1

Disciplinary and

Other FINRA Actions

FINRA has taken disciplinary actions

against the following firms and

individuals for violations of FINRA

rules; federal securities laws, rules

and regulations; and the rules of

the Municipal Securities Rulemaking

$35,000, jointly and severally. Meyers was suspended from association with

any FINRA® member in any principal or supervisory capacity for four months.

Without admitting or denying the allegations, the firm and Meyers consented

to the described sanctions and to the entry of findings that the firm failed to

completely respond, and to timely respond, to FINRA requests for information

and documents. The findings stated that Meyers was ultimately responsible

for supervision at the firm; the requests were all addressed to Meyers, who

delegated the task of responding to them, but he failed to ensure that the

responses were complete and timely.

The suspension is in effect from December 5, 2011, through April 4, 2012.

was fined $7,500 and suspended from association with any FINRA member

in any principal capacity, other than the capacity of Financial and Operations

Principal (FINOP), for 40 business days. Without admitting or denying the

allegations, the firm and Hurry consented to the described sanctions and to

the entry of findings that the firm, acting through Hurry, failed to implement

its anti-money laundering (AML) procedures, as it did not adequately monitor

for and/or investigate facts and circumstances present in certain customer

accounts that constituted “red flags” in its written AML compliance program.

The findings stated that neither Hurry, nor anyone else at her firm, took steps

to monitor for disciplinary background or multiple account red flags or for

compliance program and procedures because the firm’s chief compliance

2 Disciplinary and Other FINRA Actions

January 2012

officer (CCO) failed to create, or cause Hurry to create, a record of questionable background

reviews. FINRA found that the firm’s AML procedures pertaining to the disciplinary-

background red flag were not sufficiently specific to provide any meaningful guidance as to

where and how the firm would look for customers with questionable backgrounds. FINRA

also found that the firm utilized a means of interstate commerce in connection with its

sales of unregistered stock, and the transactions were not exempt from registration.

and annual certification of firm written supervisory procedures (WSPs), and addressing

the designated principal’s annual report to senior management. The firm, acting through

Hurry, did not submit an annual report to firm management detailing the firm’s system

of supervisory controls, the summary of test results and significant exceptions, and any

additional or amended supervisory procedures in response to the test results. Hurry failed

to establish a supervisory system and WSPs reasonably designed to achieve compliance

with applicable securities laws and regulations, and failed to enforce its WSPs. In addition,

Hurry failed to prepare a report pertaining to its home-office inspection.

FINRA also found that the firm and Hurry filed SARs that contained inaccurate or

incomplete information, and filed SARs that failed to provide adequate information

inspections were inadequate. The findings also included that the firm did not enforce its

WSP’s pertaining to letters of authorization (LOA).

The suspension is in effect from December 5, 2011, through February 1, 2012. (FINRA Case

#2008011593301)

TriCor Financial, LLC (CRD #142518, Las Vegas, Nevada) and Frank Aguilar (CRD #2296920,

Registered Principal, Las Vegas, Nevada) submitted a Letter of Acceptance, Waiver and

Consent in which the firm was censured and fined $15,000, jointly and severally with

Aguilar. Aguilar was also suspended from association with any FINRA member in any

principal capacity for two months. Without admitting or denying the findings, the firm and

Aguilar consented to the described sanctions and to the entry of findings that the firm,

acting through Aguilar, its president and CCO, failed to file with FINRA an application for

approval of the change of ownership at least 30 days prior to a change in ownership in

which a third-party entity became a 25-percent indirect equity owner of the firm.

Valmark Securities, Inc. (CRD #31243, Akron, Ohio) and Richard Michael Arceci (CRD

#1173612, Registered Principal, Sagamore Hills, Ohio) submitted an Offer of Settlement

in which the firm was censured and ordered to pay $350,000 in restitution to investors

through a receiver the U.S. District Court for the Central District of California appointed.

Arceci was fined $10,000 and suspended from association with any FINRA member in any

principal capacity for 10 business days. Without admitting or denying the allegations, the

firm and Arceci consented to the described sanctions and to the entry of findings that the

firm, through Arceci, approved an offering for sale based exclusively on its review of the

issuer’s unverified and uncorroborated statements in the offering document. The findings

stated that the firm, through Arceci, designated an individual to conduct the marketing

receiving the PPM and the other individual’s summary report, so he used the summary

report and the PPM to conduct the due diligence review, including his assessment of

the risks of the offering, and completed, signed and dated the requisite 14-question due

diligence review checklist. The firm, acting through Arceci, approved the offering for sale

based on the PPM, the checklists and the summary report. The findings also included that

the firm, acting through Arceci failed to adequately supervise its due-diligence review,

in that it failed to obtain or review financial statements for the issuer which would have

informed it in more detail of the liquidity issues of the offering’s affiliates; failed to research

background information on the offering’s officers, which would have informed it that

the chief executive officer (CEO) had been barred from the insurance industry by a state

4 Disciplinary and Other FINRA Actions

January 2012

FINRA found that the firm, acting through Arceci, ignored red flags and failed to adequately

supervise the sale of the offering after learning about liquidity issues, and failed to suspend

sales based on a PPM containing false statements. FINRA also found that no one at the

firm conducted an investigation or due diligence to determine whether customers who

invested were in danger of incurring loss of principal and interest given that affiliates had

delayed making payments to note holders. In addition, FINRA determined that the firm

continued to leave its customers in the dark regarding the issuer’s financial problems and

to sell the offering using a PPM that contained a material misrepresentation, without

disclosing missed payments on securities, and failed to provide customers with copies of

correspondence from the issuer describing problems with making payments on previously

issued notes. The firm’s decision to continue selling the offering constitutes a failure to

observe high standards of commercial honor and just and equitable principles of trade.

The suspension was in effect from December 19, 2011, through January 3, 2012. (FINRA

Case #2009018817601)

Firms and Individuals Fined

First Bermuda Securities (BVI) Ltd. (CRD #29331, Hamilton, Bermuda) and Jeffrey Gerald

communications; the firm’s electronic storage media system was deficient because such

communications could be deleted from the system prior to being preserved in the requisite

non-rewritable, non-erasable format. The findings stated that in contravention of its WSPs,

the firm permitted Conyers, its president and CCO, to use a personal email address, through

his handheld communication device, to send and receive business-related electronic

communications, which were not captured by the firm’s system and thus were not retained

nor reviewed by the firm, unless they were sent to or from a firm-provided email address.

