FINRA takes disciplinary actions against firms and individuals for violations of FINRA rules; federal securities laws, rules, and regulations; and the rules of the Municipal Securities Rulemaking Board. Below are a number of penalties announced by the regulator in January 2017. If you have been a victim of any of the below behavior, you may have legal recourse. Please contact attorney Richard Frankowski today at 888-741-7503 for a free consultation.
FINRA censured and fined VFG Securities, Inc. of Culver City, California $50,000, $10,000 of which is joint and several with Jason Bryce Vanclef. According to FINRA, the firm and Vanclef distributed and listed for sale online Vanclef’s self-published book, which contained, false, exaggerated, unwarranted, or misleading statements, and omitted material facts or qualifications where the omissions caused the communication to be misleading. The findings also state they provided customers with misleading personalized recommendation spreadsheets.
Advisors Clearing Network, Inc. of Pasadena, California was also censured and fined $50,000. FINRA found that it it failed to deliver quarterly account statements to each of the firm’s retirement plan customers as a result of technology and data transmission issues encountered between the firm’s recordkeeping affiliate and an outside vendor. The findings stated that the firm never obtained the written consent of its retirement plan customers to suspend delivery of account statements, and never advised the retirement plan customers that the quarterly account statements had not and would not be delivered while it resolved the technical difficulties it experienced.
Davenport & Company LLC of Richmond, Virginia was censured, fined $15,000, and required to revise its written supervisory procedures (WSPs).FINRA found that it failed to transmit Reportable Order Events (ROEs) to OATS. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to certain applicable securities laws and regulations, and/or FINRA rules. The firm’s WSPs failed to provide for one or more of the minimum requirements for adequate WSPs regarding OATS reporting.
D.H. Hill Securities, LLLP of Kingwood, Texas was censured, fined $30,000 and required to retain an independent consultant, not unacceptable to FINRA, to conduct a comprehensive review of the adequacy of firm’s policies, systems and procedures (written and otherwise), and training relating to participation as dealer manager or managing underwriter in securities offerings. FINRA found that when it replaced a prior dealer manager of a real estate investment trust (REIT) offering, the firm failed to seek or obtain authorization from FINRA to proceed with the offering. The findings stated that instead, the firm improperly relied on a prior “no objections” opinion issued to the predecessor manager, although the firm was not a party to the terms and arrangements approved by that opinion. Moreover, the “no objections” notification to the predecessor dealer manager specifically required that any amendments to the agreement be filed with FINRA. The findings also stated that the firm failed to comply with the requirements of FINRA Rule 5110 by not promptly filing required documents when the REIT initiated a follow-on offering. The REIT filed a Form S-11 for the follow-on offering to the initial offering, which identified the firm as the dealer manager for the offering and indicated that the firm was sent a copy of the Form S-11. Although the FINRA rule requires the filing of certain materials with FINRA within one business day of the submission of certain filings to the SEC, the firm failed to make any filings with FINRA until approximately six months later.
1st Discount Brokerage, Inc. of Lake Worth, Florida was censured, fined $50,000 and required to pay $39,060.18, plus interest, in restitution to customers. FINRA found that it failed to establish, maintain, and enforce a reasonably-designed supervisory system and WSPs regarding the sales of leveraged, inverse and inverse leveraged exchange-traded funds (non-traditional ETFs). The findings stated that the firm did not have WSPs addressing the suitability and supervision of nontraditional ETFs. The firm’s WSPs did not provide any guidance to supervisors to assist them in reviewing non-traditional ETF transactions in light of the unique features and risks of these products, including the daily reset and leverage features.In addition, the firm did not have a system that enabled principals to readily identify non-traditional ETF transactions for review. The firm failed to provide non-traditional ETF training to representatives and their supervisors, and did not have a supervisory system, such as the use of exception reports, to monitor holding periods for non-traditional ETFs.
