FINRA Broker Disciplinary Action Report March 2016

FINRA Broker Disciplinary Action Report March 2016

 

Each month and again on a quarterly basis, the agency that regulates the financial industry, FINRA (Financial Industry Regulatory Authority), produces a detailed report that runs down all disciplinary actions recently taken against brokerage firms and brokers. This long list of alleged wrongdoing and misconduct reads a lot like a police blotter. We strongly encourage any investor who suspects their broker and/or broker-dealer of having lost them money on dubious terms to at least skim this report to see if you recognize any names, schemes, products, or securities.

For our part, in addition to circulating the entire 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. View the full report here.

The Keystone Equities Group, L.P. (Ambler, Pennsylvania), John Plesnar Freeman (Newtown, Pennsylvania) and William Bruce Fretz Jr. (Souderton, Pennsylvania).

The firm was expelled from FINRA membership. Freeman and Fretz were barred from association with any FINRA member firm in any capacity. The findings stated that Freeman and Fretz controlled a private investment limited partnership, which they founded and for which they acted as managers. The findings stated that Fretz and Freeman, as fiduciaries of the private investment limited partnership, engaged in business-related misconduct that was inconsistent with just and equitable principles of trade in violation of NASD Rule 2110 and FINRA Rule 2010. Specifically, Freeman and Fretz violated their fiduciary duties to the investors in the private investment limited partnership by, among other things, using the fund’s assets to make self-interested loans, overvaluing their contributions to the fund, and loaning money to their struggling broker-dealer. The findings also stated that the firm, Freeman and Fretz made misleading statements and provided false and misleading information, including attaching falsely dated documents, in response to FINRA information requests during its investigation. The findings also included that Fretz willfully filed a false Uniform Application for Securities Industry Registration or Transfer (Form U4) and willfully failed to amend his Form U4 to disclose unsatisfied judgments filed against him.

Emergent Financial Group, Inc. (Bloomington, Minnesota) and Peter Brian Voldness (Bloomington, Minnesota).

Voldness and the firm and Voldness consented to the sanctions and to the entry of findings that the firm failed to reasonably supervise Voldness’ sale of a corporation’s shares to firm customers to ensure that he fully and specifically disclosed the source of the shares being purchased. The findings stated that prior to the corporation going public, Voldness was issued warrants to purchase shares of the corporation. Voldness later solicited certain firm customers to purchase shares in the corporation and sold to the customers shares from shares issued to him by exercising the warrants, for approximately $75,000. While Voldness disclosed to each purchaser that he was selling the corporation’s shares, he did not disclose that he was selling from his non-proprietary account. As a result, Voldness failed to disclose to all of his customers this financial conflict of interest. The findings also stated that the firm and Voldness failed to accurately record the terms and conditions of customer orders to purchase the shares on the firm’s records. Specifically, the firm and Voldness failed to mark certain of the customer order tickets for the purchase of the shares as solicited.

Fulcrum Securities, LLC (Saint Louis, Missouri)

Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to adequately enforce its WSPs to adequately detect, investigate and, if appropriate, report potentially suspicious activities or manipulative trading by customers in securities transactions involving the stocks of microcap issuers, each of which had little to no revenue or assets. The findings stated that the firm failed to review the transactions at issue, despite the presence of numerous “red flags” identified in its anti-money laundering (AML) policies and procedures. The findings also stated that the firm failed to conduct the required due diligence on correspondent accounts of foreign financial institutions and failed to maintain the required documentation. As a result, the firm failed to conduct reasonable inquiries into large sales of microcap securities issued by related entities with firm accounts.

Key Investment Services LLC (Brooklyn, Ohio)

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 sales charge discounts to certain customers’ eligible purchases of unit investment trust (UITs), which resulted in customers paying excessive sales charges of approximately $95,254.34. The findings stated that the firm has already paid restitution to all affected customers in addition to interest of $4,992.68. The findings also stated that the firm failed to establish, maintain, and enforce a supervisory system and WSPs reasonably designed to ensure that customers received sales charge discounts on all eligible UIT purchases.

Next Financial Group, Inc. (Houston, Texas)

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 sales-charge discounts to certain customers’ eligible purchases of UITs, which resulted in customers paying excessive sales charges of approximately $192,089.54. The findings stated that the firm failed to establish, maintain, and enforce a supervisory system and WSPs reasonably designed to ensure that customers received sales charge discounts on all eligible UIT purchases.

Marco Antonio Daniel aka Tony Daniel (Vista, California)

Without admitting or denying the findings, Daniel consented to the sanction and to the entry of findings that contrary to his member firm’s written policies and procedures, he borrowed a total of $19,015 from a customer. The findings stated that Daniel certified on the firm’s annual compliance questionnaire that he had read and understood the firm’s policies and procedures. However, Daniel accepted loans totaling $19,015 from the customer and did not repay the loans until after the customer complained to the firm. Daniel also failed to disclose the loans to the firm or receive the firm’s approval. After accepting the loans, Daniel inaccurately certified to the firm on an annual compliance questionnaire that he had not borrowed money from any customer. The findings also stated that Daniel engaged in an outside business activity without providing any notice to his firm. Daniel purchased pre-owned automobiles at a dealer auction with the intent to resell the automobiles for profit. Daniel used some of the funds he borrowed from the customer to engage in this activity.

Peter Nicholas Dourdas (Jamesville, New York)

He was barred from association with any FINRA member in any capacity. The sanction was based on findings that Dourdas failed to produce FINRA-requested documents and information or appear for testimony as part of FINRA’s investigation into his undisclosed outside business activities. The findings stated that Dourdas made material misrepresentations to his member firm in annual supervisory reviews regarding his outside business activities as a trustee.