The findings also stated that the firm failed to evidence its review of its business-related

electronic communications, in violation of its WSPs. The findings also included that the

firm, through Conyers, permitted non-registered persons to act in a capacity requiring

Hantz Financial Services, Inc. (CRD #46047, Southfield, Michigan) and Bruce Frederick

Coleman (CRD #50684, Registered Principal, Ann Arbor, Michigan) submitted a Letter of

Acceptance, Waiver and Consent in which the firm and Coleman were censured and fined

$10,000, jointly and severally. The firm was fined an additional $50,000. Without admitting

or denying the findings, the firm and Coleman consented to the described sanctions

and to the entry of findings that the firm failed to establish and maintain an adequate

supervisory system and WSPs to ensure that it immediately recorded on the firm’s books

and records checks its customers mailed to the firm. The findings stated that because the

firm failed to enforce that particular WSP, these deficiencies were exploited by a registered

representative who embezzled approximately $2.6 million from customers and contributed

to the firm’s failure to detect his scheme; the representative exploited the firm’s check-

handling procedures by taking control of customer checks totaling approximately $850,000

and depositing the customer funds into his own bank accounts, without the checks

being logged in the firm’s tracking system. The findings also stated that the firm, by and

The findings also included that the firm’s lack of adequate WSPs describing circumstances

under which complaining customers would be contacted contributed to its failure to

discover the representative’s scheme after a customer sent a written complaint to a

had sent the firm money and was unable to ascertain what assets were purchased with

the money. FINRA also found that although the firm interviewed the representative, the

customer was never contacted and the representative’s illegal activities continued for

approximately another 10 months. After the representative’s death, the firm undertook a

forensic audit of the representative’s transactions, which led to identification of numerous

customers whose funds had been embezzled; the results were shared with FINRA and were

instrumental in exposing how the funds were embezzled and the extent of the customer

harm. In addition, FINRA determined that the firm voluntarily provided more than $2

million in restitution to customers. (FINRA Case #2008012747901)

Firms Fined

6 Disciplinary and Other FINRA Actions

January 2012

that while the firm’s Membership Agreement permitted the firm to engage in trading

securities for its own account in fixed income debt securities, the Membership Agreement

did not permit it to engage in proprietary trading of equity securities. The findings also

stated that the firm failed to have a properly licensed principal supervise its proprietary

equity trading. While the firm had a general securities principal supervising the equity

trading activity, the general securities principal did not have his equity trading license.

(FINRA Case #2011025809401)

of findings that a firm trader and market maker, on the firm’s behalf, filed Form 211

applications to quote the securities of two issuers on the Over-the-Counter Bulletin Board

(OTCBB) and prepared a Form 211 for one of the issuers and signed the application as the

person FINRA should contact for additional information regarding the application. The

findings stated that shares of one of the issuers were delivered to a former firm principal

in certificate form; the firm trader and the former firm principal transferred more than

half of the shares to the trader’s relative and the remainder to entities affiliated with his

family and the firm. The findings also stated that neither the trader nor the firm provided

a payment, or other consideration, directly or indirectly from the issuers, or an affiliate or

promoter thereof, for submitting Form 211 applications in connection with the issuers,

publishing quotations and acting as a market maker.

circulated, or caused to be published or circulated, a communication reporting a transaction

without believing that the transaction was a bona fide purchase or sale, and quoted the bid

price and ask price in the security, without believing that such quotations represented a

bona fide bid for, or offer of, the security.

ledgers, or other records, reflecting all assets, liabilities, income and expense and capital

accounts. Moreover, FINRA found that despite the fact that the firm’s trader received

payment for filing Forms 211, making markets in two securities and entering quotations

in the securities, no firm supervisory personnel made any effort to reasonably supervise

his activities. No one at the firm took adequate measures to ensure the trader did not

receive payment for market making and that he did not enter non-bona fide quotations in a

security or engage in a non-bona fide transaction in the security. Furthermore, FINRA found

that the firm’s supervisory system did not provide for supervision reasonably designed to

achieve compliance with applicable securities laws, regulations and FINRA rules concerning

NASD Rules 2460, 3310 and IM 3310. (FINRA Case #2007008031801)

ordered to pay $41,593.23, plus interest, in restitution to affected customers. Without

admitting or denying the findings, the firm consented to the described sanctions and

to the entry of findings that it entered into a trading agreement with a foreign broker-

dealer whose owner had his customers open fully disclosed accounts with the firm where

the owner had discretionary trading authority, and negotiated a special compensation

structure with the firm for option and equity transactions. The findings stated that

approximately three months after the firm entered into the trading agreement with the

owner, it terminated its relationship. The firm informed the customers that the owner

their accounts were transferred to another firm before their positions expired. The findings

also included that the firm’s service charges were greater than the amount warranted by

market conditions, the cost of executing the transactions, the value of services the firm

rendered and other pertinent factors; the total overcharges were $41,593.23.

8 Disciplinary and Other FINRA Actions

January 2012

firm’s failure to supervise these private securities transactions violated NASD Rule 3040,

which requires members to give prior written approval or disapproval of any proposed

private securities transaction by an associated person. The findings also stated that the

firm failed to establish and enforce a supervisory system and WSPs to supervise private

securities transactions some of its registered representatives executed, including failing to

record the transactions on its books and records.(FINRA Case #2010021008701)

AML requirements and its own procedures by failing to adequately monitor for, detect

and investigate suspicious transactions notwithstanding multiple red flags presented

by the trading in a customer’s account. The findings also stated that in most instances,

suspicious activity related to one or more of the red flag categories identified in the firm’s

AML compliance procedures, including substantial fluctuations in the customer’s account

value during the period in which the account was maintained at the firm; unexplained

and extensive wire activity, including a large number of third-party incoming wires (some

of which originated from international banks); and a wire transfer from the customer’s

entry of findings that it failed to establish and maintain a supervisory system and adopt,

maintain and enforce WSPs reasonably designed to achieve compliance with the disclosure

requirements for municipal securities transactions. The findings stated that the firm’s

procedures failed to describe in sufficient detail the regulatory obligation to disclose to

customers certain material information, such as a rating agency’s recent downgrade of the

security, to enable them to make an informed decision in connection with the purchase of

gas bonds and other municipal securities. (FINRA Case #2009018038501)

to customers. Funds of hedge funds are investment companies that may be registered

closed-end funds or unregistered funds that contain largely unregistered hedge funds as

underlying investments. The firm marketed these products primarily to high net-worth

individuals and institutions that met the accredited investor standard as defined by the

Securities Act of 1933 and/or the qualified purchaser standard under the Investment

Company Act of 1940. The findings stated that PBUSA relationship managers used a

marketing pitch book to market the firm’s alternative investment products, including

hedge funds and funds of hedge funds, to customers and prospective customers. The pitch

various product categories for PBUSA customers, contained a discussion of hedge funds

as part of an overall investment portfolio, provided brief overview information about

certain representative offerings, described the general due diligence process at the firm

and contained a summary description of alternative investment offerings at the firm.

PBUSA registered representatives often used the pitch book to guide their discussions at

introductory presentations with prospective or existing customers, and to describe the

firm’s offerings of and capabilities with respect to alternative investments. The findings

also stated that the pitch book contained a number of statements regarding the firm’s due

diligence efforts; it represented that the firm would conduct continuous and ongoing due

diligence of the funds. The findings also included that the statements were not accurate

because for certain funds, the firm performed little ongoing due diligence, and when it was

16 Disciplinary and Other FINRA Actions

January 2012

in seven bonded life settlements and in total, the bonded life settlement company paid

approximately $120,475.90 in commissions related to Ahmann’s sales. The findings also

stated that Ahmann lacked a reasonable basis to recommend the purchase of the bonded

life settlements to his customers given his failure to perform a reasonable investigation

concerning the life settlement product. Although Ahmann inquired about the manner in

which the company that offered the life settlements procured life insurance policies for its

offerings, he took no further action when the company’s principals pointedly refused to

share that information with him. The findings also included that Ahmann failed to obtain

adequate information regarding the qualifications of the company principals to issue life

settlements and to examine reports of the company’s financial status in order to assess the

company’s economic well-being. Ahmann failed to adequately inquire about the companies

that assessed the life expectancies of the underlying insureds and re-insured the underlying

life insurance policies prior to recommending and selling the bonded life settlements.