First Southern Securities, LLC. of Alpharetta, Georgia was censured, fined $25,000, and must offer rescission to their customers who executed transactions at either the original purchase price or the current fair market value, whichever is higher. FINRA found that it effected municipal bond transactions in amounts below the minimum denomination set for the bonds being sold. The findings stated that the firm failed to disclose to customers at trade time that the transaction amount being effected was below the minimum denomination. The findings also stated that the firm failed to establish and maintain a supervisory system; failed to establish, maintain and enforce WSPs prohibiting the sale of municipal securities to customers below the minimum denomination; and failed to have any systems or controls in place to monitor and prohibit sales below the minimum denomination.
Hilltop Securities Inc. of Dallas, Texas was censured and fined $10,000. FINRA found that for each of the four calendar quarters of 2015, it made publicly available a report on its routing of non-directed orders in covered securities during those quarters. The findings stated that in these reports, the firm failed to disclose the material aspects of its relationship with its significant execution venues as it pertains to payment for order flow arrangements. The firm is required to describe the material terms of the arrangements, such as any amounts per share or per order that the firm receives.
Mischler Financial Group, Inc. of Corona Del Mar, California was censured and fined $10,000. FINRA found that it failed to report transactions in TRACE-eligible securitized products to TRACE within the time required by FINRA Rule 6730(a).
VFinance Investments, Inc. of Boca Raton, Florida was censured, fined $17,500, and required to revise its WSPs. FINRA found that it failed to transmit ROEs to OATS. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations, and FINRA rules. The firm’s WSPs failed to provide for one or more of the minimum requirements for adequate WSPs for OATS reporting.
H.D. Vest Investment Services, Inc. of Irving, Texas was censured and required to provide FINRA with a remediation plan to remediate eligible customers who qualified for, but did not receive, the applicable mutual fund sales charge waiver. As part of this settlement, the firm agrees to pay restitution to eligible customers, which is estimated to total $261,905 (the amount eligible customers were overcharged, inclusive of interest). Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge. The findings stated that these eligible customers were instead sold Class A shares with a front-end sales charge, or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. These sales disadvantaged eligible customers by causing such customers to pay higher fees than they were actually required to pay.
Paul McLellan Alexander Jr. of Jupiter, Florida was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for 20 business days. FINRA found that in contravention of his member firm’s policies and procedures, he effected transactions while exercising discretion without prior written authorization in customer accounts and without his firm accepting the accounts as discretionary.
Clifford Eugene Amos of Thomasville, Alabama was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for three months. FINRA found that he photocopied previously signed forms, altered the forms and submitted the forms as authentic to his member firm or to other entities. The findings stated that these reused forms included his firm’s distribution/withdrawal request forms, new account applications, variable annuity applications, exchange forms and notices. Amos obscured and altered pertinent information and submitted the reused forms with non-original signatures as originals to his firm. Amos submitted the forms to his firm with the non-original signatures for the convenience of the respective customers. However, Amos’ alteration of information, the reuse of customer signatures, and the submission of the altered forms as originals to his firm or to other entities caused his firm to maintain inaccurate books and records, and violated the firm’s WSPs.
Cynthia Robin Bolker of Del Mar, California was barred from association with any FINRA member in any capacity. FINRA found that she borrowed at least $745,800 from individuals, two of whom were customers at her member firm, to pay for her personal expenses. The findings stated that Bolker did not disclose to her firm that she borrowed from the customers, though she understood that the firm’s policies and procedures prohibited borrowing from customers. The findings also stated that Bolker’s firm began an internal investigation into her borrowing activity. During an interview with the firm, Bolker provided false and misleading information, including denying that she borrowed from any firm customers. Subsequently, on several occasions during the internal investigation, Bolker falsely denied that she had borrowed from any customers of the firm. Bolker knew these statements were false when she made them. The findings also included that Bolker provided a false, misleading, and incomplete response to FINRA’s request for documents and information as part of an investigation into her borrowing activity.
Anthony Joseph Cacaro of Memphis, Tennessee was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for six months. FINRA found that he willfully failed to update his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose that he had been charged with a felony.
