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
Michael Bruce Ralby (CRD #1301072, Boca Raton, Florida)
Without admitting or denying the findings, Ralby consented to the sanction and to the entry of findings that he refused to appear for a FINRA on-the-record testimony in connection with its investigation into whether he had accepted loans from a customer.
Mark Kaplan (CRD #1978048, Merrick, New York)
Without admitting or denying the findings, Kaplan consented to the sanction and to the entry of findings that he willfully violated Section 10(b) of the Securities Exchange Act of 1934, Securities Exchange Act Rule 10b-5, and violated FINRA Rule 2020, by churning and engaging in unsuitable excessive trading in the brokerage accounts of a senior customer. The finding stated that Kaplan exercised de facto control over the customer’s accounts and the customer relied on Kaplan to direct investment decisions in his accounts, contacting Kaplan frequently. In addition, the customer was experiencing a decline in his mental health. The court granted an application by the customer’s nephew to act as his legal guardian and manage his financial affairs after he was diagnosed with dementia. Kaplan effected more than 3,500 transactions in the customer’s accounts, which resulted in approximately $723,000 in trading losses and generated approximately $735,000 in commissions and markups for Kaplan and his member firm.
Stephen John Woods (CRD #4390407, Freeport, New York)
Without admitting or denying the findings, Woods consented to the sanctions and to the entry of findings that he failed to produce documents and information requested by FINRA in connection with an ongoing investigation regarding his trading activity in customer accounts.
Gary John Basralian (CRD #14385, Springfield, New Jersey)
Without admitting or denying the findings, Basralian consented to the sanction and to the entry of findings that he failed to provide FINRA-requested documents and information in connection with an investigation into, among other things, the circumstances of his resignation from his member firm. The findings stated that the firm had filed a Uniform Termination Notice for Securities Industry Registration (Form U5) terminating Basralian’s registrations and reporting that he resigned after a customer allegation of fraud and breach of contract related to investments away from the firm.
William Bernard Lyons (CRD #1521283, Middletown, New Jersey)
Without admitting or denying the findings, Lyons consented to the sanctions and to the entry of findings that he failed to reasonably supervise an individual’s outside business activities with a non-FINRA-regulated broker-dealer and to supervise the individual’s private securities transactions. The findings stated that Lyons, in his capacity as a general securities principal, was delegated the responsibility to review, approve and enforce the member firm’s WSPs with respect to outside business activities and private securities transactions. The firm’s WSPs required Lyons to determine whether the activity was, in fact, an outside business activity, or a prohibited private securities transaction. Lyons was required to investigate red flags indicating that the individual was engaging in private securities transactions away from the firm; however, he ignored numerous red flags indicating that the individual was engaging in unapproved private securities transactions.
Mark Jude Ketner (CRD #1138522, Dix Hills, New York)
Without admitting or denying the findings, Ketner consented to the sanctions and to the entry of findings that he engaged in an unsuitable pattern of short-term trading of unit investment trusts (UITs) in connection with the accounts of customers. The findings stated that Ketner repeatedly recommended that these customers sell these products well before their maturity dates. The majority of the UITs that Ketner recommended had maturity dates of at least 24 months and carried sales charges ranging from 1.95 percent to 3.95 percent. Nevertheless, Ketner repeatedly recommended that his customers sell their UIT positions less than a year after purchase. The average holding period for the UITs recommended by Ketner was 195 days. In addition, Ketner recommended on multiple occasions that a customer use the proceeds from the short-term sale of a UIT to purchase another UIT with identical investment objectives.