FINRA found that Ahmann’s firm’s CEO asked Ahmann whether a sale of stock and

subsequent withdrawal of funds in a customer’s account was in any way related to

his suspected participation in private securities transactions involving the bonded

life settlements. Ahmann told the CEO that he was not participating in the sale of life

settlements and had not recommended them to investors, which was not true. In fact,

prior to the date of Ahmann’s misrepresentation, Ahmann had solicited the customer

to purchase a bonded life settlement and had signed transaction paperwork related to

thereby failing to provide the reader with a sound basis for evaluating the merits of the

investment. The statement in the sales material that it was intended to serve as “layman’s

description” was misleading given the complex nature of the product and the risks

involved. Ahmann did not present the sales material for review to a registered principal of

his firm prior to using them in connection with his sales of the bonded life settlement to a

customer.

an unspecified rate of return, in exchange for each customer’s transfer of ownership of

existing annuities to the non-profit. Ahmann’s customers exchanged existing annuities

with a combined accumulated value of at least $195,000 for the installment plan contracts.

Moreover, FINRA found that Ahmann failed to adequately ascertain which charities, if any,

the non-profit supported, the manner in which the non-profit invested customer funds,

and the existence of a cease and desist order issued by a state against the non-profit which

sales. Furthermore, FINRA found that Ahmann learned that the non-profit’s application for

status as a 501 (c)(3) organization was pending and had not yet been granted by the U.S.

Internal Revenue Service (IRS), and that investors would not be entitled to a tax benefit if

the non-profit’s application was ultimately denied. Ahmann failed to inform his customers

that the non-profit’s application remained pending and that they would not receive a tax

benefit if the application was ultimately denied. A predominate feature of the non-profit’s

product was the reported tax savings an investor would enjoy through the purchase of

an installment plan contract. Issues concerning the tax-deductibility of the product were

clearly material as it was a key feature of the product and, together with the non-profit’s

status as a charitable organization, a factor that distinguished it from other similarly

structured products. Its tax-deductibility was also prominently advertised by the non-profit

and, in many instances, a key factor in investors’ choice over alternative products.

The findings also stated that in connection with his sale of the installment plan contract

to a customer, Ahmann presented the customer with illustrations the non-profit prepared,

which included a cover page, a flow chart graphically depicting the terms of the proposed

installment plan contract and a 1099 Statement detailing the amount of the scheduled

payments and listing that portion of the annual payment that was to be reported as tax-

free and the portion that was to be reported as ordinary income. The flow chart failed to

reflect that the total payout amount included a return of principal and did not specify the

rate of return. Such omissions provided an oversimplified and exaggerated presentation

heading for the principal column, entitled “reported as tax-free,” provided the false

impression that this column represented tax-free income. The findings also included that

Ahmann did not present the flow chart and 1099 Statement for review to a registered

principal of his firm prior to using them in connection with his sales of the installment plan

contract to a customer.

business card identified him as being associated with the company, and Ahmann and the

individual shared all expenses associated with the maintenance of the company’s office.

Documents related to the sales of the bonded life settlements identified the individual

as the sales agent, though Ahmann clearly solicited and arranged for the sales. Although

the commission payments associated with the bonded life settlements were issued to the

individual, the latter paid the commission monies to Ahmann. The company subsequently

18 Disciplinary and Other FINRA Actions

January 2012

that Ahmann held Series 6 and 63 licenses but never held a Series 7 license that would

permit him to engage in the sale of securities but nevertheless, he engaged in the sale

of bonded life settlements and installment plan contracts, each of which are securities.

(FINRA Case #2009019041001)

another registered representative when he learned that her business had borrowed money

from a customer. The firm’s WSPs prohibit registered representatives from borrowing

from customers. The findings also stated that Allison did not properly follow up on this

information; he did not ensure that the customer was repaid or examine the business’s

bank statements to determine whether the representative had borrowed from additional

customers. The findings also included that even when Allison placed the representative

on heightened supervision, after learning of the loan from the customer, he did not begin

conducting the quarterly audits the plan mandated until months later.

The suspension was in effect from December 5, 2011, through December 16, 2011. (FINRA

Case #2009017068502)

for customers’ existing U.S. bank accounts. The findings also stated that the customers

requested that Azevedo open a bank account for their business in the United Kingdom

Julie Ann Bekeleski (CRD #3141133, Registered Representative, Uniontown, Ohio)

submitted a Letter of Acceptance, Waiver and Consent in which she was fined $5,000 and

suspended from association with any FINRA member in any capacity for seven months. The

fine must be paid either immediately upon Bekeleski’s reassociation with a FINRA member

firm following her suspension, or prior to the filing of any application or request for relief

from any statutory disqualification, whichever is earlier. Without admitting or denying the

findings, Bekeleski consented to the described sanctions and to the entry of findings that

she failed to timely amend her Form U4 with material information and failed to timely

respond to FINRA requests for information.

Phillip Peter Borup (CRD #4446376, Registered Principal, Cameron Park, California)

submitted an Offer of Settlement in which he was fined $15,000 and suspended from

association with any FINRA member in any principal capacity for 18 months. The fine

must be paid either immediately upon Borup’s reassociation with a FINRA member firm

following his suspension, or prior to the filing of any application or request for relief from

20 Disciplinary and Other FINRA Actions

January 2012

while Borup was the OSJ manager of which he was or should have been aware. The findings

also stated that when the new OSJ manager raised concerns about the private-placement

business in the branch offices, Borup declined to take steps to address those concerns and

conform the conduct of that business to all applicable laws, rules and regulations. The

findings also included that as the firm’s chief executive, owner and the person who directed

the firm’s business, Borup remained responsible for the private-placement business the

representatives in the branch offices conducted on the firm’s behalf. These branch offices

participated in transactions involving the sale of several different private placements to

investors who invested approximately $1,727,000. The representatives employed a general

solicitation to obtain these investors.

receipt of selling compensation. FINRA also found that the general solicitation caused the

transactions to be ineligible for the Rule 506 exemption and, therefore, the transactions

constituted the sale of unregistered securities in contravention of Section 5 of the

Securities Act of 1933. Borup was the firm principal responsible for the offer and sale of the

private-placement securities and by permitting these transactions to occur in contravention

of the registration provisions of the Securities Act of 1933, he engaged in conduct that was

inconsistent with high standards of commercial honor and just and equitable principles

of trade. In addition, FINRA determined that Borup was responsible, directly or indirectly,

with the laws, rules and regulations applicable to the private-placement business; Borup

did not undertake to provide the principal with opportunities to develop the knowledge

needed to supervise the private-placement business effectively, nor did he revise, or

instruct the principal to revise, the firm’s systems and procedures for supervising that

business although he knew, or should have known, that they were inadequate. Moreover,