Stuart Graham Dickinson of Highland Park, Texas was barred from association with any FINRA member in any capacity and required to pay $924,000, plus interest, in restitution to customers. FINRA found that Dickinson sold securities without reasonable grounds for believing that the investment was suitable for any investor. The findings stated that Dickinson sold more than $1 million of limited partnership interests in a company whose purported business was to acquire and operate automated teller machines (ATMs) to seven customers while he was associated with his member firm. The company did not own any ATMs. Dickinson’s firm permitted him to sell interests in the company as private securities transactions. Dickinson recommended the securities without first conducting adequate and reasonable due diligence on the company. Dickinson failed to verify or confirm information he obtained from interested parties, and failed to detect multiple red-flag warnings that the company was a fraudulent Ponzi scheme. As a result, the customers lost their entire investments. If Dickinson had conducted a reasonable investigation, he would have recognized red flags indicating that the offering was fraudulent and thus unsuitable for any investors regardless of their wealth, risk tolerance, age or other individual characteristics.
James Luis Fonseca of Miramar, Florida was barred from association with any FINRA member in any capacity. FINRA found that he accepted $25,000 from an individual he was soliciting to become a customer of his member firm, who agreed to invest in a day-trading endeavor with Fonseca. The findings stated that Fonseca deposited and comingled the individual’s funds in a bank account controlled by Fonseca and his wife. Fonseca then converted some of those funds at a time when the individual was a customer. The findings also stated that Fonseca failed to appear for FINRA on-the-record testimony and failed to provide FINRA with requested information in connection with its investigation into whether he comingled and converted customer funds.
Richard Lynn Hollan of Houston, Texas was fined $5,000 and suspended from association with any FINRA member in any capacity for one month. FINRA found that he mismarked order tickets in customers’ accounts as unsolicited orders when, in fact, the trades were solicited, causing his member firm to maintain inaccurate book and records.
John Stuart Hudnall of Pacifica, California was barred from association with any FINRA member in any capacity. FINRA found that he participated in an undisclosed and unapproved private securities transaction. The findings stated that Hudnall recommended and sold a REIT investment to an elderly customer, which he split into two simultaneous transactions of $40,000 and $360,000. To circumvent his member firm’s supervisory review of such a large transaction of this kind, Hudnall executed the $360,000 portion of the REIT investment for the customer directly with the REIT sponsor and without first providing it to the firm for the requisite prior preapproval and prior written notice. The $400,000 REIT investment exceeded the firm’s supervisory thresholds and, if fully disclosed to the firm, would have triggered additional supervisory review and likely would have not been approved. Hudnall generated a gross commission of $25,200 in connection with the $360,000 portion of the REIT investment.
Carnell Moore of Tampa, Florida was fined $5,000 and suspended from association with any FINRA member in any capacity for 30 days. FINRA found that he engaged in an outside business activity without providing prior written notice to his member firm. The findings stated that Moore continued to disclose a company that he requested and received the firm’s approval to participate in as an outside business activity after another company became that company’s successor corporation, and he failed to disclose the company’s successor as an outside business activity via the firm’s electronic outside business interest reporting system. Moore also failed to disclose the company’s successor as an outside business activity on compliance questionnaires that he submitted to the firm. Moore misrepresented on the questionnaires that he had no such outside business activities or interests.
Shannon Lynn Parkoff-Moskoff of Boca Raton, Florida was barred from association with any FINRA member in any capacity. FINRA found that she accessed another registered representative’s credit card account and, without his authorization, converted credit card awards points earned on the the registered representative’s business account for her own use by using those awards points to purchase goods worth $4,763 for herself.
Thomas Jackson Phillips Jr. of Austin, Texas was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for two months. FINRA found that he willfully failed to timely disclose a felony charge on his Form U4. The findings stated that Phillips made a false attestation to his member firm on an annual compliance questionnaire in which he failed to disclose the felony charge.
