Friday, May 16, 2014

FINRA Enforcement Actions: Month in Review

APRIL 2014 SELECTED FINRA ENFORCEMENT ACTIONS

FIRMS FINED

The Huntington Investment Company (CRD #16986, Columbus, Ohio)


The Huntington Investment Company consented to a $25,000 fine and censure. The firm consented to an entry of "findings that it failed to provide notice to the MSRB via the Electronic Municipal Market Access System (EMMA) that no preliminary official statements or official statements were to be prepared for bond anticipation note offerings in which the firm participated." Furthermore, it was found that the firm allegedly "engaged in advance refund offerings, and failed to file advance refunding documents with the MSRB via EMMA in each of the three advance refunding offerings in which the firm participated as the sole or senior underwriter." Finally, the firm was also found to allegedly fail "to disclose four political contributions by a non-municipal finance professional (MFP) executive at the firm had made."

Stifel, Nicolaus & Company, Incorporated (CRD #793, St. Louis, Missouri)

Stifel, Nicolaus & Company, Inc consented to a $22,500 fine and censure. The firm consented to an entry of "findings that it effected transactions in securities while a trading halt was in effect with respect to each of the securities."

Tejas Securities Group, Inc. (CRD #36705, Austin, Texas)

Tejas Securities Group, Inc consented to a $73,000 fine, censure, and order to pay $22,333 plus interest in restitution to customers. The firm consented to an entry of findings that "it sold (bought) corporate bonds to (from) customers and failed to sell (buy) such bonds at a price that was fair." The firm also allegedly "failed to report transactions in TRACE-eligible securities to TRACE within 15 minutes of the time of execution, failed to report the correct trade execution time for transactions in TRACE-eligible securities, and failed to show the correct execution time on memoranda of brokerage orders."

FINRA Fines Brown Brothers Harriman a Record $8 Million for Substantial Anti-Money Laundering Compliance Failures

FINRA fined Brown Brothers Harriman & Co "$8 million for substantial anti-money laundering compliance failures including, among other related violations, its failure to have an adequate anti-money laundering program in place to monitor and detect suspicious penny stock transactions." According to FINRA's complaint, "BBH executed transactions or delivered securities involving at least six billion shares of penny stocks, many on behalf of undisclosed customers of foreign banks in known bank secrecy havens" despite the fact that "it was unable to obtain information essential to verify that the stocks were free trading." Additionally, FINRA found that "although BBH was aware that customers were depositing and selling large blocks of penny stocks, it failed to ensure that its supervisory reviews were adequate to determine whether the securities were part of an illegal unregistered distribution." BBH and BBH's former Global AML Compliance Officer Harold Crawford " neither admitted nor denied the charges, but consented to the entry of FINRA’s findings."

FINRA Fines Berthel Fisher and Affiliate, Securities Management & Research, $775,000 for Supervisory Failures Related to Sales of Non-Traded REITs and Leveraged and Inverse ETFs

FINRA fined Berthel Fisher & Company Financial Services, Inc. and its affiliate, Securities Management & Research, Inc., "a combined $775,000 for supervisory deficiencies, including Berthel Fisher’s failure to supervise the sale of non-traded real estate investment trusts, and leveraged and inverse exchange-traded funds." According to FINRA's Executive Vice President of Enforcement, Brad Bennett, "“Berthel’s supervision of the sales of non-traded REITs, inverse ETFs and other products fell short..., as it failed to ensure that its registered representatives understood the unique features and risks of these products before presenting them to retail clients." FINRA found that " from April 2009 to April 2012, Berthel Fisher did not have a reasonable basis for certain sales of leveraged and inverse ETF" and the firm had not "adequately research[ed] or review[ed] non-traditional ETFs before allowing its registered representatives to recommend them to customers, and failed to provide training to its sales force regarding these products." Berthel Fisher and Securities Management & Research "neither admitted nor denied the charges, but consented to the entry of FINRA's findings."

INDIVIDUALS BARRED

Richard Hans Bach (CRD #1011097, Registered Principal, Mohawk, New York)

Richard Hans Bach has been barred from association with any FINRA member in any capacity for allegedly causing "his member firm to violate the Net Capital Rule by conducting a securities business while it had insufficient net capital."

Stefani Ann Bennett (CRD #5890347, Registered Representative, Salmon, Idaho) 

Stefani Ann Bennett has been barred from association with any FINRA member in any capacity for allegedly withdrawing $100,000 "in cashier’s checks and cash from [her] customer’s estate checking account at her member firm’s sister bank affiliate" and then converting "the $100,000 for her own use and benefit."

William Bradford Coolidge (CRD #1636957, Registered Representative, Cordova, Tennessee)

William Bradford Coolidge "submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity" for allegedly effecting " trades in elderly customers’ accounts without obtaining the customers’ prior written authorization and without his member firm’s acceptance of the accounts as discretionary." It was found that "[g]iven the customers’ age, investment objectives, and risk profile or annual income, Coolidge’s recommendations were not suitable and were inconsistent with their account objectives" and the customers ultimately incurred losses of almost $200,000.

