Securities Lawyer Blog | Victim of Fraud?

TAG | failure to maintain supervisory system by brokerage

Apr/12

26

Clearwater, FL, Rep Barred by FINRA

Comments off · Posted by Securities Lawyer in FINRA

The following information is from FINRA’s website under “Disciplinary Actions, April, 2012:”
 

James Landon Yarbrough (CRD #703889, Registered Representative, Clearwater, Florida)

was barred from association with any FINRA member in any capacity. The Hearing Officer did not order restitution because FINRA’s Department of Enforcement represented that the customer has been made whole by the customer’s estate entering into a settlement agreement with Yarbrough. The sanction was based on findings that Yarbrough borrowed $45,000 from a firm customer although his member firm’s WSPs prohibited registered representatives from borrowing money from customers unless the customer was an immediate family member or a financial institution; Yarbrough had not requested nor received his firm’s permission to borrow money from the customer.

These findings stated that Yarbrough repaid the customer’s estate $5,000 of the $45,000. The findings also stated that Yarbrough failed to appear for an on-the-record interview, impeding FINRA’s investigation and preventing FINRA from completing its regulatory responsibility to fully investigate potential rule violations.

(FINRA Case #2010022751101)

 

The information from FINRA’s website has ended. 

 

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

· · · · · · · · · · · · · · · · · · · · · ·

Apr/12

24

FINRA Sanctions Brokerage and Brokers

Comments off · Posted by Securities Lawyer in FINRA

The following information is from FINRA’s website under “Disciplinary Actions, April, 2012:”

Headwaters BD, LLC (CRD #117042, Denver, Colorado),

Paul Edward Janson (CRD #4992234, Registered Principal, Avon, Connecticut),

Roberta Ann Laraway (CRD #4845302, Registered Principal, Lone Tree, Colorado) and

Philip Williams Seefried Jr. (CRD #1747086, Registered Principal, Denver Colorado)

submitted an Offer of Settlement in which the firm was censured and fined $60,000, of which $40,000 was jointly and severally with Janson, Laraway and Seefried. Janson was also suspended from association with any FINRA member in a General Securities Principal (Series 24) capacity for one year. Laraway was also suspended from association with any FINRA member in an Operations Professional (Series 99) capacity for one year and Seefried was suspended from association with any FINRA member in any General Securities Principal (Series 24) capacity for one month.

Without admitting or denying the allegations, the firm, Janson, Laraway and Seefried consented to the described sanctions and to the entry of findings that the firm, acting through Laraway and Seefried, created false and misleading annual chief executive officer (CEO) certifications and that the firm, acting through Laraway and Janson, created false and misleading 3013 reports in response to FINRA’s request for the documents during a routine examination. The findings stated that the firm provided FINRA with two annual CEO certifications during the examination instead of the required four, but Laraway later emailed two CEO certifications to FINRA, which were backdated and had been provided to FINRA to cause FINRA staff to conclude that the firm was in compliance with the annual certification requirement. The findings also stated that the firm was unable to evidence that it conducted certain branch office inspections during the examination but later, Laraway emailed FINRA inspection reports that were prepared after the fact and backdated.

These findings also included that the firm, by failing to create branch office inspection reports at or about the time of the inspections, failed to retain the reports for much of the threeyear period for which NASD Rule 3010(c)(2) requires retention.

FINRA found that the firm failed to prepare or provide Rule 3013/3130 reports and Rule 3012 reports to the CEO or anyone else in a senior position for four years. FINRA also found that the firm did not have distinct and clearly identifiable written supervisory control procedures; did not have procedures setting forth how the firm would review and supervise for the identification of producing managers, the supervision of producing manager accounts or detail how the firm would ensure that none of its managers were producing managers; did not have procedures addressing heightened supervision of producing managers’ activities; lacked procedures concerning how the firm would supervise the transmittal of customer funds and securities, customer changes of address, customer changes in investment objective, including confirmation, notification or follow-up that can be documented, or for ensuring that the firm did not engage in businesses to which the Rule 3012 provision applies; and procedures addressing CEO annual certifications in sufficient detail were deficient.