FINRA found that Borup failed to supervise in a manner reasonably designed to prevent

the sale of unregistered securities by firm registered representatives in the branch offices

who offered and sold securities purportedly exempt from registration. Furthermore,

FINRA found that Borup was responsible, directly or indirectly, for the supervision of firm

personnel in the branch offices and the business activities in which they engaged on the

firm’s behalf, including the supervision of their use and distribution of sales literature on

rates of return and yield, and allowed the rates of return and investment performance to

constitute predictions and/or projections of investment performance. The items of sales

literature also included statements and claims that were incomplete and oversimplified,

unwarranted or exaggerated. The findings also included that by permitting the branches

to distribute sales literature, Borup did not establish and maintain a system to supervise

the activities of the firm’s associated personnel that was reasonably designed to achieve

compliance. In addition to the failure to supervise in a manner reasonably designed to

achieve compliance with the content standards applicable to sales literature, Borup also

failed to maintain a record of what was reviewed and/or approved for representatives

to disseminate, and did not take steps to ensure that the registered representatives

disseminated only sales literature the firm approved. FINRA found that Borup authorized

and permitted registered representatives of the firm’s branch offices to provide cash

compensation in the form of referral fee payments to non-registered individuals who

provided information about persons to whom the representatives intended to offer and sell

The suspension is in effect from December 5, 2011, through June 4, 2013. (FINRA Case

#2008014385101)

with any FINRA member in any capacity for 10 business days. In light of Bowen’s financial

status, no monetary sanctions have been imposed. Without admitting or denying the

The suspension was in effect from December 5, 2011, through December 16, 2011. (FINRA

Michael William Bozora (CRD #28009, Registered Principal, Belvedere, California) submitted

22 Disciplinary and Other FINRA Actions

January 2012

relation to an entity’s private placement offered and sold through his firm. The findings

stated that Bozora did not have a reasonable basis for believing the recommendation of

the entity’s partners to be suitable for any of the firm’s customers. Bozora failed to obtain

sufficient information from individuals solicited to invest in the entity’s offering during the

relevant time period to ascertain whether a recommendation to invest in the entity would

be suitable for them based upon their financial circumstances and needs. The findings also

stated that Bozora’s firm, acting through him, failed to maintain subscription agreements

for investors in the entity’s private placement who invested through the firm. The findings

also included that Bozora participated in the offer and sale of limited partnership units of

an entity he co-founded. Among other things, Bozora provided information about the entity

to other broker-dealers for the purpose of facilitating the offer and sale of the entity by

those firms; and, in connection with this activity, he distributed, or caused the distribution

of, a PPM that contained material misrepresentations and omitted to disclose material

facts regarding the entity’s operations and financial condition. The PPM failed to disclose

investor funds were being applied to pay earlier investors, Bozora did not have a reasonable

basis for believing that the recommendation to invest in the entity’s preferred notes was

suitable for any customer. In addition, FINRA determined that Bozora failed to establish and

maintain a supervisory system, and to establish, maintain and enforce WSPs reasonably

designed to cause the firm to conduct due diligence for new offerings. Moreover, FINRA

found that Bozora failed to supervise the activity of its registered representatives selling his

entity’s preferred notes. Furthermore, Bozora failed to document ongoing due diligence of

his entity and also failed to establish, maintain and enforce procedures regarding the firm’s

due diligence review.

to the entry of findings that they received checks totaling $55,180.29 from a customer to

be applied to the Briggs’ mortgage and were intended as loans, without notifying their

respective firms of the loans and without obtaining approval to receive the loans. The

findings stated that the Briggs’ firms had policies and procedures that generally prohibited

lending arrangements between the firms’ representatives and customers, with certain

exceptions. Those exceptions did not apply to the loans between the customer and the

Briggs. The firms required that a representative receive pre-approval for any lending

arrangement between the representative and a customer of the firms. The findings also

stated that the Briggs have not repaid the loans.

The suspension is in effect from December 19, 2011, through February 15, 2012. (FINRA

Case #2010022654101)

for four months. Without admitting or denying the findings, Collantes consented to the

described sanctions and to the entry of findings that she failed to supervise an individual,

who over eight years, misappropriated $749,978 from customers, falsified account

records and engaged in unauthorized trades. In doing so, the individual took advantage

of supervisory and systems lapses at the branch, deliberately targeting the firm’s most

vulnerable customers. The findings stated that Collantes was responsible for reviewing

24 Disciplinary and Other FINRA Actions

January 2012

information kept in a third-party database. The individual wrote an explanation on the

hard copy of the report that failed to address mismatches and Collantes accepted the

individual’s explanation without further review. The findings also stated that Collantes

was responsible for reviewing LOAs, which authorized the firm to make transfers of funds,

disbursements and changes to account information, including address changes. Review

of LOAs at the branch was typically limited to reviewing a particular LOA for completeness

without reference to prior LOAs or account statements involving the same account. In

following this approach, Collantes failed to ensure an adequate response to suspicious

activity in customer accounts as reflected in LOAs. The findings also included that the

individual used a series of LOAs to channel money from customer accounts to herself. The

individual changed the residential account address on a fraudulent account the individual

created in her relative’s name to reflect the individual’s residential address. Transfers were

made from unrelated trust accounts to the fraudulent account totaling $32,364.78. At the

same time, a check-writing feature was added to the fraudulent account and a checkbook

The suspension is in effect from December 5, 2011, through April 4, 2012. (FINRA Case

Richard Paul Counts (CRD #3241105, Registered Representative, Belleair, Florida) submitted

Rod R. Cushing (CRD #2479782, Registered Representative, Salt Lake City, Utah) submitted

included that Cushing then caused the forms to be signed by the customers and submitted

to the firm, which made the firm’s books and records inaccurate.

$5,000 and suspended from association with any FINRA member in any capacity for 20

business days. The fine must be paid either immediately upon Dayton’s reassociation with

a FINRA member firm following his suspension, or prior to the filing of any application

or request for relief from any statutory disqualification, whichever is earlier. Without

admitting or denying the findings, Dayton consented to the described sanctions and to

the entry of findings that he failed to properly review and supervise a joint brokerage

account application shared by a registered representative employed at his firm and a

firm customer, and approved the opening of the account even though it violated firm

policies and procedures that prohibited such joint accounts. The findings stated that as

a registered principal of the firm, Dayton was responsible for supervising the opening of

new accounts for a registered representative and periodically reviewing the accounts the

32 Disciplinary and Other FINRA Actions

January 2012

to the firm’s policies, Glassberg failed to disclose to the firm that he worked as a manager

at a company, which served as an investment vehicle for investments in a corporation.

FINRA also found that Glassberg failed to disclose to his firm that he served on the board of

directors for an affiliate of the corporation.

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and

suspended from association with any FINRA member in any capacity for four months. The

fine must be paid either immediately upon Graddy’s reassociation with a FINRA member

firm following his suspension, or prior to the filing of any application or request for relief

from any statutory disqualification, whichever is earlier. Without admitting or denying the

findings, Graddy consented to the described sanctions and to the entry of findings that he

failed to amend his Form U4 to disclose a material fact. The findings stated that Graddy

failed to timely respond to FINRA requests for testimony.

