FINRA

FINRA Bars Former JP Morgan, Stifel Nicolaus, and Benjamin & Jerold Brokers

Published on: September 11, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has barred three former brokers who failed to take part in the self-regulatory authority’s probe into allegations of wrongdoing. Stephen T. Hurtak, formerly of Stifel Nicolaus & Co., was a broker for 39 years. According to FINRA, Hurtak refused to take part in the investigation into possibly unsuitable recommendations he may have made to several customers.

Unsuitable Recommendations

Brokers have a duty to make investment recommendations and strategies that are appropriate for a customer as it pertains to their investment goals, risk tolerance, and portfolios. When unsuitable recommendations lead to investment losses, this can be grounds for an investor fraud case.

Sanctions Against Wedbush Securities in SEC and FINRA Rulings Are Upheld by the 9th Circuit

Published on: April 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The United States Court of Appeals for the 9th Circuit has refused to overturn the US Securities and Exchange Commission ruling that Wedbush Securities Inc. engaged in inadequate supervision of its own regulatory compliance. The appeals court also affirmed the suspension of the brokerage firm’s president and principal Edward W. Wedbush.

The SEC’s 2016 finding had sustained a 2014 ruling by the Financial Industry Regulatory Authority’s National Adjudicatory Council, which ordered Wedbush to pay a $350K fine for either not filing, or filing late, dozens of documents regarding complaints and judgments that had been brought against the investment firm and its financial representatives. Finra found that Wedbush Securities violated the bylaws and rules of the NASD, the NYSE, and the self-regulatory organization itself 158 times and was delinquent in submitting the documents at issue over a five-year period, from 1/2005 to 7/2010.

Wedbush and its president had tried to argue before the SEC that FINRA was wrong in finding that the broker-dealer failed to supervise reporting requirements. The brokerage firm also questioned whether the hearing it received before the SRO was a fair one since a FINRA rule did not specifically note suspension as a sanction.

Aegis Capital to Pay Over $1M to the SEC and FINRA to Settle Allegations Involving Low-Priced Securities and Anti-Money Laundering Violations

Published on: March 28, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has fined Aegis Capital Corp. $550K for inadequate supervision and anti-money laundering systems related to its low-priced securities sales. According to the self-regulatory organization, the firm’s supervisory system that oversees trading involving delivery versus payment (DVP accounts) was not designed in a manner reasonable enough to properly “monitor and investigate” trading in the accounts, especially those involving securities transactions that were priced low.

With DVP accounts, a broker-dealer making the trades does not have to be holding the securities that are bought and sold. FINRA said that Aegis did not “adequately monitor or investigate” seven DVP customer accounts, a number of which belonged to foreign financial firms, in which trading involved the liquidation of billions of dollars of such securities. These transactions resulted in millions of dollars in proceeds. A number of these institutional clients made the transactions for underlying customers whose identities Aegis did not know.

The SRO found that Aegis failed to mark these transactions as suspect even after a clearing firm highlighted that there were anti-money laundering-related red flags. Aegis is settling FINRA’s case but without denying or admitting to the regulator’s findings.

Broker Fraud Allegations Lead to Finra Bars for Northwestern, Fortune Financial, and Morgan Stanley Representatives

Published on: March 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred three brokers in separate, unrelated cases for alleged misconduct. They are ex-Morgan Stanley (MS) representative Thomas Alain Meier, ex-Fortune Financial broker Michael Giokas, and ex-Northwestern Mutual broker Michael Cochran.

Former Morgan Stanley broker Thomas Alan Meier is accused of making unauthorized trades in customer accounts. In the self-regulatory organization’s letter of acceptance, waiver, and consent, FINRA stated that from 7/2012 through 3/2016, Meier “effected” over 1000 transactions that were not authorized in six customers’ accounts. His allegedly unauthorized transactions involved discretion without written permission or the accounts garnering discretionary acceptance and impacted four clients.

Between 4/2016 and 10/2017, Morgan Stanley submitted 21 amended Forms U5 for Meier. The forms showed that 14 customer complaints were filed against Meier, including two arbitration cases. AdvisorHub reports that because of Meier’s alleged misconduct, customers sustained $818K in losses and over $2M in unrealized losses. To date, the brokerage firm has paid customers about $2.5M in settlements and resolved 13 of the claims.

FINRA Cases: Allegis Investment Adviser and Ex-Broker Ordered to Pay Nearly $405K, Former Madison Avenues Securities Broker Accused in $1.67M Unauthorized Trading Case is Barred by FINRA, and US Senator Elizabeth Warren Introduces Bill To Address Unpaid Arbitration Awards

Published on: March 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Arbitration Panel Awards Allegis Investment Advisors Client $404,482

A Financial Industry Regulatory Authority arbitration panel has awarded Mark Watson $404,482 in his unauthorized trading case against Allegis Investment Services, Allegis Investment Advisors, and ex-broker Brandon Curt Stimpson. Watson is accusing Stimpson of placing his life savings in investments that were too risky and complex and of making unauthorized trades involving index put options connected to the Russell 2000 Index even though he had told the broker that he only wanted up to 25% of his portfolio involved in these. Instead, Watson alleges, Stimpson invested way more of his money in the index put options.

In his securities arbitration case, Watson also alleged breach of fiduciary duty. Now, a FINRA panel has awarded him nearly $275K in compensatory damages, nearly $54K in interest, and other costs.

Stimpson was fired by Allegis last year for not abiding by the firm’s ethics code and policies. According to his BrokerCheck records, he has been named in eight other customer disputes.