FINRA determined that the firm had not conducted an anti-money laundering (AML) test since it became a member firm until FINRA filed a complaint, which was a period of almost 10 years.

Janson’s suspension is in effect from March 19, 2012, through March 18, 2013. Laraway’s suspension is in effect from March 19, 2012, through March 18, 2013. Seefried’s suspension will be in effect from March 25, 2013, through April 24, 2013.

 (FINRA Case #2010020941501)

The information from FINRA’s website has ended.
 
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
For a free consultation with an attorney, please call 888-760-6552, or visit our website at: www.securitieslawyer.com.

 

· · · · · · · · · · · · · · · · · · · · · · · · ·

Apr/12

24

Broker and Firm Sanctioned and Fined by FINRA

Comments off · Posted by Securities Lawyer in FINRA

The following information is from FINRA’s website under “Disciplinary Actions, April, 2012:”
 

Cantone Research Inc. (CRD® #26314, Tinton Falls, New Jersey) and Christine L. Cantone (CRD #2687618, Registered Principal, Thompson, Pennsylvania)

 

submitted an Offer of Settlement in which the firm was censured, fined $25,000, $10,000 of which was jointly and severally with Christine Cantone, and ordered to pay a total amount of $200,000 in partial restitution to customers, jointly and severally with Christine Cantone. Christine Cantone was suspended from association with any FINRA member in any principal capacity for three months.

Without admitting or denying the allegations, the firm and Christine Cantone consented to the described sanctions and to the entry of findings that Christine Cantone, as the firm’s vice president and chief compliance officer (CCO), failed to reasonably supervise a registered representative who was able to continue engaging in a scheme through which he sold fictitious investments to firm customers and misappropriated more than $1.6 million of their funds. Throughout the time of the registered representative’s association with the firm, Christine Cantone was aware of certain “red flags” that should have alerted her to the misconduct but failed to reasonably follow up on those indications of possible misconduct.

These findings stated that Christine Cantone was responsible for enforcing the firm’s procedures regarding the monitoring and review of employee transactions in outside accounts, and for reviewing incoming and outgoing paper and electronic correspondence for the firm’s registered representatives. The findings also stated that upon the registered representative’s association with the firm, he disclosed an account at another member firm. Christine Cantone asked him to transfer the account to the firm and he objected, citing several reasons, including that he needed to pay certain bills from the account.

Christine Cantone acquiesced and permitted the registered representative to retain his account at the other member firm. The findings also included that Christine Cantone regularly reviewed statements from the account, which alerted her to unusually large deposits in the account. Concerned that the registered representative might be engaging in outside business activities or private securities transactions, Christine Cantone questioned him about the origin of the funds but accepted the registered representative’s explanation that the deposits were related to real estate sales or to his relative’s supposed antique business, and did not request supporting documentation or make any other efforts to verify those representations.

 FINRA found that even when presented with direct evidence of the registered representative’s deposit of customer funds into the account, Christine Cantone continued to rely on his unverified representations. As a result of Christine Cantone’s failure to supervise the representative, he was able to continue his misappropriation scheme unabated while registered at the firm. FINRA also found that although the firm had general procedures requiring the disclosure of outside brokerage accounts, the provision of duplicate statements for those accounts and the questioning of registered representatives about suspect transactions in those accounts, the written supervisory procedures (WSPs) lacked specific requirements, and the firm otherwise failed to provide for reasonable follow-up or review of such suspect transactions, such as requesting documentation on questionable transactions, comparing deposit activity in the outside accounts to withdrawal activity in customer accounts, or speaking with customers. As a result, the firm failed to establish and maintain a supervisory system and establish, maintain and enforce WSPs reasonably designed to achieve compliance with applicable securities laws and regulations with regard to monitoring the activity of its registered representatives in outside brokerage accounts.

