FINRA

FINRA Orders Oppenheimer to Pay $3.4M Penalty For Alleged Reporting Failures and Not Giving Discounts to Mutual Fund Clients

Published on: November 21, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority says that Oppenheimer & Co. (OPY) must pay $3.4M in sanctions. According to the regulator, for eight years the firm was about four years late when submitting 365 filings about disciplinary actions that it brought against its brokers and in arbitration and litigation settlements. FINRA is also accusing Oppenheimer of not giving seven claimants the documentation they needed in their arbitration against Mark Hotton, an ex-registered representative, and of overcharging 825 customers more than $1M collectively for mutual fund shares over a six-year period.

The self-regulatory organization claims that the late filings to FINRA took place between 2008 and 2016 and that Oppenheimer failed to provide claimants the documentation related to the Mark Hotton allegations between 2010 and 2013. The failure to apply the appropriate fee waiver discount for mutual fund shares purportedly occurred between 2009 and 2015.

Already, Oppenheimer has paid over $6M to settle customer disputes alleging inadequate supervision of Hotton and another $1.25M to 22 customers who did not file arbitration cases but suffered losses, too. Oppenheimer also was ordered to pay a $2.5M fine to FINRA last year over the Hotton claims. The former broker, whom FINRA permanently barred from the securities industry three years ago, was sentenced sentenced to 11 years in prison for stealing client monies and excessively trading their brokerage accounts.

Broker Fraud Cases: Former Newbridge Securities Broker Pleads Guilty in $131 Market Manipulation Scheme and FINRA Bars LPL Financial Broker for Depositing Client Funds Into His Own Account, and Lincoln Financial Securities is Fined $650K for Not Protecting Client Information

Published on: November 17, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Newbridge Securities Broker Involved in $131M Fraud Pleads Guilty
Gerald Cocuzzo, has pleaded guilty to securities fraud related to his involvement in a $131M market manipulation scam involving Forcefield Energy Inc. (FNRG). According to the U.S. Justice Department, between 1/2009 and 4/2015, Cocuzzo and others sought to bilk investors in the publicly traded company that globally distributes and provides LED lighting products. They did this by artificially manipulating the volume and price of the shares that were traded.

Meantime, Cocuzzo received kickbacks for buying Forcefield stock in his clients’ brokerage accounts. He did not tell the customers that he was receiving these payments. Instead, he and several others sought to hide their involvement.

Newbridge Securities fired Cocuzzo earlier this year following the federal indictment. Before working at Newbridge, he was registered with IAA Financial, previously called CBG Financial Group Inc.

FINRA Complaint Accuses Dawn Bennett Of Not Testifying in Fraud Probe Involving Her Clothing Company

Published on: November 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Once again, financial adviser Dawn Bennett is in the news. The Financial Industry Regulatory Authority has reportedly filed a securities case against Bennett, who is the owner of Bennett Group Financial Services, for not appearing four times to testify in the regulator’s probe into her retail clothing business, DJBennett.com. FiNRA said that her failure to appear to testify violates its rules. Bennett was recently investigated for fraud while she was an independent broker at Western International Securities.

She stepped down from that firm last year after FINRA found that she may have committed securities fraud, as well as been involved in private securities transactions, undisclosed external business activities, and the misappropriation of investor funds.

It was in 2015 that she allegedly solicited Western clients in a debt deal that her retail clothing company was supposed to guarantee. Bennett sold $6M of convertible and promissory notes to about 30 investors.

FINRA Says Former MML Investors Services Broker Bilked Older Couple in Senior Fraud

Published on: November 9, 2016 | by Shepherd Smith Edwards & Kantas, LLP

FINRA has issued a complaint against Stanley Clayton Niekras accusing the broker of elder financial abuse. According to the regulator, Niekras allegedly cheated a couple, who are in their nineties and in failing mental and physical health, out of over $70K in financial panning services fees.

Even though Niekras didn’t have an investment advisory or financial planning agreement with the elderly couple, he allegedly billed them for hundreds of hours of time that he purportedly spent working on their “financial future” –work that he claimed to have done over four years. The purported elder fraud would have taken place while he worked for MML Investors Services. FINRA said that Niekras charged the couple $250/hr in retroactive compensation. The couple received their bill for these supposed services in 2013.

FINRA contends that Niekras knew that he had no right to the “financial planning fees or the “estate planning” fees he was charging the couple. The self-regulatory organization said that the broker, who had been contending with tax liens, had told MML Investors Services that he could cover the liens because of commissions he was expecting. Niekras purportedly thought that he could sell variable annuities to the children of the older couple, who had gifted them with about $500K in securities and cash each.
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Voya Financial Advisors, Cetera Advisors, and Six Other Broker-Dealers to Pay $12.5M in Fines and Restitution For Allegedly Not Properly Supervising The Sale of L-Share Variable Annuities

Published on: November 2, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is fining eight brokerage firms $6.2M for not supervising the sale of L-share variable annuities to customers. Five of the firms must pay another $6.3M to customers because the variable annuities that they were purchased were potentially not compatible with the latter’s investment goals and accounts.