Tyler Jack Harris (CRD #5377730, Registered Representative, Greenville, South Carolina)

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and

suspended from association with any FINRA member in any capacity for three months.

The fine must be paid either immediately upon Harris’ reassociation with a FINRA member

firm following his suspension, or prior to the filing of any application or request for relief

from any statutory disqualification, whichever is earlier. Without admitting or denying

the findings, Harris consented to the described sanctions and to the entry of findings that

he engaged in private securities transactions by recommending that customers invest

in a company, which was not an investment his member firm approved. The findings

stated that at the time Harris recommended that his customers invest in the company,

he was aware that his firm’s policies and procedures specifically prohibited its registered

representatives from recommending or selling any security, insurance product or other

investment opportunity not approved by the firm, and purchased through a system at or

approved by the firm. The findings also stated that Harris did not give notice to, and receive

The suspension is in effect from November 21, 2011, through February 20, 2012. (FINRA

Case #2009020928101)

submitted a Letter of Acceptance, Waiver and Consent in which he was barred from

association with any FINRA member in any capacity. Without admitting or denying

services. (FINRA Case #2010021731601)

34 Disciplinary and Other FINRA Actions

January 2012

he had falsified her signature on a surrender form for a fixed life insurance policy that

she wanted to surrender. The findings stated that Haywood admitted that he had signed

the customer‘s name to the surrender form and further admitted that he had signed

additional clients’ names to insurance-related documents during a period of almost four

years. These documents included policy surrender forms, policy delivery forms, designation

of beneficiaries’ forms, and change of ownership forms, personal health and status

declarations, and authorizations for the release of health-related information. The findings

also stated that Haywood admitted that he did not obtain the clients’ prior authorization to

sign their names but claimed to have signed the various documents on his clients’ behalf, in

general, to expedite the processing of the documents. (FINRA Case #2010024175801)

from association with any FINRA member in any capacity. Without admitting or denying

the findings, Hill consented to the described sanction and to the entry of findings that he

improperly used $1,800,000 in funds that belonged to a customer. The findings stated that

Hill and his relative formed a company to serve as an investment vehicle for investments

in a manufacturer and distributor of a dental prosthesis that snaps over a patient’s natural

teeth. Hill solicited a customer to invest in his company; the customer agreed to the

investment and Hill caused the transfer of $103,000 from the customer’s account at his

member firm to an affiliate of the manufacturer. Within hours of this transfer, Hill caused

unbeknownst to the customer, Hill’s company and the affiliate executed a secured

promissory note. Hill’s company financed the note using $1,800,000 of the customer’s

funds plus $200,000 Hill and a third party contributed, for a total of $2 million. Pursuant to

the note, the affiliate agreed to pay Hill’s company, not the customer, interest at a rate per

annum equal to 20 percent on the aggregate unpaid principal balance. FINRA found that

Hill did not inform his firm in writing of these transactions and investments. (FINRA Case

#2010022653601)

admitting or denying the findings, Hoshimi consented to the described sanction and to

the entry of findings that he entered into an arrangement with a registered investment

advisor that was not a FINRA member, whereby he would receive orders from the registered

investment advisor’s customers who wished to purchase promissory notes and would

effect the purchases through his member firm. The findings stated that Hoshimi purchased

promissory notes for the investment advisor’s customers for a total of approximately

based compensation, thereby sharing his commissions with the investment advisor. The

findings also stated that Hoshimi engaged in private securities transactions without

prior written notice to and approval from his firm; he participated in life settlement

transactions in which his customers sold fixed life insurance policies to settlement brokers

for a total of approximately $390,855. The findings also included that Hoshimi engaged

in outside business activities without providing prompt written notice to his member

firm; he participated in life settlement transactions in which his customers sold variable

life insurance policies to settlement brokers for a total of approximately $1,152,033 for

which he received approximately $325,422 in commissions. FINRA found that Hoshimi

engaged in private securities transactions without prior written notice to and approval

from his firm; he effected purchases of stocks as his own personal investments for a total of

approximately $139,500.

The suspension is in effect from December 19, 2011, through June 18, 2012. (FINRA Case

#2008014855301)

the findings, House consented to the described sanctions and to the entry of findings

that he signed a sales agreement which allowed his member firm to market and sell an

steps, such as obtaining and reviewing the due third-party diligence reports for the other

entity’s offerings, which were evidencing some serious red flags. It was unreasonable that

House, on his firm’s behalf, failed to investigate the red flags in those due diligence reports

as they related to the potential risks in the issuer’s offering. The findings also stated that

House failed to investigate the background of an individual, who, according to the issuer,

had purportedly demonstrated the ability to identify mineral rights deals and had extensive

36 Disciplinary and Other FINRA Actions

January 2012

executives. The individual had prior disciplinary history with a state’s securities regulators

relating to the offering of unregistered securities. If House had investigated the public

record, this should have raised serious concerns with the offering’s reliance on his expertise

and therefore the offering’s viability. The findings also included that House, acting on his

firm’s behalf, failed to conduct due diligence of an entity. Without due diligence, House

could not identify and understand the inherent risks of the offerings. FINRA found that

House failed to enforce supervisory procedures to detect or address potential red flags as it

relates to the offering; House failed to maintain a supervisory system reasonably designed

to achieve compliance with applicable securities laws and regulations.

Kaminski also ignored many red flags that should have caused him to question the

abilities of the supervisor and head of the firm’s compliance department, and whether

the findings, Kardish consented to the described sanction and to the entry of findings that

he failed to appear and testify at a FINRA on-the-record interview regarding allegations of

misappropriation of funds. (FINRA Case #2009018982901)

time Katz borrowed the money, his firm’s WSPs did not allow the borrowing and lending

of money between registered persons and firm customers unless the customer was the

registered person’s relative. Katz did not request or obtain the firm’s permission to borrow

money from the customer and was not related to the customer. Katz was aware of the

firm’s procedures and certified that he had received and read the firm’s written policies

and procedures regarding financial arrangements with clients. Katz did not disclose to

his firm that he had obtained loans from the customer. FINRA found that since the firm’s

procedures did not permit borrowing, Katz could not borrow money from the customer in

borrowed $25,000, evidenced by a promissory note, from her customer at her member firm.

The findings stated that when the borrowing occurred, the firm permitted representatives

38 Disciplinary and Other FINRA Actions

January 2012

admitting or denying the findings, Kent consented to the described sanctions and to the

entry of findings that he took a long-term care (LTC) CE online course, and while taking the

CE test, he improperly received another individual’s assistance with answering questions.

