FINRA

FINRA Bars Former Raymond James Advisor for Elder Financial Fraud, Charges SWS Over Variable Annuity Supervision

Published on: October 6, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred Jo Ellen Fischer, an Raymond James independent financial advisor, for purportedly stealing nearly $1 million from a 95-year-old client. At the time, Fisher worked for Peoples Bancorp.

According to the self-regulatory organization, from July to December 2013, the Raymond James advisor converted $924,750 from the elderly customer’s trust without permission. She did this by moving funds and securities into a brokerage account under her daughter’s name. Fisher then liquidated securities and used the money to cover her personal spending, including two Rolexes, motor vehicles, a 2-carat diamond ring, and other expenses.

FINRA says that Fisher claimed that the elderly client was her daughter’s godfather and he wanted her to have the money when she was older. The SRO, however, contends that the Raymond James advisor falsified documents regarding this matter. She has agreed to the bar without denying or admitting to the findings alleging elder financial fraud.

SEC Approves FINRA Arbitration Fees, SRO Proposes Rule For CARDS

Published on: September 29, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission has approved a Financial Industry Regulatory Authority Inc. proposal to up the pay for arbitrators. The rule change will increase how much it will cost to file securities arbitration claims, as well as processing fees, surcharge, and hearing session fees for bigger cases.

The changes would only impact claims involving over $250,000, with fees per hearing session going up by $100 to $300 depending on how big the claim. Filing fees would go up 10% to 25%, again depending on the claim’s size.

FINRA has not upped its fees since 1999. Under the proposed rule, arbitrators of these larger cases would get paid $300 for every hearing session, while the chairman would get another $125 a day. With the proposal, the self-regulatory organization would be bringing in $4 million to $5.6 million annually.

SEC News: Regulator to Review Rule Change on New Hire Background Checks, Prepares Mutual Fund Regulations, and is Defendant of Oxfam America Lawsuit

Published on: September 20, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Sends Background Check for New Hires Rule to the SEC

The Financial Industry Regulatory Authority is moving ahead with a rule change that would mandate that broker-dealers do a better job of vetting new hires. The SRO sent a rule to the Securities and Exchange Commission that would obligate brokers to implement written procedures to confirm the accuracy of information provided in an applicant’s U4 form.

Already, firms must review applicants for jobs. However, under the new rule, they would have to look into their public records.

FINRA Bars Ex-Wells Fargo Broker From Industry For Allegedly Bilking Customers, Expels HFP Capital Markets LLC for Securities Fraud

Published on: September 19, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred a former Wells Fargo (WFC) registered representative from the brokerage industry. According to the self-regulatory organization, Ane S. Plate, who previously worked with Wells Fargo Advisors Financial Network in Florida, allegedly made fifteen unauthorized trades in a joint brokerage account of two customers between October 2013 and April 2014. The transactions resulted in $176,080 of cash proceeds, of which Plate is accused of pocketing $132,358.

The former Wells Fargo broker is also accused of setting up bi-weekly transfers from the brokerage account to a bank account that was in the name of one of her relatives. She then allegedly moved $7,700 to that account between December 2013 and May 2014.

Plate, who was working with Wachovia Securities when Wells Fargo acquired that firm, has since been fired after the latter discovered the purported theft. FINRA’s BrokerCheck reports that the customers that were harmed were fully reimbursed for the amount taken from them.

FINRA Fines Minneapolis Broker-Dealer $1M for Inadequate Supervision of Penny Stocks

Published on: September 13, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has issued an enforcement action charging Feltl & Company for not notifying certain customers of the suitability and risks involving certain penny-stock transactions, as well as for failing to issue customer account statements showing each penny stock’s market value. The brokerage firm is based in Minneapolis, Minnesota.

FINRA claims that the firm failed to properly document transactions for securities that temporarily may not have fulfilled the definition of a penny stock and did not properly track penny-stock transactions involving securities that didn’t make a market.

Feltl made a market in nearly twenty penny stocks. The brokerage firm made $2.1 million from at least 2,450 customer transactions that were solicited in 15 penny stocks between 2008 and 2012. The SRO says it isn’t clear how much the firm made from selling penny stocks that it didn’t keep track of but that revenue from this would have been substantial.

FINRA Headlines: SRO Considers Revised Broker Bonus Plan, To Discuss Potential Dark Pool Rules, May Instigate Civil Action Against Wells Fargo, &Warns Investors About Frontier Markets

Published on: September 12, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA to Revive Proposal Mandating that Brokers Disclose Recruitment Incentives

The Financial Industry Regulatory Authority has decided to revive a proposal that would obligate brokers to notify clients of any incentives they received for being recruited by another firm. The self-regulatory organization had withdrawn the rule in June after getting over 180 comment letters.

