FINRA NOVEMBER 2015 BROKER DISCIPLINARY REPORT

FINRA (Financial Industry Regulatory Authority)

 

For our part, in addition to circulating the entire FINRA broker-dealer disciplinary report to help get the word out about these alleged misdeeds, we like to pick out some of the highlights from each report. Specifically, we’re looking for schemes or abuses that might be more far-reaching than the individual cases brought through the FINRA arbitration process. In other words, we name names here because we hope to raise awareness out there about certain brokers and products that might otherwise go unnoticed except for the case appearing in the report. In this particular report, we noticed repeated alleged offenses of financial abuse against elderly clients and the misuse and lack of supervision of nontraditional or leveraged ETF investment products.

 

Brokerage Firms

J.H. Darbie & Co., Inc. of New York, New York and Wolf A. Popper, Inc. of New York, NY was censured; fined $230,000, $10,000 of which is joint and several with Popper; and is required to comply with undertakings in the AWC. Popper was censured; fined $10,000, which is joint and several with Darbie; and if, within three years from the date of Notice of Acceptance of the AWC, Darbie transfers its penny stock liquidation business to Popper, Popper shall agree to comply with the undertakings in the AWC. A lower fine was imposed on Popper after considering, among other things, the firm’s revenues and financial resources. Without admitting or denying the findings, the firms consented to the sanctions and to the entry of findings that the firms facilitated the deposit and liquidation of billions of shares of low-priced, microcap stocks for customers without having in place adequate procedures to assure that such liquidation transactions were scrutinized sufficiently. The findings stated that both firms failed to reasonably detect and investigate “red flags” indicative of potentially suspicious activity in connection with certain stock transactions, which might have required the filing of a suspicious activity report.

J.P. Turner & Company, L.L.C. was censured; fined $45,000; ordered to pay $21,230, plus interest, in restitution to customers; required to certify that it has corrected its systems and procedures with respect to the sale of non-traded REITs and BDCs; and ordered to review all non-traded REITs and BDC sales it made and certify that it had identified all transactions for which a customer did not receive the volume discount for which it was eligible and provide restitution, if necessary. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to identify and apply volume discounts to certain customers’ eligible purchases of non-traded REITs and BDCs, resulting in customers paying excessive sales charges of $21,230. The findings stated that the firm failed to establish, maintain and enforce a supervisory system and WSPs with respect to the sale of non-traded REITs and BDCs.

National Planning Corporation was censured; fined $30,000; ordered to pay $16,411.09 plus interest, in restitution to customers; ordered to provide certification that it has corrected its systems and procedures with respect to the sale of non-traded REITs and BDCs; and ordered to review all non-traded REIT and BDC sales it made and certify that it has identified all transactions for which a customer did not receive the volume discount for which it was eligible and provide restitution, if necessary. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to identify and apply volume discounts to certain customers’ eligible purchases of non-traded REITs, resulting in seven customers collectively paying excessive sales charges of $16,411.09 on nine purchases. The findings stated that with respect to the sale of non-traded REITs and BDCs, the firm failed to establish, maintain, and enforce a supervisory system and WSPs reasonably designed to identify accounts that would be eligible for volume discounts. The findings also stated that the firm relied on its associated persons, including supervisors, to ensure its customers received the volume discounts to which they were entitled, but failed to provide adequate guidelines, instructions or policies for its associated persons to follow to determine whether a customer’s purchase qualified for a volume discount and to ensure that the customer was made aware of the available discount.

Broker Misconduct

Philip Dunwoody Cox Jr. of Atlanta, GA was assessed a deferred fine of $10,000, suspended from association with any FINRA member in any capacity for three months, and required to pay deferred disgorgement of commissions received in the amount of $5,238.40, plus interest. Without admitting or denying the findings, Cox consented to the sanctions and to the entry of findings that he marked a total of 966 order tickets in 26 customer accounts as unsolicited when he had solicited each order by bringing the relevant security or transaction to the customer’s attention. The findings stated that the mismarked order tickets involved leveraged and inverse exchange-traded funds (ETFs). Cox mismarked the order tickets in contravention of his member firm’s WSPs, which prohibited registered representatives from soliciting leveraged and inverse ETFs.

Barry George Hartman of Montana was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Hartman consented to the sanction and to the entry of findings that he served on the board of directors of an unaffiliated privately held company without providing written notice to his member firm in the form the firm required. The findings stated that Hartman participated in private securities transactions by personally investing approximately $450,000 in the undisclosed outside business. Hartman also recommended that the firm’s customers invest in the undisclosed outside business and referred them directly to complete their investments. Hartman failed to provide written notice of these private securities transactions to the firm, and he failed to comply with firm procedures that required the firm’s pre-approval of such transactions.

Glenn Allen Moffitt of Nevada was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Moffitt consented to the sanction and to the entry of findings that he failed to appear for a FINRA on-the-record interview during its investigation into allegations that he converted at least $370,000 from an elderly customer.

Yuvraj Taneja of Virginia was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Taneja consented to the sanction and to the entry of findings that he electronically submitted fictitious applications for term life insurance policies to a non-member insurance company affiliated with his member firm, on behalf of purported customers that did not exist. The findings stated that Taneja created fake names for the applicants and used his friends’ bank accounts to submit payments for the policies. Taneja submitted and paid for these fictitious applications in order to win a contest sponsored by the insurance company.

Cory Don Williams of Maryland was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Williams consented to the sanction and to the entry of findings that he participated in at least 125 private securities transactions with another registered representative without providing written notice of the transactions to his member firm or receiving the firm’s approval. The findings stated that approximately $13.5 million of the transactions were by firm customers. Williams’ participation in the transactions included responding to customer requests related to investments in a company, authorizing wire transfers of funds from customer accounts at the firm to the company, and manually adding customers’ outside company holdings to consolidated statements that were sent to the customers. The company paid Williams approximately 3 percent of the assets he and the former registered representative sold to customers, half of which Williams remitted to the former registered representative, with proceeds to Williams totaling approximately $94,000. In early 2012, the company stopped paying dividends and its shares are currently worthless.

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