The findings stated that certain states, including California, where Kent resides, require

financial advisors to successfully complete a LTC CE course before selling LTC insurance

products to retail customers.

copy of the answer sheet from the registered representative with the answers to the 50

questions circled by hand, and the words “master copy” written on the top of the answer

Stephen Ira Kolinsky (CRD #1090913, Registered Principal, Upper Saddle River, New Jersey)

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and

suspended from association with any FINRA member in a supervisory or principal capacity

for 40 business days. Without admitting or denying the findings, Kolinsky consented to

the described sanctions and to the entry of findings that he failed to supervise a registered

The suspension is in effect from December 19, 2011, through February 15, 2012. (FINRA

Case #2010022653801)

Kari Colleen Kreuz (CRD #4965794, Registered Representative, Toledo, Ohio) submitted a

Letter of Acceptance, Waiver and Consent in which she was fined $5,000 and suspended

from association with any FINRA member in any capacity for one year. The fine must be

paid either immediately upon Kreuz’ reassociation with a FINRA member firm following her

suspension, or prior to the filing of any application or request for relief from any statutory

disqualification, whichever is earlier. Without admitting or denying the findings, Kreuz

consented to the described sanctions and to the entry of findings that she wrote 37 checks

totaling approximately $4,869 from her personal brokerage account at her member firm

at times when she did not have enough funds to cover the amounts. The findings stated

that if the amount of a withdrawal exceeded available funds in her account, Kreuz, as the

account representative, received a non-sufficient funds (NSF) notification and could request

payment of the debit. The findings also stated that when Kreuz received NSF notifications,

she requested that the checks be paid even though she knew there were insufficient funds

in her account to cover the amounts until her paycheck was deposited to the account

The suspension is in effect from November 21, 2011, through November 20, 2012. (FINRA

Case #2011026616801)

The fine must be paid either immediately upon Lichtenstein’s reassociation with a FINRA

member firm following his suspension, or prior to the filing of any application or request

40 Disciplinary and Other FINRA Actions

January 2012

fine must be paid either immediately upon Lopez’ reassociation with a FINRA member

firm following his suspension, or prior to the filing of any application or request for relief

from any statutory disqualification, whichever is earlier. Without admitting or denying

the findings, Lopez consented to the described sanctions and to the entry of findings that

without the knowledge or consent of a customer, Lopez opened two bank accounts for the

customer, a checking and savings account, signed the customer’s name on each account’s

respective signature cards, personally funded the checking account and signed withdrawal

slips to withdraw money he deposited in the checking account; the savings account was

never funded. The findings stated that without a second customer’s knowledge or consent,

Lopez opened a checking account for the customer, signed that customer’s name on the

signature card, personally funded the checking account and signed withdrawal slips to

withdraw money he deposited in that account.

The suspension is in effect from December 5, 2011, through May 4, 2012. (FINRA Case

#2011027885801)

Martino consented to the described sanctions and to the entry of findings that as president

of his member firm, he failed take sufficient action to ensure that his firm established,

and its supervisory practices and knew that the parent company notes and preferred stock

were not appropriate for customers with low or moderate risk tolerance, or with limited

investment experience. The findings also included that the firm’s procedures did not set

forth adequate mechanisms for reviewing the suitability of sales of high-risk products such

as the notes and preferred stock. They also did not allocate responsibility for performing

specific tasks to identified individuals. The procedures instead assigned supervisory

those responsibilities were to be carried out. As a result, no one at the firm undertook any

substantive review of the suitability of the sales of the securities to the firm’s customers,

including risk-averse customers. The findings also included that instead of taking

appropriate action to ensure that the procedures addressed these issues in connection with

the sale of the notes and preferred stock, Martino assumed that the principal responsible

for private placements or the firm’s CCO would review the customer account information.

The firm’s registered representatives sold private placements to customers for whom the

investment was unsuitable because they had conservative or moderate risk tolerances,

many had limited investment experience, and many invested large percentages of their

annual income in the notes or preferred stock. In addition, a number of the customers did

not satisfy the criteria for accredited investor status required under Rule 506. Because of

the deficiencies in the firm’s procedures, the sales of the notes and preferred stock to these

customers did not receive adequate supervisory review.

The suspension is in effect from November 21, 2011, through January 19, 2012. (FINRA Case

#2011026346201)

books and records by inserting his email address in his firm’s computerized customer

records that were supposed to record the customers’ email addresses, so the firm’s emails

account numbers, or other information on the existing forms and replacing them with new

information. McKinnis then used the altered documents to make account transfers.

48 Disciplinary and Other FINRA Actions

January 2012

to a customer. The fine and restitution must be paid either immediately upon Rowley’s

reassociation with a FINRA member firm following his suspension, or prior to the filing of

any application or request for relief from any statutory disqualification, whichever is earlier.

Without admitting or denying the findings, Rowley consented to the described sanctions

and to the entry of findings that he recommended and engaged in excessive, unsuitable

trading in customers’ accounts. The findings stated that Rowley did not have reasonable

grounds for believing that the recommended trades were suitable for the customers, and

the trading was inconsistent with the customers’ age, investment objectives, financial

situation and needs. The findings also stated that Rowley’s trades generated total gross

commissions of approximately $79,433. One customer’s account decreased in value by

approximately $177,000 and the other customer’s account experienced a realized loss of

$143,166.26.

The suspension is in effect from December 5, 2011, through June 4, 2012. (FINRA Case

#2009020612001)

whichever is earlier. Without admitting or denying the findings, Rybalchenko consented

to the described sanctions and to the entry of findings that he effected discretionary

Ronnie Charles Saliba (CRD #2625194, Registered Supervisor, Old Westbury, New York)

submitted a Letter of Acceptance, Waiver and Consent in which he was suspended from

association with any FINRA member in any capacity for two years. Without admitting

or denying the findings, Saliba consented to the described sanction and to the entry of

findings that he improperly used his block trading account to allocate favorable trades

when placing an order using the block account. The findings also included that if the price

was favorable, Saliba allocated the trade to either one of his customers’ accounts, or both,

from which he earned commissions. If the price was not favorable, Saliba allocated the

trade to the account the branch manager managed, from which he earned management

fees. FINRA found that one of the cherry-picked trades was also an unauthorized trade

because the branch manager had not authorized any trade activity for that security. FINRA

also found that Saliba’s cherry picking and unauthorized trading cost the discretionary

advisory account approximately $60,000. The firm reimbursed that account for its losses,

with Saliba contributing to the reimbursement amount.

findings also included that Sciarra failed to respond to FINRA requests for information.

(FINRA Case #2010022840501)

Elijah Smith (CRD #5632806, Registered Representative, Findlay, Ohio) submitted a

Letter of Acceptance, Waiver and Consent in which he was barred from association with

any FINRA member in any capacity. Without admitting or denying the findings, Smith

consented to the described sanction and to the entry of findings that he opened traditional

50 Disciplinary and Other FINRA Actions

January 2012

the accounts in the employee’s name and signed his name to the accounts without her

knowledge or authorization. After the employee complained to Smith, Smith terminated

her from her position. The findings also included that for another employee, Smith opened

the IRA accounts by submitting forms bearing a signature that purported to be the

employee’s. Smith opened the accounts in the employee’s name and forged his signature

without his knowledge or authorization. When the firm confronted Smith, Smith falsely

informed the firm that the employee signed his own application.

box was improperly checked “no.” Smith opened the IRA accounts and forged his relatives’

signatures on each of the account applications without their knowledge or authorization.