Now, however, according to the agenda for FINRA’s next board meeting, the SRO intends to look at a revised recruitment practices policy that would make the recruiting firms delineate their compensation packages to clients who are thinking of moving their assets from the a broker’s previous firm to the financial representative’s new firm.

Citigroup Global Markets Fined $1.85M By FINRA, Must Pay $638K Restitution Over Non-Convertible Preferred Securities Transaction Valuations

Published on: August 27, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority says that Citigroup Global Markets Inc. (C) will pay a fine of $1.85 million for not providing best execution in about 22,000 customer transactions of non-convertible preferred securities, as well as for supervisory deficiencies that went on for over three years. Affected customers are to get over $638,000 plus interest.

A firm and its registered persons have to exercise reasonable diligence to make sure that the sale/buying price the customer pays is the most favorable one under market conditions at that time. FINRA says that instead a Citigroup trading desk used a pricing methodology for the securities that failed to properly factor in the securities’ National Best Bid and Offer. Because of this, contends the self-regulatory organization, over 14,800 customer transactions were priced inferior to the NBBO. The SRO also claims that because Citigroup’s BondsDirect system for order execution used a faulty pricing logic, over 7,200 customers transactions were priced at less than NBBO.

FINRA says that Citigroup’s written supervisory procedures and supervisory system related to best execution in these securities were lacking. It claims that the firm did not review customer transactions for the securities at issue, which were either executed manually by the trading desk or on BondsDirect. Such an assessment could have ensured compliance with Citigroup’s best execution duties. (FINRA noted that it had sent the firm inquiry letters about the reviews.)

FINRA Claims Wedbush Securities Engaged in Supervisory and Anti-Money Laundering Violations

Published on: August 26, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has filed a disciplinary complaint against Wedbush Securities Inc. that accuses the firm of violations related to anti-money laundering and systemic supervision. The self-regulatory organization says that from January 2008 through August 2013, Wedbush did not put enough of its resources towards supervisory systems, risk-management controls, and procedures. At the time, the firm was one of the largest market access providers, making millions of dollars from the business.

Because of purported violations, contends FINRA, market-access customers, including non-registered participants, were able to permeate U.S. exchanges and make thousands of trades that could have been manipulative and may have even involved spoofing and manipulative layering. The agency says that even though it was Wedbush’s duty to look out for suspect and possibility manipulative trades, the firm depended mostly on its market access customers to self-report such trading, as well as self-monitor.

FINRA contends that even though Wedbush received notice about the risks involved in its market access business, the firm ‘s supervisory procedures and risk management controls were not reasonably designed to deal with these factors. Wedbush even established incentives for compensation to be based on the value of market customer access trading. FINRA says that Wedbush should have set up, kept up, and enforced satisfactory AML policies and procedures, and it purportedly failed to report suspect transactions.

Securities Regulations News: SEC Looks to Delay Principal Trading Rules, FINRA Adds More Time to REIT Price Changes and 2nd Circuit Says Dodd-Frank’s Whistleblower Protections Don’t Apply Overseas

Published on: August 22, 2014 | by Shepherd Smith Edwards & Kantas, LLP

SEC Wants To Extend Temporary Rule Letting Dually-Registered Advisers Get Principal Trading Consent

For the third time in four years, The Securities and Exchange Commission wants to extend a temporary rule that makes it easier for investment advisers that are also registered as brokers to sell from the proprietary accounts of their firms. The regulator issued for comment its proposal that would move the interim’s rule expiration date to the end of 2016 instead of the end of 2014.

Under the temporary rule, dually registered advisers can either get verbal consent for principal trades on a transaction basis or give written prospective disclosure and authorization, in addition to yearly reports to the clients. With principal trades, a brokerage firm uses its own securities in the transaction.

FINRA Investor Alert Warns About Scams Touting Ebola Cure and Other Viral Disease Stock Schemes

Published on: August 19, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has put out an investor alert warning against buying stocks in companies claiming to combat viral diseases. The self-regulatory organization says it knows of several possible schemes involving stock promotions employing tactics such as pump-and-dump scams to inflate share prices. The scammers will then sell their shares at a profit while leaving investors with shares that have lost their value.

Intensified news coverage of the recent Ebola and Middle East Respiratory Syndrome outbreak will likely have attracted the attention of stock scammers wanting to take advantage of people’s fears. To avoid falling victim to a viral disease stock scam, FINRA is offering several tips, including:

• Be wary of promotional materials, correspondence, and press releases from senders you don’t know. Watch out for communications that say little about the risks involved while only touting the positives. Getting a barrage of information about the same stock opportunities can also be a red flag.