the scheme. (FINRA Case #2009018215701).

Debember, 2011:

William Alexis Cronin Jr. (CRD #872542, Registered Principal, Madison, Connecticut) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $181,000, which includes disgorgement of $171,000 in commissions, and suspended from association with any FINRA member in any capacity for two years. The fine must be paid either immediately upon Cronin’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, Cronin consented to the described sanctions and to the entry of findings that he participated in private securities transactions without prior written notice to, and prior written approval from, his member firm. The findings stated that Cronin sold approximately $1,712,500 in notes and debentures to investors, most of whom were his firm’s customers at the time. The notes and debentures, which were securities, were sold through private placements. Cronin received approximately $171,000 in commissions from these investments. The findings also stated that Cronin borrowed $10,000 from one of his customers at his firm. Cronin executed a promissory note stating that the loan was to be paid in full by a certain date, but failed to repay the loan according to the terms of the note. Cronin eventually repaid the loan with interest, but only after the customer filed an action against him. The findings also included that Cronin borrowed $5,000 from another customer through a loan that was not reduced to writing, and had no repayment terms; Cronin repaid the loan. FINRA found that Cronin did not disclose either of the loans to his firm, which prohibited loans from customers without prior firm approval.

The suspension is in effect from November 7, 2011, through November 6, 2013. (FINRA Case #2011025885801).

December, 2011:

Eric Lawrence Bloom (CRD #1742255, Registered Principal, Boca Raton, 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, Bloom consented to the described sanction and to the entry of findings that he made material misrepresentations and omissions of fact and unwarranted, exaggerated and misleading statements to investors in connection with the sale of private placement offerings. The findings stated that Bloom misrepresented in an offering’s subscription agreement that the use of proceeds for the offering was initial funding of the company’s ventures in technology risk management solutions and business development of services. The proceeds were actually used to purchase shares of a stock from an individual. Bloom did not disclose the stock purchasing agreement between the company and the individual that predated the offering and failed to disclose the conflicts of interest and control relationships that existed among the company and his member firm’s outside counsel. Bloom failed to disclose that the firm’s outside counsel, who prepared all the offering documents, had created the company to operate out of his residential address and that the outside counsel’s relatives actually owned and operated the company. The findings also stated that for another offering, Bloom misrepresented the offering in the PPM as an investment in membership interests of a company but did not disclose to investors that there was a promissory note between his firm’s CEO and the company’s owner, and that $400,000 was due pursuant to the note. Bloom failed to disclose to investors that $400,000 of investors’ funds had already been paid to satisfy the note and that $352,200 of investor funds from the offering had already been paid by check to pay back the promissory notes from the offering. Until a supplement to the offering memorandum, Bloom failed to disclose to investors the profit distribution from the offering and further failed to disclose the conflicts of interest and control relationships among the offering company, the company that controlled the offering company, and the firm’s outside counsel and counsel’s family. The findings also included that for two other offerings, Bloom failed to disclose to investors in the subscription agreements of both companies the significant regulatory history of the controlling partners of the offerings who had been charged by FINRA in a market manipulation scheme in connection with alleges sales of over $3.5 million of stock to firm customers. Bloom’s firm’s counsel prepared the offering documents in consultation with Bloom. Bloom relied to his detriment on the counsel’s advice about which facts needed to be disclosed and which could be omitted in the offering documents.

FINRA found that Bloom was the principal at the firm responsible for supervising all aspects of the firm’s business, including ensuring compliance with FINRA’s rules regarding communications with the public. Bloom’s firm acted as the sole placement agent for an additional private placement, and the offering memorandum was not fair and balanced regarding the potential investment returns of the partnership. The offering memorandum utilized past performance of the Average of Top 25 S&P 500 Fund as compared to the anticipated returns of investing in the offering. FINRA also found that Bloom’s firm participated in best efforts, minimum-maximum offerings conducted by companies, and instead of having investors deposit their funds into a bank escrow account as required by SEC Rule 15c2-4, the offering documents set forth that an escrow account with a transfer agent would be established for investor funds during the contingency period, causing the firm to violate Section 15(c) of the Securities Exchange Act of 1934 and SEC Rule 15c2-4. (FINRA Case #2009016157801),

December, 2011:

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).