In addition, FINRA determined that Smith admitted to his firm that he submitted the

applications and opened the accounts in order to reach production numbers. (FINRA Case

#2011025962601)

consented to the described sanction and to the entry of findings that she misappropriated

$23,223 in cash premiums from customers of her member firm’s affiliated insurance

personal expenses, thereby misappropriating the $16,758. The findings also included

that in response to questions by her insurance company’s auditor, Solis admitted to using

cash premium payments for personal reasons. Solis has repaid the $16,758 owed to the

affiliated insurance company’s account, but to date has not repaid the insurance company

account shortages in the amount of $6,465. (FINRA Case #2010025009001)

William Slay Stevens (CRD #2889238, Registered Representative, Montgomery, Alabama)

submitted a Letter of Acceptance, Waiver and Consent in which he was barred from

association with any FINRA member in any capacity. Without admitting or denying the

findings, Stevens consented to the described sanction and to the entry of findings that he

made recommendations to a customer that were unsuitable based on the customer’s risk

tolerance and investment objectives, and involved an over concentration of liquid net worth

in an illiquid investment. The findings stated that Stevens recommended that a customer

invest in promissory notes issued by a newly-formed holding company in the process of

acquiring his member firm and other affiliates. Based upon Stevens’ recommendation, the

customer invested $250,000 in the company’s promissory notes. The findings also stated

that Stevens approached the customer about investing in the company’s preferred stock

involving a private placement offered pursuant to SEC Regulation D, Rule 506. Based upon

Stevens’ recommendation, the customer purchased some shares of each series of the

company’s preferred stock in blocks of $65,000, for a total investment of $260,000. The

FINRA found that Stevens had no reasonable basis for recommending that the customer

invest in a concentrated position of high-risk investments in the company’s securities.

FINRA also found that Stevens failed to disclose numerous material facts to the customer

in connection with the sale of the promissory notes. The company’s PPM, which

Stevens provided in connection with the sale of the preferred stock, contained material

misstatements and omitted to disclose material facts, and was not updated to disclose

subsequent material events when they occurred. In particular, Stevens failed to disclose,

among other things, that the company was a startup business with no operating history,

limited capital and was dependent on raising additional capital. In addition, FINRA

determined that Stevens failed to disclose that his firm lost a substantial number of its

52 Disciplinary and Other FINRA Actions

January 2012

Jeffrey James Sturm (CRD #1909934, Registered Representative, Roberts, Illinois) submitted

a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended

from association with any FINRA member in any capacity for three months. Without

admitting or denying the findings, Sturm consented to the described sanctions and to the

entry of findings that a member firm had informed its representatives and customers that

it would no longer offer one mutual fund and would be liquidating existing positions in the

fund. The findings stated that Sturm forgot to exchange a customer’s holdings of shares

of that mutual fund for shares of another mutual fund, and when he realized his mistake,

he immediately placed the order to exchange the mutual funds, without knowing that

the customer had died; Sturm did not receive a commission for the transaction. Since the

customer had died prior to the trades being executed and Sturm did not have authority

from the customer’s beneficiaries to place the orders, the mutual fund exchange was

unauthorized. The findings also stated that Sturm had customers sign blank forms or

sign and date forms authorizing a partial or full withdrawal from their variable deferred

customer’s outside non-brokerage online account to Sullivan’s own personal outside non-

brokerage online account, which was later transferred back from Sullivan’s personal outside

non-brokerage online account to the customer’s account with the firm. The findings also

included that at the time Sullivan commingled the customer’s funds with his own, he knew

that the firm prohibited its employees from commingling funds with customers.

Brandon James Thompson aka Brandon James Lumpkins (CRD #1918634, Registered

Supervisor, San Jose, California) submitted a Letter of Acceptance, Waiver and Consent in

which he was fined $10,000 and suspended from association with any FINRA member in

any capacity for 15 business days. Without admitting or denying the findings, Thompson

consented to the described sanctions and to the entry of findings that he failed to ensure

reasonable supervision of customer accounts at a member firm’s branch office, failed to

implement a reasonable system of follow-up and review of the delegated tasks, and failed

to detect or investigate warning signs concerning a former registered sales assistant’s

wrongful taking of customer funds. The findings stated that the sales assistant gained

access to confidential client account information and used her knowledge of customer

accounts, and lapses in the firm’s supervisory practices, to take advantage of some of

the firm’s most vulnerable customers. The individual forged client signatures, falsified

account records and engaged in unauthorized trades, transfers and disbursements of

customer funds, misappropriating $749,978 from firm customers. The findings also

FINRA found that at the same time, a check-writing feature was added to the fraudulent

account and a checkbook was sent to the individual’s residential address. Transferred funds

were subsequently disbursed to the individual using the newly-issued checks. FINRA also

found that Thompson did not ensure that a reasonable system of follow-up and review

was consistently implemented, even when supervisory deficiencies were identified through

the firm’s Risk and Control Self-Assessment (RCSA). During a calendar quarter, the RCSA

54 Disciplinary and Other FINRA Actions

January 2012

FINRA determined that in one case, a report identified two mismatches that the

individual was instructed to resolve. On the hard copy of the report, the individual wrote

an explanation that failed to address either of the two mismatches. The individual’s

explanation was accepted without further inquiry. Although Thompson delegated review

of the reports to others at the branch, he failed to follow-up and review to ensure that

these delegated tasks were performed reasonably. Moreover, FINRA found that Thompson’s

supervision of customer accounts at the branch was unreasonable and failed to ensure

compliance with FINRA rules and the federal securities laws; he failed to implement

a reasonable system of follow-up and review concerning the supervision of customer

accounts and, as a result failed, to detect or investigate warning signs concerning the

individual’s misconduct.

Case #2008013231503)

borrowed $5,000 from an investor and customer of his member firm contrary to his firm’s

compliance manual that generally prohibited representatives from borrowing money

Dennis Lee Travis (CRD #2166809, Registered Representative, Pittsburgh, Pennsylvania)

submitted a Letter of Acceptance, Wavier and Consent in which he was fined $5,000 and

suspended from association with any FINRA member in any capacity for 10 business days.

Without admitting or denying the findings, Travis consented to the described sanctions and

The suspension was in effect from December 19, 2011, through January 3, 2012. (FINRA

David William Trende (CRD #2725055, Registered Representative, Hinckley, Ohio) was

fined $10,000 and suspended from association with any FINRA member in any capacity for

three months. The fine is due and payable upon Trende’s return to the securities industry.

