FINRA Broker Disciplinary Action Report: April 2017
Each month, 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. 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, 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.
FINRA Firms & Brokers, Fined & Sanctioned
Beaconsfield Financial Services, Inc. (CRD #14634, Canonsburg, Pennsylvania)
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to reasonably supervise one of its registered representative’s private securities transactions. The findings stated that the representative was associated with an unaffiliated RIA that was disclosed to the firm and approved as an outside business activity. Although the representative participated in securities transactions for compensation through the RIA, including transactions executed on behalf of firm customers, the firm did not record these securities transactions on its books and records or otherwise supervise these activities, as required.
Dawson James Securities, Inc. (CRD #130645, Boca Raton, Florida)
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it had supervisory failures relating to research and private offerings and that those supervisory failures led to substantive rule violations in both areas.
Feltl & Company (CRD #6905, Minneapolis, Minnesota)
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish, maintain and enforce WSPs that were reasonably designed to supervise the personal trading activity of persons associated with the firm for conflicts of interest. The findings stated that during the relevant period, one registered representative associated with the firm sold more than 900,000 shares in a penny stock that he personally owned, at or around the same time he was recommending to his firm customers that they purchase shares in the penny stock. The representative sold his shares through a firm account held in his own name.
Kelly Clayton Althar (CRD #2666723, San Pablo, California)
Without admitting or denying the allegations, Althar consented to the sanction and to the entry of findings that he made unsuitable recommendations and engaged in excessive trading in accounts held by an elderly customer. The findings stated that Althar engaged in high-volume trading to generate commissions and over- concentrated the customer’s accounts in risky securities, despite the fact that the customer was close to retirement and only wanted low-risk investments. Althar’s trading decimated the customer’s accounts, which constituted the bulk of her net worth and retirement savings.
James David Calder II (CRD #4022637, Borger, Texas)
Without admitting or denying the findings, Calder consented to the sanctions and to the entry of findings that he engaged in an undisclosed outside business activity by participating in the sale of life settlement contracts to customers of his member firm after it had expressly denied his request to participate in such activity. The findings stated that Calder recommended life settlement investments to the customers, and when they expressed interest in investing, he referred them to his wife to make their investments. Calder further facilitated the customers’ investments by answering their questions about life settlement investments and providing them with the necessary paperwork to make the investments. The customers dealt exclusively with Calder, not his wife, in connection with making their life settlement investments. Calder and his wife received into a joint bank account $8,925 in commission payments for life settlement sales.
Timothy Allen England (CRD #5718567, Columbus, Indiana)
Without admitting or denying the findings, England consented to the sanction and to the entry of findings that he refused to respond to FINRA’s request for documents and information during the course of its investigation into allegations that he converted funds from a community organization while acting as its treasurer.
Larry Westly Farmbry (CRD #1017621, Philadelphia, Pennsylvania)
Without admitting or denying the findings, Farmbry consented to the sanctions and to the entry of findings that he made discretionary trades in customer accounts without the customers’ written authorization and without his member firm having approved the accounts for discretionary trading.
Adam Stuart Fritzsche (CRD #2821218, Canterbury, Connecticut)
Without admitting or denying the findings, Fritzsche consented to the sanction and to the entry of findings that he made unsuitable recommendations to customers that were inconsistent with the customers’ investment objectives and resulted in overconcentration of their liquid net worth in an alternative investment. The findings stated that the alternative investment was a speculative, illiquid investment that, according to its registration statement, was suitable only as a long-term investment for persons of adequate financial means who had no need for liquidity. At the time of Fritzsche’s 18 Disciplinary and Other FINRA Actions April 2017 recommendations, all of the customers were retired and had conservative investment objectives. Fritzsche’s recommendations resulted in an undue concentration of the customers’ liquid net worth in a single, high-risk, illiquid investment. The findings also stated that Fritzsche caused his member firm’s books and records to be inaccurate by submitting forms that misrepresented the net worth of the customers. Fritzsche attempted to circumvent the firm’s procedures, which prohibited over-concentrating customers’ liquid net worth in alternative investments, by overstating the customer’s net worth on forms he submitted to the firm on their behalf.
Joan Marie Larsen (CRD #4504926, Keansburg, New Jersey)
Without admitting or denying the findings, Larsen consented to the sanction and to the entry of findings that she accepted a $50,000 interest-free personal loan from an elderly customer who was not an immediate family member. The findings stated that Larsen’s member firm did not have written procedures permitting such a loan. Although Larsen subsequently repaid $3,000, $47,000 of the principal loan amount remains unpaid. The findings also stated that Larsen refused to appear and provide FINRA with on-the-record testimony during the course of its investigation of this matter.
Jaoshiang Luo (CRD #2143876, Flushing, New York)
Lo was barred from association with any FINRA member in any capacity and ordered to pay $109,769.88, plus prejudgment interest, in restitution to customers. The NAC modified the sanctions following appeal of an OHO decision. The sanctions were based on findings that Luo made material misrepresentations and omissions in connection with the sale of high interest rate promissory notes issued by his member firm’s parent company. The findings stated that Luo sold the high interest rate promissory notes to two unsophisticated investors with conservative risk tolerances and investment objectives without a reasonable basis for determining that the notes were suitable for any investor or for these specific investors. Additionally, Luo made material misrepresentations and omissions concerning the risks of the notes in connection with the sales to these customers. As a result of his conduct, Luo violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and FINRA Rule 2020.
Matthew Christopher Maczko (CRD #1888519, Downers Grove, Illinois)
Without admitting or denying the findings, Maczko consented to the sanction and to the entry of findings that he engaged in excessive trading in an elderly customer’s accounts. The findings stated that Maczko effectively controlled these accounts, which had an average aggregate value of $3 million. Maczko’s transactions in these accounts generated approximately $581,650 in commissions, $84,270 in other fees, and approximately $397,000 in trading losses. This level of trading was unsuitable for the customer given her investment profile, including her age, risk tolerance and income needs.
Miguel Ortiz (CRD #5893323, New York, New York)
Ortiz was barred from association with any FINRA member in any capacity. The NAC imposed the sanctions following appeal of an OHO decision. The sanction was based on findings that Ortiz fraudulently misrepresented material facts in connection with communications with owners of an investment account by distributing misleading emails and falsified account statements that misrepresented the true composition and value the account to conceal the losses in the account. The findings stated that Ortiz created the false account statements to mislead the account holders into believing their joint brokerage account with his former member firm contained assets and investments that it did not contain, and to prevent them from learning the true value of their joint account. Before, during, and after Ortiz’s association with his firm, he misrepresented the composition and value of the account and actively concealed significant losses from them to avoid confrontation and prevent them from liquidating their account. The customers ultimately closed their joint account after having lost approximately $162,843.
Curtis C. Randle El (CRD #4877870, Pittsburgh, Pennsylvania)
Without admitting or denying the findings, Randle El consented to the sanctions and to the entry of findings that he recommended and effected short-term trades involving Class A mutual fund shares and UITs in accounts of elderly customers’ with conservative investment objectives without having a reasonable basis for believing that such transactions were suitable.
For the full Disciplinary Action Report from FINRA, visit their website by clicking here.
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.