Florlena Cortez (CRD #4339441, Registered Principal, El Paso, Texas)

Florlena Cortez has been barred from association with any FINRA member in any capacity  for allegedly "participat[ing] in private securities transactions by soliciting customers to invest in securities that were outside the regular course and scope of her association with her member firm."

Harold Lavern DePrill Jr. (CRD #1302318, Registered Principal, Johns Island, South Carolina) 

Harold Laverb DePrill Jr. has been barred from association with any FINRA member in any capacity for failing to appear "for FINRA-requested testimony."

Richard David Jameison Jr. (CRD #2567029, Registered Principal, Devon, Pennsylvania)

Richard David Jameison Jr. has been barred from associating with any FINRA member in any capacity for allegedly converting "$150,000 from an acquaintance who was not his member firm’s customer." While Jameison told the acquaintance that he would invest the funds in an enterprise, in reality "Jameison never invested any of the investor’s funds and converted the bulk of the funds for his own use and benefit." When the acquaintance asked for the funds to be returned, Jameison wrote checks drawn against accounts "that he maintained with his wife." The accounts contained insufficient funds, so the checks were dishonored. "Jameison’s firm terminated his employment, and the acquaintance and his wife filed a lawsuit against Jameison. Jameison paid the acquaintance and his wife $165,000."

Gregg N. Nussbaum (CRD #2020751, Registered Representative, Deerfield, Florida)

Gregg N. Nussbaum has been barred from associating with any FINRA member in any capacity for "intentionally exceeded his trading authority" as a "a proprietary trader for his member firm."

Richard Martin Ohlhaber (CRD #2154794, Registered Principal, Keller, Texas)

Richard Martin Ohlhaber has submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity for participating "in the sale of life settlement contracts offered by a company...without providing written notice of his involvement in the sales of the life settlement contracts to either of his FINRA member firms, and never obtain[ing] either firm’s permission to engage in such outside business activity."

Allen Hugo Reichman (CRD #1002285, Registered Representative, Irvington, New York)

Allen Hugo Reichman has submitted a Letter of Acceptance, Waiver and Consent in which he has been barred from association with any FINRA member in any capacity for failing "to appear for FINRA-requested testimony."

Timothy Burke Ruggiero (CRD #2119642, Registered Principal, Plantation, Florida)

Timothy Burke Ruggiero has been barred from associating with any FINRA member in any capacity for allegedly engaging in "intentional stock price manipulation" and for failing to prevent the manipulation" in his roles as his "member firm’s President and Chief Executive Officer."

Mark Raymond Talley (CRD #4969783, Registered Representative, Ft. Mitchell, Kentucky)

Mark Raymond Talley has been barred from associating with any FINRA member in any capacity for allegedly giving a customer false information when "recommend[ing] that his customer replace an existing variable annuity with a new variable annuity."

Robert Durant Tucker (CRD #1725356, Registered Representative, New York, New York)

Robert Durant Tucker has been barred from associating with any FINRA member in any capacity because he allegedly "approved the transfer of customer funds to his personal checking account by falsifying a wire transfer form to give the appearance that he was a manager at his firm, and then converted those funds for his personal use."

Linda Whitmore (CRD #2855540, Associated Person, Brown Deer, Wisconsin)

Linda Whitmore has been barred from associating with any FINRA member in any capacity because she and her manager allegedly "manipulated their member firm’s payroll system and caused payments to be made to them to which they were not entitled."

Pamela Anne Wooten (CRD #1313028, Registered Principal, Beaufort, South Carolina)

Pamela Anne Wooten has been barred from associating with any FINRA member in any capacity for allegedly failing "to appear for investigative on-the-record testimony to obtain information concerning certain transactions she executed between her member firm and one of its customers."

Michael Anthony Zolondek (CRD #2513409, Registered Principal, Mauston, Wisconsin) 

Michael Anthony Zolondek has been barred from associating with any FINRA member in any capacity for allegedly assisting employees and contractors to cheat on Life Underwriting Training Council courses that he moderated.

John Joseph Misulia (CRD #5330650, Associated Person, New York, New York) 

John Joseph Misulia has been barred from associating with any FINRA member in any capacity for converting a "total of $5,683.31 from his member firm when he charged personal expenses on a corporate credit card the firm had issued him."

COMPLAINTS FILED

NSM Securities, Inc. (CRD #134357, West Palm Beach, Florida), Niyukt Raghu Bhasin (CRD #2282048, Registered Principal, Wellington, Florida), Shondeep Sajan Balchandani (CRD #5165930, Registered Representative, West Palm Beach, Florida) and Naveen K. Bhagwani (CRD #5423037, Registered Representative, West Palm Beach, Florida)

NSM Securities, Inc. , Niyukt Raghu Bhasin, Shondeep Sajan Balchandani and Naveen K. Bhagwani were named respondents in a FINRA complaint "alleging that the firm, acting through and at the direction of its founder, owner, President, and CEO Bhasin, derived most of its revenue from actively and aggressively trading stocks in the commission-based accounts of its retail customers." According to the complaint, "Bhasin prioritized his firm’s profits over the duties owed to its customers and chose not to establish a supervisory system tailored to the firm’s business." As a result of the "grossly inadequate supervisory system Bhasin established, many firm customers suffered significant losses."


FINRA's April 2014 enforcement actions in full are available here (PDF). 

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