FINRA Cautions Investors About Scams Involving the Impersonation of the SRO

Published on: February 10, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is warning investors to watch out for financial schemes in which the fraudsters are pretending to be the self-regulatory organization. FINRA released its Investor Alert noting that there have been scammers using its FINRA logo and name. In some instances they are even forging the signature of FINRA president and CEO Robert W. Cook to try and solicit funds for fraudulent investments. Use of FINRA’s name appears to be geared toward making the scheme appear legitimate.

For example, an investor contacted the SRO to report one instance that purportedly involved the fraudster sending a letter that was supposedly from Cook and guaranteeing a proposed investment. The letter, however, had a number of errors, including mistakes involving FINRA’s name and its leadership titles. Another alleged fraud involved e-mail pitches, again purportedly from Cook. The correspondence told targets that their outstanding inheritance fund had been “approved for release.” They were instructed to go abroad (beyond the jurisdiction of US authorities or regulators) to obtain this money. Meantime, the targets were asked to share certain personal data.

A regulator imposter fraud might ask the victim to pay an advanced fee. In such scams, investors are asked to pay certain fees related to the purchase of stock shares that, in truth, are not doing well or are “virtually worthless.” However, upon sending the funds, investors rarely see the money returned to them or the funds that a stock buyback was supposed to render. The fraudster may even ask for more money.

FINRA Awards more than $4M to Elderly Investors Bilked by Ex-First Allied Securities Broker

Published on: January 19, 2018 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority arbitration panel has awarded over $4.3M to investors in their elder financial fraud case against former First Allied Securities broker Anthony Diaz. The plaintiffs contend that he invested their retirement funds in high risk private placement investments that were unsuitable for them. They are alleging inadequate supervision, misrepresentation and omissions, unsuitability, fraud, and other violations.

Diaz is considered to be a rogue broker by the regulator, who barred him in 2015. He not only worked at 11 firms win 14 years, but also he appeared to have no problem getting another job whenever he was let go from a previous. Diaz’s BrokerCheck profile shows that he is named in 53 customer dispute and regulatory disclosures.

The arbitration award to the investors is over $1M in compensatory damages, more than $413K in legal fees, and $2.9M in punitive damages. They settled with First Allied Securities last year.

BitConnect Shutters Its Lending and Exchange Operation, Leaving Texas Investors With No Place to Trade Their BCC Currency

Published on: January 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

BitConnect, an investment lending platform for Bitcoin, has suddenly announced that it is shuttering its lending and exchange operation immediately. The company said that its exchange platform would shut down in five days. In a post on its site, BitConnect said that moving forward, it would operate for “wallet service, news and educational purposes.”

The announcement caused the price of BitConnect Coins (BCC), which is its Bitcoin currency, to plunge by over 90%–from over $400/coin to about $17.25/coin. Now, its investors are left wondering what to do with their coins.

Some site users are claiming that even though the exchange for the BCCs was supposed to stay open throughout the week, they have been unable to process trades because they cannot access the exchange. CoinDesk reports that one investor sent an email, claiming over $400K in losses because of this.

FINRA Cases: Ex-Morgan Stanley Broker and Former Western International Securities Broker Are Barred, Questar Capital Ordered to Pay $797K Restitution Over Mutual Fund Sales, and Morgan Stanley Smith Barney is Accused of Not Sending Millions of Margin Disclosures

Published on: January 16, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Two Brokers Barred After Not Appearing at FINRA Hearings

Guillermo Valladolid, an ex-Morgan Stanley (MS) broker, has been barred by the Financial Industry Regulatory Authority. According to the regulator, Valladolid did not show up at a hearing into whether, according to InvestmentNews, he “sold investments away from his employer” and neglected to disclose certain outside business activities.

Morgan Stanley terminated Vallodolid’s employment. Previous to that he worked with Merrill Lynch.

In a different FINRA case, the regulator barred another broker, Bradley C. Mascho, also after he did not appear at his hearing. Some of Mascho’s activities while at Western International Securities had come under question. The firm fired him last month, which is also when the US Securities and Exchange Commission filed fraud charges against Mascho and Dawn Bennett of the Bennett Group Financial and DJP Holdings. Mascho was CFO of the latter.

Securities News: Meyers Associates Fined $75K for Sales Literature, Former Royal Bank of Scotland Trader is Banned For Rigging Libor, and Ex-Credit Union CEO is Sentenced in Bank Fraud Case

Published on: January 10, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Meyers Associates is Fined by FINRA Over Misleading Sales Literature
The Financial Industry Regulatory Authority is ordering Meyers Associates, now called Windsor Street Capital, to pay a $75K fine for a number of securities violations, including sending sales literature that was misleading via email and not supervising books and records preparations. The firm’s principal, Bruce Meyers, is now barred from working as a firm supervisor or principal.

According to the regulator’s National Adjudicatory Council, Meyers Association has been named in 16 disciplinary actions this century. It paid about $390K in sanctions for different issues, including issuing false statements, supervisory deficiencies, omissions related to a securities offering, improper review of emails, inadequate maintenance of books and records, and not reporting customer complaints in a timely manner. Last year, the US Securities and Exchange Commission turned down Meyers’ appeal of a FINRA securities ruling that prevented him from serving as firm CEO.

Ex-RBS Trader Banned and Fined £250,000 for Manipulating Libor
The UK’s Financial Conduct Authority has banned ex-Royal Bank of Scotland Group (RBS) trader Neil Danzinger from the securities industry and ordered him to pay a $338,000 over allegations that he rigged the London interbank offered rate (Libor). According to the regulator, Danziger, a former RBS interest rate derivatives trader, “routinely” asked RBS Libor submitters to modify the rate to benefit his trading positions. He also allegedly factored in certain trading positions when serving as a submitter and on more than one occasion got a broker to help him to rig other banks’ yen Libor submissions.