Christine Cantone’s suspension is in effect from March 19, 2012, through June 18, 2012.

(FINRA Case #2009020383002)

 

The information from FINRA’s website has ended.
 
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
For a free consultation with an attorney, please call 888-760-6552, or visit our website at: www.securitieslawyer.com.

 

 

 

· · · · · · · · · · · · · · · · · · · · · · · · · · ·

Apr/12

17

Citi International Financial Fined by FINRA for Excessive Markups and Markdowns

Comments off · Posted by Securities Lawyer in FINRA

On the Financial Industry Regulatory Authority’s website (FINRA) it was announced that it had fined Citi International Financial Services LLC, a subsidiary of Citigroup, Inc., $600,000 and ordered more than $648,000 in restitution and interest to more than 3,600 customers for charging excessive markups and markdowns on corporate and agency bond transactions, and for related supervisory violations.

Executive Vice President, Thomas Gira, FINRA Market Regulation, said, “FINRA is committed to ensuring that customers who purchase and sell securities, including corporate and agency bonds, receive fair prices. The markups and markdowns charged by Citi International were outside of appropriate standards for fair pricing in debt transactions, and FINRA will continue to identify and address transactions that violate fair pricing standards, regardless of whether a markup or markdown is above or below 5 percent.”

The article stated that FINRA found that from July 2007 through September 2010, Citi International charged excessive corporate and agency bond markups and markdowns. The markups and markdowns ranged from 2.73 percent to over 10 percent, and were excessive given market conditions, the cost of executing the transactions and the value of the services rendered to the customers, among other factors. In addition, from April 2009 through June 2009, Citi International failed to use reasonable diligence to buy or sell corporate bonds so that the resulting price to its customers was as favorable as possible under prevailing market conditions.

Throughout this relevant period, Citi International’s supervisory system regarding fixed income transactions contained significant deficiencies regarding, among other things, the review of markups and markdowns below 5 percent and utilization of a pricing grid for markups and markdowns that was based on the par value of the bonds, instead of the actual value of the bonds. Citi International was also ordered to revise its written supervisory procedures regarding supervisory review of markups and markdowns, and best execution in fixed income transactions with its customers.

In this settlement, the Finra article concludes, Citi International neither admitted nor denied the charges.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

 
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·

Mar/12

22

Spartan Securities Group, Clearwater, FL, Censured and Fined by FINRA

Comments off · Posted by Securities Lawyer in FINRA

The following information is from FINRA’s website under “Disciplinary Actions, March, 2012:
 
Spartan Securities Group, LTD (CRD #104478, Clearwater, Florida)
 
submitted a Letterof Acceptance, Waiver and Consent in which the firm was censured, fined $52,500 and required to revise its WSPs regarding its supervisory system, procedures and qualifications;order handling; best execution; anti-intimidation/coordination; trade reporting; short sale transactions; other trading rules; OATS; books and records; the Sub-Penny Rule; and review for compliance of incoming, outgoing and internal electronic communications.
 
Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it executed short sale transactions in reportable securities and failed to report each of the transactions to the FNTRF with the correct symbol indicating whether the transaction was a short sale or a short sale exempt transaction and reported some short sales as long to the FNTRF. The findings stated that the firm failed to report to the FNTRF the correct symbol indicating the capacity in which it executed transactions in reportable securities; incorrectly reported transactions to the FNTRF, failed to report a transaction to the FNTRF, reported transactions which it was not required to report to the FNTRF, incorrectly reported reports to the FNTRF, and failed to submit a cancellation for two reports to the FNTRF. The findings also stated that the firm transmitted reports to OATS that contained inaccurate, incomplete, or improperly formatted data.
 
