FINRA August 2015 Disciplinary Actions: Part I

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FINRA August 2015 Disciplinary Actions: Part I

Dempsey Lord Smith, LLC and Jerry Eskel Dempsey, Jr. of Rome, Georgia submitted a letter of acceptance, waiver and consent (“AWC”) in which the firm was censured and fined $10,000. Dempsey is joint and severally liable for half of that with the firm. Similarly, Dempsey was fined $10,000, half of which the firm is joint and severally liable for with Dempsey. According to FINRA, the firm through Dempsey, its CEO and Financial and Operations Principal, failed to establish a proper escrow account for the maintenance of investor funds relating to numerous securities offerings, despite the fact the firm participated in all of the offerings and received customer funds. Rather, the firm let investor funds become commingled in lawyer escrow accounts the issuers had set up. Dempsey allegedly sent emails to potential investors in relation to solicitations to sell bonds issued by an affiliate of the firm that had promissory statements that were not fair and balanced. The firm also failed to enforce its written supervisory procedures in relation to the establishment of escrow accounts and advertising rules. It also failed to ensure that a proper escrow account was established for three contingent offerings and failed to ensure that all its representatives’ communications complied with FINRA’s advertising rules.

Atlas One Financial Group, LLC of Miami, Florida submitted an AWC that fined the firm $25,000. According to FINRA, Atlas failed to report transactions in TRACE-eligible securitized products to TRACE within the required time.

Beta Capital Management, L.P. of Miami, Florida submitted an AWC that fined the firm $7,500. According to FINRA, Beta failed to report S1 transactions in Trace-eligible corporate debt securities to TRACE within 15 minutes of the execution time.

Cobra Trading, Inc. of Plano, Texas submitted an AWC that fined the firm $32,500 and mandated that it revise its written supervisory procedures. According to FINRA, the firm performed short sale orders and failed to adequately identify them as short. On numerous occasions, Cobra received a short sale order in an equity security from another person or effected a short sale in an equity security for its own account without borrowing the security, entering into a bona-fide arrangement to borrow the security, having reasonable grounds to think that the security could be borrowed so that it could be delivered on the date delivery is due, and reporting compliance with SEC Rule 203(b)(1) of Regulation SHO. FINRA’s findings also show that the firm’s supervisory system did not provide supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations concerning the firm’s compliance with SEC Rules 200(g) and 203(b)(1) of Regulation SHO.

Merrimac Corporate Securities, Inc. of Altamonte Springs, Florida stipulated to a $100,000 fine and was mandated to keep an independent consultant to review its policies, systems, and procedures, as well as training pertaining to outside business activities and private securities transactions, and adopt and implement the independent consultant’s recommendations. The National Adjudicatory Council upheld the penalties after the firm appealed the decision, asserting that the firm lacked the ability to pay the stipulated fine. The penalties were predicated on FINRA’s findings that the firm failed to establish, maintain and enforce reasonable written supervisory procedures, and failed to reasonably supervise the outside business activities and private securities transactions of two registered representatives who have since been banned from the industry.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.

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