Derek Steven Fish (Hanover, Pennsylvania)

Without admitting or denying the findings, Fish consented to the sanctions and to the entry of findings that he circumvented and violated his member firm’s gift procedures by accepting gifts of stock from a firm customer. The findings stated that Fish accepted a total of 750 shares of stock, which were collectively worth approximately $23,000 at the time. Fish concealed his receipt of these gifts by arranging for the shares to be transferred, with the customer’s consent, from the customer’s account to an account at the firm in the name of Fish’s father-in-law. Fish’s father-in-law subsequently sold the shares for $31,000 and gave the proceeds to Fish.

Michael Roger Griffith (Middle River, Maryland)

Without admitting or denying the findings, Griffith consented to the sanction and to the entry of findings that he submitted fictitious life insurance applications on behalf of a customer of his member firm, forged the customer’s signature on the applications, and set up an automatic bank debit for the policies using the customer’s banking information, all without the customer’s knowledge or authorization.

Michael William Hajek III (Treasure Island, Florida)

Without admitting or denying the findings, Hajek consented to the sanctions and to the entry of findings that he exceeded the scope of his member firms’ approval to conduct his Certified Public Accountant (CPA) business by assisting customers open and administer self-directed Individual Retirement Accounts (IRAs) away from the firms, and by recommending and facilitating customers’ investments in those accounts, some of which included securities. The findings stated that Hajek’s firms’ customers transferred a total of nearly $1.8 million in cash and assets from their firm accounts to their self-directed IRA accounts. Hajek continued to engage in this business even after his firm directed him to cease. Hajek was also involved in other outside business activities that he was obligated to disclose to his firms in writing, as required by their WSPs, but failed to do so. Hajek failed to properly disclose his involvement with outside business activities to a firm upon association with the firm. The findings also stated that Hajek participated in private securities transactions effected in customers’ self-directed IRAs totaling more than $2.3 million. These private securities transactions were done away from his firms. Hajek was required to notify his firms in writing of his participation prior to participating in them, but failed to do so.

Joseph Gregory Mahalick (Chicago, Illinois)

Without admitting or denying the findings, Mahalick consented to the sanction and to the entry of findings that he refused to cooperate with FINRA requests to appear and provide testimony in connection with a FINRA examination into his activities at his member firm concerning, among other things, potential sales practice violations, potential registration violations, and potential violations of books and records rules.

Kevin Patrick Murphy (New York, New York)

Without admitting or denying the findings, Murphy consented to the sanctions and to the entry of findings that he sold $1.2 million of shares and warrants in a private placement to four individuals and one limited partnership without his member firm’s knowledge or consent. The findings stated that Murphy did not secure the approval of the firm’s president and CCO as required by the firm’s WSPs, nor did Murphy provide prior written notice to the firm regarding these transactions.

Robert E. Richards (Boynton Beach, Florida)

Without admitting or denying the findings, Richards consented to the sanctions and to the entry of findings that he aided and abetted the price manipulation of penny stocks by brokers at other FINRA member firms. The findings stated that at the time Richards made trades in two companies’ securities, he was reckless in failing to recognize that his actions were part of an overall course of conduct that was illegal or improper and in failing to inquire sufficiently into whether the trades were part of such a course of conduct. The findings also stated that Richards failed to implement his member firm’s AML procedures. Despite the risks, Richards, as a supervisor for a branch, did not implement the firm’s AML compliance system. As a result, Richards was either unaware of, or chose to ignore, numerous red flags related to his branch’s market-making activity and the retail trading activity of its customers. Richards failed to monitor for red flags associated with suspicious activity; and when he became aware of red flags, failed to perform additional due diligence or report the suspicious activity to the firm’s AML compliance officer (AMLCO).

Lee Robert Sobel (Los Angeles, California)

He was barred from association with any FINRA member in any capacity. The sanction was based on findings that Sobel failed to respond to FINRA requests that he appear and provide sworn testimony in connection with a FINRA investigation into his involvement in a private placement.

Michael Bruce Winegar (Salem, Oregon)

Without admitting or denying the findings, Winegar consented to the sanction and to the entry of findings that he converted $100,000 from an elderly customer and used the funds to repay his family and personal debts, and to trade securities on his own behalf. The findings stated that Winegar enticed the elderly customer into paying him $100,000 and told the elderly customer that he would use the funds to help establish an independent investment advisory firm through which Winegar would supposedly satisfy the debt by providing the elderly customer with free investment advice over the next four years. Winegar never established an independent investment advisory firm, and at the time of the loan agreement, Winegar was planning on retiring from the securities industry. Shortly after obtaining the $100,000 from the elderly customer, Winegar sold his securities business to another registered representative at his firm and left the securities industry. As part of the sale, Winegar entered into a noncompete agreement that prevented him from providing investment advice to his former customers, including the elderly customer from whom Winegar had obtained the $100,000. Winegar used the elderly customer’s $100,000 for his own personal use, including paying off his daughter’s student loan debt and his own credit card bills. He also used some of the funds to engage in securities trading on his own behalf. Winegar has not repaid any of the funds obtained from the elderly customer.

FINRA Securities Litigation Attorneys

 

If you or someone you know has been a victim of investment fraud or broker misconduct, please contact our team of securities lawyers toll-free immediately for a free consultation at 1-888-462-3330 or via our online contact form.

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