The findings also included that the firm, on numerous occasions, accepted 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, or entering into a bona fide arrangement to borrow the security; or having reasonable grounds to believe that the security could be borrowed so that it could be delivered on the date delivery is due; and documenting compliance with SEC Rule 203(b)(1) of Regulation SHO. FINRA found that the firm failed to disclose the reported price, the markup/markdown or the correct markup/markdown,and/or the market maker status on customer confirmations.
 
FINRA also found that the firm failed to provide an order memorandum or a proprietary ledger, failed to provide a customer account statement, failed to provide a complete customer order memorandum, and in other instances failed to document the correct time of entry, time of execution, execution price, and/or terms and conditions on the customer order memorandum.
 
In addition, FINRA determined that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and/or FINRA rules addressing supervisory system, procedures and qualifications; order handling; anti-intimidation/coordination; trade reporting; short sale transactions; other trading rules; OATS; books and records; the Sub-Penny Rule; and review for compliance of incoming, outgoing and internal electronic communications.
 
Moreover, FINRA found that the firm failed to provide documentary evidence during one month that it performed the supervisory reviews set forth in its WSPs concerning supervisory system, procedures and qualifications; order handling; best execution; antiintimidation/coordination; trade reporting; other trading rules; OATS; and review for compliance of incoming, outgoing, and internal electronic communications.
(FINRA Case #2009017008302)
 
The information from FINRA’s website has ended.
 
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
For a free consultation with an attorney, please call 888-760-6552, or visit our website at: www.securitieslawyer.com.

· · · · · · · · · · · · · · · · · · · · · · ·

Mar/12

6

Miami Brokerage Fined $125,000 by FINRA

Comments off · Posted by Securities Lawyer in FINRA

The following information was obtained on FINRA’s website’s ‘Disciplinary Actions, February 2012.”
 
Bulltick Securities, LLC (CRD #132092, Miami, Florida)
 
submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $125,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it made transaction-based payments to a non-registered foreign asset manager (foreign finder) whose activities required registration.
 
The findings stated that the firm’s sole business entailed executing securities transactions on behalf of Latin American customers foreign finders referred to the firm. The foreign finders were not registered with FINRA. In making referral payments, the firm relied on NASD Rule 1060, which allows member firms to pay transaction-based compensation to non-registered foreign finders (without requiring those entities/individuals to register) based upon the business of customers they direct to the firm provided that certain specified conditions are satisfied.
 
The findings also stated that a non-registered foreign finder referred customer accounts to the firm that generated gross commissions of approximately $600,000 through the unsolicited, short-term trading of collateralized mortgage obligations (CMOs). The firm paid the non-registered foreign finder approximately $400,000 in net commissions from this amount. The findings also included that the firm’s relationship with the non-registered foreign finder failed to satisfy the requirement of NASD Rule 1060. After the non-registered foreign finder referred the foreign customers to the firm, the securities trades in those accounts were managed by a non-registered affiliate of the foreign finder who was not a foreign asset manager.
 
FINRA found that the affiliate’s office manager or president would provide the firm with the daily trading instructions for the non-registered foreign finder’s referred account but never obtained evidence confirming that the affiliate was authorized to effect securities transactions in the referred accounts. Additionally, the firm paid the non-registered foreign finder approximately $82,000 for transactions in a United States citizen’s account.
 
FINRA also found that the firm did not evaluate whether the affiliate’s role in the transactions required the affiliate or the non-registered foreign finder to register in the United States as a broker-dealer. The firm’s confirmations for transactions in the referred accounts failed to state that it was paying a referral or finder’s fee. The CMO trading decision and strategy in the referred accounts were directed in part by the customer, who was purportedly a consultant with the affiliate.
 
Also, FINRA determined that the customer opened an account in his name with the firm and shortly after he had voluntarily resigned from a FINRA member firm. The firm maintained the customer’s account along with the nonregistered foreign finder’s referred accounts of foreign customers (sharing the same account number prefix). The customer had a disciplinary history at the time he opened his firm account.
 