The firms, and their sanctions, include: Voya Financial Advisors Inc., for $2.75M fine, First Allied Securities, Inc., for $950K fine, VSR Financial Services, for $400K fine, Cetera Financial Specialists LLC, for $350K fine, Cetera Advisors Networks LLC, for $750K fine, Summit Brokerage Services, Inc., for $500K fine, Kestra Investments, for $475K fine, and FTB Advisors, for $250K fine. The firms that have to pay restitution are: Voya, for $1.8M, while first Allied, Cetera Advisors Networks, VSR, and Summit Brokerage Services will collectively pay $4.5M. All the firms are settling, but they are not denying or admitting to any of the alleged claims.

At issue was the sale of the L-share annuities, which are “potentially incompatible, complex and expensive long-term minimum-income and withdrawal riders.” L-share annuities are more likely to pay registered representatives and their firms higher compensation than more traditional instruments.

Securities Cases: Merrill Lynch Ordered to Pay $2.8M for Supervisory And Other Violations, Ernst & Young Agrees to Pay $11.8M for Failed Audits, and Ex-Morgan Stanley Client Administrator is Suspended Over Fraudulent Wire Transfer

Published on: October 20, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Financial Industry Regulatory Authority Fines Merrill Lynch $2.8M

FINRA has fined Merrill Lynch, Pierce, Fenner and Smith Inc. $2.8 million. By settling, the firm is not denying or admitting to the self-regulatory organization’s charges.

FINRA said because of system errors, Merrill Lynch inaccurately reported millions of trades. The regulator said that Merrill Lynch’s supervisory system as it relates to specific matters related to documenting, reporting, and records was not designed in a reasonable manner.

Ernst & Young Settles Audit Failure Charges By Agreeing to Pay Over $11.8M

Ernst & Young LLP has agreed to resolve U.S. Securities and Exchange Commission charges accusing it of audit failures. The monetary settlement, along with the $140M penalty that audit client Weatherford International agreed to pay separately, will go back to investors who were hurt in the accounting fraud.

FINRA Actions: Former UBS Broker Is Barred for Overvaluing Customer’s Account by Up to $3M, Ex-Broker Allegedly Stole $400K From Parents, Wells Fargo Adviser is Suspended After Client is Victimized in Phishing Scam, and Former Stifel Broker is Accused of Unauthorized Payments

Published on: October 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ex-UBS Broker is Accused of Inflating Customer’s Account

The Financial Industry Regulatory Authority has barred Jeffrey Hamilton Howell from the broker-dealer industry. The former broker is accused of giving a customer bogus weekly account statements that overvalued an account by up to $3M. The alleged misconduct is said to have occurred between 9/2008 and 11/2014.

According to FINRA, Howell sent the customer over 300 Stock Tracking Reports that misstated the client’s portfolio in amounts ranging from $289K to approximately $3M. He purportedly used his personal e-mail to send the customer some of the fake reports. This left UBS with records and books that were not accurate.

Texas Securities Cases: IMS Securities to Pay $100K Over Variable Annuity Exchanges, State Regulator Bans Broker from Making Nontraded REIT Recommendations, and Former Dallas Billionaire Sam Wyly to Pay $198M To Settle Fraud Case

Published on: October 10, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Texas-Based Brokerage Firm Accused of Inadequate Supervision Involving VA Exchanges

The Financial Industry Regulatory Authority is ordering IMS Securities Inc. to pay a $100K fine. The Texas-based brokerage firm is accused of failures related to its monitoring of variable annuity exchanges. By settling, however, it is not denying or admitting to the allegations.

According to the self-regulatory authority, the firm exhibited inadequate supervisory procedures for “problematic rates of exchange” in transactions involving variable annuities. FINRA claims that from 7/ 15/13 through 7/8/14, IMS Securities depended on its CFO to review annuity exchanges but did not provide tools or guidance to help look for “problematic rates of exchange.” The broker-dealer is accused of not probing possibly “problematic patterns” of VA exchanges and not enforcing written supervisory procedures related to consolidated reports.

Investors Capital To Pay $1.1M Over UIT Sales

Published on: October 7, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A Cetera Financial Group network brokerage firm will pay $1.1M in fines and restitution related to its sale of unit investment trusts. The broker-dealer is Investors Capital Corp.

According to the Financial Industry Regulatory Authority, in 74 clients’ accounts, certain advisers recommended steepener notes, as well as short-term trading of UITs that were not suitable for these investors. Investors Capital is also accused of not applying discounts when applicable to certain UIT purchases.

The regulator claims that two representatives at Investors Capital recommended these unsuitable short-term UIT transactions between 6/2010 and 9/2015.

Securities Cases: Hawaii-Based Investment Adviser is Accused of Cherry-Picking Trades, Broker Ordered to Pay $600K for Elder Financial Fraud, and FINRA Bars Ex-Axa Advisors Broker

Published on: October 6, 2016 | by Shepherd Smith Edwards & Kantas, LLP

SEC Charges Hawaii-Based Investment Adviser for Misleading Clients and Cherry Picking

The U.S. Securities and Exchange Commission has filed civil charges against Oracle Investment Research, which is based in Hawaii, and its owner Laurence I. Balter. The regulator claims that the investment adviser cherry picked trades that were profitable for his own accounts. He is also accused is misleading clients, including senior citizens, about the risks involved in the investments he recommended, as well as about the fees they would be charged.

According to the SEC Enforcement Division, Balter and Oracle Investment Research bought options and equities in an omnibus account but waited to distribute the trades until their execution. Then, he would allegedly move the profitable trades into his accounts and the unprofitable ones to the accounts of clients.