FINRA Broker Disciplinary Action Report August 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
Coastal Equities, Inc.
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 a reasonably designed supervisory system for its representatives’ sales of leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs). The findings stated that the firm’s procedures required it to perform due diligence on each new product sold to customers to ensure that the firm and its representatives understood the nature of the product and its potential risks and rewards.
Wells Fargo Securities, LLC
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to report all of its reportable conventional options positions for an unknown but significant period of time because of the firm’s erroneous belief that the positions were not reportable and then, after determining that the firm would begin reporting these positions, the firm failed to develop and implement a Large Options Position Report (LOPR) system.
Legend Securities, Inc.
An OHO Decision became final in which the firm was fined a total of $475,000 and ordered to pay $884,436.24, plus interest, in restitution to customers. The sanctions were based on findings that the firm failed to have a reasonable supervisory system and WSPs to ensure it timely reported customer complaints, filed timely amendments to Uniform Application for Securities Industry Registration or Transfer (Form U4) and Uniform Termination Notice for Securities Industry Registration (Form U5), reviewed incoming and outgoing email communications, and considered heightened supervision for brokers with histories of misconduct. The findings stated that the firm failed to report, or reported late, customer complaints to FINRA, and failed to file and timely file amendments to Forms U4 for seven of its registered representatives. The findings also stated that the firm improperly charged customers in 34,313 securities transactions.
Paul Wescoe Smith
Without admitting or denying the findings, Smith consented to the sanction and to the entry of findings that he failed to provide FINRArequested documents and information related to him conducting a private securities transaction without notifying his member firm
Anthony Joseph Verzi
Without admitting or denying the findings, Verzi consented to the sanction and to the entry of findings that he refused to appear for FINRA-requested on-the-record testimony during the course of an investigation into his potential unsuitable trading of UITs in customer accounts.
Thomas Aloysius Skove
Without admitting or denying the findings, Skove consented to the sanction and to the entry of findings that he failed to appear and provide FINRA requested testimony in connection with an investigation into allegations of fraudulent activity relating to pre-arranged trading.
Lawrence Marshall Thomas
Without admitting or denying the findings, Thomas consented to the sanction and to the entry of findings that he refused to provide FINRA-requested on-the-record testimony in connection with an investigation into his recommendation that his member firm’s customers purchase an unauthorized product.
Blake P. King
Without admitting or denying the findings, King consented to the sanction and to the entry of findings that he failed to provide to FINRA-requested documents and information related to an investigation into allegations that he may have engaged in unauthorized trading in customer accounts
Mark Charles Koehler
Without admitting or denying the findings, Koehler consented to the sanction and to the entry of findings that he refused to produce FINRA requested information and documents after it commenced an investigation following receipt of a tip that he had engaged in unsuitable trades in the account of a senior customer. The findings stated that during its investigation, FINRA also reviewed trading in certain other of Koehler’s customer accounts, including those associated with a second customer and her senior customer parents. FINRA sought to investigate, among other activity, whether Koehler engaged in unsuitable trading, including short-term mutual fund switching and excessive trading in customer accounts, placed undue influence on the second customer before her death, and failed to disclose to his member firm his status as a named beneficiary in the second customer’s will.
James Robert Schaedler, Jr.
Without admitting or denying the findings, Schaedler consented to the sanction and to the entry of findings that he refused to produce FINRA-requested information and documents during the course of an investigation into allegations that he exercised influence over an elderly former client, who ultimately amended her trust, which made him a partial beneficiary and the residual beneficiary of her $2.3 million dollar estate. The findings stated that the investigation was later expanded to include allegations that Schaedler also improperly received a $200,000 gift from a second elderly client.
Without admitting or denying the findings, Gordon consented to the sanctions and to the entry of findings that she recommended that her customer liquidate several diversified investments in her member firm brokerage and IRA accounts, and invest half of her liquid net worth in a single Master Limited Partnership focused on the energy sector. The findings stated that the recommendation was unsuitable because the investment represented an excessive concentration of the customer’s net worth. The Master Limited Partnership prospectus described the investment as speculative. Following Gordon’s recommendation, the customer invested a total of $334,000 in the Master Limited Partnership. Gordon’s recommendation that the customer invest half of her liquid net worth in this single sector focused Master Limited Partnership was not suitable for the customer in light of her financial condition and the excessively concentrated nature of the investment.
Christopher Robert Hickman
Without admitting or denying the findings, Hickman consented to the sanctions and to the entry of findings that he engaged in an unsuitable pattern of short-term trading of UITs in six customer accounts. The findings stated that Hickman repeatedly recommended that the customers purchase UITs and then sell these products within a year of purchase. The UITs that Hickman recommended had maturity dates of 24 months or longer and carried sales charges of up to 3.95 percent. The average holding period for the UITs purchased in these six customers’ accounts was just 136 days. In addition, on several occasions, Hickman recommended that his customers use the proceeds from the short-term sale of a UIT to purchase another UIT with similar or even identical investment objectives. As a result of these transactions, the six customers at issue suffered losses of approximately $115,989.75.
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.