Moreover, FINRA found that the firm was aware of this and, in opening the customer’s account, the firm tasked a registered principal with providing heightened supervision over the customer’s account. Although the firm implemented monthly principal reviews by the principal of the activity in the customer’s account, this procedure was insufficient. The firm learned about the SEC action against the customer shortly after it was filed. Nevertheless, the customer’s account remained open and continued to trade.
 
Furthermore, FINRA found that the customer routinely engaged in cross-trades of CMOs with other non-registered foreign finder’s referred accounts. In many instances, the customer would purchase the CMOs for his account from another broker-dealer and re-sell the positions at substantially higher prices to other of the non-registered foreign finder customers. As a result of the differences in the prices of the cross-trades, the customer profited on the majority of the CMO transactions in the referred accounts. The customer’s account made a profit of approximately $1.83 million.
 
The findings also stated that the firm did not reject any trades in the customer’s account until it cancelled an order to sell a CMO position from the customer’s accounts to other non-registered foreign finder’s referred accounts because the execution prices for the purchases were different. The firm later terminated its relationship with the non-registered foreign finder but never conducted a review of the CMO transactions in the referred accounts to determine if there were other transactions with discrepancies.
 
The findings also included that the firm had a written anti-money laundering (AML)
compliance program (AMLCP) that covered, among other things, monitoring for, detecting and reporting of suspicious activities. The firm’s procedures specified that its designated principal (its AML compliance officer (AMLCO)) and others would determine whether a particular account or transaction must be reported based upon a lengthy list of red flags of possible misconduct. FINRA found that the firm failed to monitor for, detect and appropriately investigate suspicious transactions the customer conducted and, if appropriate, file a suspicious activity report (SAR), despite multiple red flags related to these transactions. The red flags, each of which corresponded to a red flag identified in the firm’s procedures, included, among other things the short-term trading activity of CMO securities conducted through the customer’s account, which was generally inconsistent with the long-term investment horizon associated with such investments; the customer’s disciplinary history with the SEC; the volume of cross-trades involving the customer and the non-registered foreign finder’s referred accounts, which appeared to have no business purpose other than to enrich the customer; the fact that the pricing of the customer’s cross-trades differed from the prices the firm received from its clearing firm for the same securities; the differences in prices on the cross-trades involving the customer’s account and the profits the customer obtained; and transactions involving disparate pricing in the customer’s cross-trade involving other of the non-registered foreign finder-referred accounts, which occurred over the course of one month. FINRA also found that the firm failed to develop and implement a reasonably designed AMLCP because its procedures did not address the AML risks presented by certain aspects of its foreign finder business and CMO trading.
 
FINRA also determined that the firm failed to establish and maintain a supervisory system, and establish, maintain and enforce WSPs, reasonably designed to achieve compliance with applicable rules and regulations relating to its foreign finder business and the CMO transactions and trading activity in the referred accounts. The firm principal responsible for supervising the securities activity in the non-registered foreign finder’s referred accounts did not have any experience prior to joining the firm regarding CMOs, which rendered his monthly review of the customer’s account and implementation of heightened supervision inadequate.
 
Additionally, FINRA found that the firm failed to establish WSPs pertaining to CMOs. The firm’s WSPs did not address how it would obtain, monitor and conduct due diligence on pricing for these securities. Furthermore, FINRA found that the firm failed to establish a system or WSPs that addressed the payment of transaction-based compensation to foreign finders made pursuant to NASD Rule 1060 and related registration issues, and failed to ensure that its relationships with the foreign finders satisfied the criteria of NASD Rule 1060 for payment of transaction-based compensation to those entities. The findings also stated that the firm failed to enforce its WSPs requiring it to obtain trading authorization for third-party transactions.
(FINRA Case #2009015969501)
 
The information from FINRA’s website has ended.
 
Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide.
For a free consultation with an attorney, please call 888-760-6552, or visit our website at: www.securitieslawyer.com.

· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·

Find it!

Theme Design by devolux.nh2.me
To top