The sanctions were based on findings that Trende falsified Federal Reserve forms with

respect to customers and caused his firm to maintain false books and records by providing

false information on Purpose Statements and submitting them to the firm. The findings

stated that a Stock-to-Cash program was designed to help customers of insurance agents

fund purchases of fixed annuity and fixed life insurance products; loan documents and

federal regulations prohibited investment of the loan proceeds in margin securities. The

program’s terms prohibited borrowers from investing in variable annuities. As part of the

Stock-to-Cash loan process, Trende was required to provide a Purpose Statement setting

forth the intended use of proceeds, in order to ensure compliance with Federal Reserve

Board regulations restricting the extension of margin credit. Trende had general discussions

with the customers who agreed to borrow approximately $180,000 concerning the possible

the firm received a commission from the annuity sale, and Trende received a payout from

the firm. FINRA found that both customers profited on their investments in the securities

56 Disciplinary and Other FINRA Actions

January 2012

Tyge Thomas Tuccillo (CRD #3075541, Registered Representative, Venice, Florida)

submitted a Letter of Acceptance, Waiver and Consent in which he was barred from

association with any FINRA member in any capacity. Without admitting or denying the

findings, Tuccillo consented to the described sanction and to the entry of findings that

FINRA requested him to appear for a scheduled on-the-record testimony in connection with

a private-placement offering sales practice investigation. The findings stated that Tuccillo

informed FINRA that he was no longer associated with a FINRA member firm and had no

intention of ever doing so in the future. Tuccillo informed FINRA that he would not appear

for scheduled testimony on any date in the future. (FINRA Case #2010021240401)

paid either immediately upon Weaver’s reassociation with a FINRA member firm following

his suspension, or prior to the filing of any application or request for relief from any

statutory disqualification, whichever is earlier. Without admitting or denying the findings,

Weaver consented to the described sanctions and to the entry of findings that he did not

complete end-of-term conversion forms related to term life insurance policy renewals in

compliance with his member firm’s procedures. The findings stated that Weaver did not

obtain customers’ signatures on the end-of-term conversion forms, but rather signed

customers’ names to these documents. In these cases, Weaver obtained the customers’

automatic withdrawal from the customers’ bank account of premiums to pay for

continuing coverage.

submitted an Offer of Settlement in which he was barred from association with any FINRA

member in any capacity. Without admitting or denying the allegations, Wilmot consented

Shawn David Young (CRD #5079413, Registered Representative, West Jordan, Utah)

submitted a Letter of Acceptance, Waiver and Consent in which he was barred from

association with any FINRA member in any capacity. Without admitting or denying the

findings, Young consented to the described sanction and to the entry of findings that

he effected multiple option transactions in his personal brokerage account held at his

then-member firm when he lacked the necessary funds to pay for them. (FINRA Case

#2011028116701)

Complaints Filed

FINRA issued the following complaints. Issuance of a disciplinary complaint represents

Andrew James Aragona (CRD #1320844, Registered Representative, Deerfield Beach,

Florida) was named as a respondent in a FINRA complaint alleging that he recommended

Aragona received $67,500 in commissions. The complaint also alleges that less than a

year later, Aragona recommended that the customer switch the annuity for another one

because he believed it provided more flexibility in volatile market conditions and allowed

investments in subaccounts; the annuity was purchased for $1,017,195 and the customer

incurred approximately $61,000 in surrender fees for which Aragona received $56,000 in

commissions. The complaint further alleges that because the customer incurred a total of

approximately $130,000 in surrender fees in less than one year, the costs outweighed any

purported benefits; therefore, the recommendations were not suitable for the customer.

(FINRA Case #2010023963301)

Brookstone Securities, Inc. (CRD #13366, Lakeland, Florida) was named as a respondent

recommended and sold two private placement offerings in non-convertible redeemable

cumulative preferred stock and through its president, FINOP/CCO and another CCO, failed

to conduct adequate due diligence of the offerings before allowing its representatives

to recommend and sell the securities. The complaint alleges that without adequate due

diligence, the firm could not identify and understand the inherent risks of the offerings

64 Disciplinary and Other FINRA Actions

January 2012

Daniel Martin Croke (CRD #4363980)

Carlsbad, California

(November 10, 2011)

FINRA Arbitration Case #10-02514

Carl Morris Drury III (CRD #2574178)

Atlanta, Georgia

(November 30, 2011)

FINRA Arbitration Case #11-00284

Coronado, California

(November 4, 2011)

Cary, North Carolina

(November 30, 2011)

FINRA Arbitration Case #09-07172

James Brian Herrick (CRD #4682415)

Venice, Florida

(November 10, 2011)

FINRA Arbitration Case #11-01810

David Jacob Herzog (CRD #1688885)

Houston, Texas

(November 10, 2011)

66 Disciplinary and Other FINRA Actions

January 2012

Similarly, the floating-rate loan funds sold by Chase were subject to significant credit

risks and certain of the funds could also be illiquid. Accordingly, concentrated positions

in the funds were not suitable for certain investors with conservative risk tolerances or

those seeking preservation of principal. Despite this, Chase brokers recommended the

purchase of floating-rate loan funds to customers who had conservative risk tolerances,

were seeking preservation of principal or were seeking a highly liquid investment. These

customers suffered unreimbursed losses of nearly $500,000 as a result of these unsuitable

recommendations.

On Oct. 4, 2011, FINRA issued an Investor Alert called Public Non-Traded REITs – Perform a

Careful Review Before Investing to help investors understand the benefits, risks, features

and fees of these investments.

In concluding this settlement, the firm neither admitted nor denied the charges, but

68 Disciplinary and Other FINRA Actions

January 2012

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “FINRA

continues to look closely at sales of private placements to determine whether the selling

firms are fulfilling their responsibilities to customers. These actions reinforce that any firm

or individual who fails to conduct reasonable investigations of these offerings, especially in

light of multiple red flags, will not be allowed to shift all the responsibility to the issuers of

the fraudulent private placements.”

• Investors Capital Corporation of Lynnfield, MA, was ordered to pay roughly $400,000 in

• National Securities Corporation of Seattle, WA, was ordered to pay $175,000 in

• Securities America, Inc. of La Vista, NE, was censured and fined $250,000 in connection

• Leroy H. Paris II, former President and Chief Executive Officer for the now-defunct

two of its earlier offerings. Nevertheless, Medical Capital proceeded with its last offering,

Medical Capital’s remaining assets. The SEC action is pending.

From September 2006 through January 2009, Provident Asset Management, LLC, marketed

70 Disciplinary and Other FINRA Actions

January 2012

of that fact. In July 2009, the SEC filed a civil injunctive action in the Northern District of

Texas naming Provident and others for violations of the federal securities laws. The Court

granted the SEC’s request for a temporary restraining order, an emergency asset freeze

and appointment of a receiver to take control of Provident and preserve the assets for the

benefit of the defrauded investors. The SEC action is pending. On March 18, 2010, FINRA

announced that it had expelled Provident Asset Management, LLC, a Dallas-based broker-

dealer, for marketing a series of fraudulent private placements offered by its affiliate,

Provident Royalties, LLC.

Leroy Henry Paris’ suspension is in effect from July 18, 2011, through January 17, 2012.

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, “Wells Fargo

failed to review reverse convertible transactions to ensure they were suitable and also did

not provide sales charge discounts to eligible customers purchasing unit investment trusts,

both serious failings that harmed investors.”

UITs offer sales charge discounts on purchases that exceed certain thresholds

(“breakpoints”) or involve redemption or termination proceeds from another UIT during the

initial offering period. Between January 2006 and July 2008, Wells Fargo failed to provide

certain eligible customers with these “breakpoint” and “rollover and exchange” discounts.

Under FINRA rules, a firm or individual named in a complaint can file a response and