Seila Phlong of Atlanta, Georgia was fined $5,000, suspended from association with any FINRA member in any principal capacity for three months, and required to requalify as a Municipal Securities Principal (Series 53), General Securities Sales Supervisor (Series 9), and/or Registered Options Principal (Series 4) prior to reassociation with any FINRA member firm in that capacity. FINRA found that as his member firm’s designated principal for review and approval of trading, despite a lack of prior supervisory experience, Phlong failed to establish, maintain, and enforce supervisory systems and procedures reasonably designed to provide for the proper review and approval of daily orders. The findings stated that the firm’s CCO did not give him any instructions as to his duties, Phlong did not read the firm’s WSPs, and he was unaware of what his role or responsibilities as a principal were. Although he was required to do so by the firm’s WSPs, Phlong failed to conduct any principal review or approval of the firm’s order tickets or daily trade blotters from his designation as principal until the firm ceased trading.
Jennifer Lynn Steele of Pinellas Park, Florida was fined $5,000 and suspended from association with any FINRA member in any capacity for one month. FINRA found that she failed to provide prior written notice to, and receive approval from, her member firm of an outside business activity for which she was the sole owner and managing member, and from which she had a reasonable expectation of compensation. The findings stated that the outside business activity was a limited liability corporation that had been formed for tax- and asset-protection purposes, and Steele received a salary and distributions from the outside business. The firm’s WSPs required registered representatives to provide prior written notice to the firm and to receive the firm’s approval for all outside business activities.
Grant P. Talbert of Lexington Kentucky was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for three months. Without admitting or denying the findings, Talbert consented to the sanctions and to the entry of findings that he engaged in an outside business activity without providing appropriate prior notice to his member firm. The findings stated that Talbert entered into a solicitor’s agreement with a registered investment advisory firm in which he earned a percentage of the advisory fees collected from referred clients.
Karen Tucker of El Paso, Texas was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for six months. FINRA found that she was associated with a member firm despite being subject to statutory disqualification. The findings stated that while associated with the firm, Tucker was arrested and then charged with certain drug-related felonies. Tucker pled guilty to one felony count and was sentenced. As a result of Tucker’s felony conviction, she became subject to statutory disqualification from association with a FINRA member. Contrary to firm policy, Tucker failed to notify the firm of her arrest, indictment, guilty plea and conviction. By failing to disclose her felony conviction, Tucker caused the firm to remain associated with a person subject to statutory disqualification for more than two years.
Marian Gaye Wahrmund aka Marian Cox of Harper, Texas was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for 45 days. FINRA found that she made false statements in check request forms generated by her member firm’s internal record keeping systems. The findings stated that an imposter posing as a firm customer sent a series of emails to Wahrmund requesting the issuance of third-party checks from the customer’s accounts. Through the firm’s internal systems, Wahrmund requested the issuance of third-party checks payable from the customer’s accounts in the various requested amounts. Wahrmund falsely represented and falsely attested on the request forms that she verbally confirmed the check requests with the customer, when in fact, she had not. In connection with three of the checks, Wahrmund entered the reason for the request as bill/loan payment, although the imposter provided no such reason in the email requests. Following Wahrmund’s entry of the check requests into the firm’s internal system, the firm issued checks payable to the third parties the imposter identified. By making these false statements in the check request forms generated by the firm’s internal record keeping systems, Wahrmund also caused her firm to maintain false books and records.
Bruce Michael Weinstein of Boca Raton, Florida was barred from association with any FINRA member in any capacity. FINRA found that he converted $2,605 of his member firm’s funds by submitting false expense reports and accepting reimbursements from his firm for the ineligible expenses. The findings stated that each of the expense reports submitted falsely represented that Weinstein and multiple customers and potential customers had attended football games using tickets for which Weinstein sought reimbursement. In fact, Weinstein had sold the tickets to third parties, and neither he nor any customers or potential customers had attended the games. By knowingly submitting false expense reports, Weinstein caused his firm to maintain inaccurate books and records.If you or someone you know has lost money as a result of a retirement plan, investment, or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.