FINRA Broker Disciplinary Action Report August 2018
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.
Brokers & Brokerages Barred, Suspended, or Fined by FINRA
Newport Coast Securities, Inc. and Douglas Anthony Leone
The firm appealed a National Adjudicatory Council (NAC) decision to the Securities and Exchange Commission (SEC). The firm was expelled from FINRA® membership, fined $403,000 and ordered to pay $853,617.04, plus prejudgment interest, jointly and severally, in restitution to customers.
Donnell Noah Bowen
Bowen was barred from association with any FINRA member in all capacities. Without admitting or denying the findings, Bowen consented to the sanction and to the entry of findings that he failed to provide FINRA with requested documents and information, and appear for on-the-record testimony, related to being under investigation at the time of his resignation from his former member firm for allegations of forgery of client signatures on non-variable insurance documents
William David Nelson - New York
Nelson was barred from association with any FINRA member in all capacities. Without admitting or denying the findings, Nelson consented to the sanction and to the entry of findings that he refused to appear and provide FINRA with testimony in connection with its investigation of allegations that he engaged in unsuitable and excessive trading in a customer’s account.
James Patrick Acosta - Belmar, New Jersey
Acosta was barred from association with any FINRA member in all capacities. Without admitting or denying the findings, Acosta consented to the sanction and to the entry of findings that he failed to appear and provide FINRA with requested on-the-record testimony related to his termination from his member firm.
James Edward Lyons - Shreveport, Louisiana
Lyons was barred from association with any FINRA member in all capacities. Without admitting or denying the findings, Lyons consented to the sanction and to the entry of findings that he refused to appear for FINRA on-the-record testimony.
John Douglas Wade - Placentia, California
Wade was barred from association with any FINRA member in all capacities. Without admitting or denying the findings, Wade consented to the sanction and to the entry of findings that he converted funds totaling $105,712.18 from his member firm’s elderly customers without authorization. The findings stated that Wade electronically transferred, without authorization, $47,570.47 from one of the elderly customers’ checking account (at a bank affiliated with the firm) to Wade’s own mortgage account. Wade similarly used funds from another elderly customer to pay his own mortgage. Wade had this customer withdraw funds from his firm account via third-party checks, in amounts totaling $51,141.71, and write a check in the amount of $7,000 from his checking account (at a bank affiliated with the firm), ostensibly to invest in real estate investment trusts (REITs). Wade did not use those funds for their intended purpose, to invest in REITs for the customer. Rather, Wade used those checks to pay his own mortgage.
Harold Lee Connell - Pinecrest, Florida
Connell was barred from association with any FINRA member in all capacities. Without admitting or denying the findings, Connell consented to the sanction and to the entry of findings that he willfully violated Section 10(b) of the Exchange Act and Rule 10b-5, and FINRA Rules 2010 and 2020 by participating in the sale of three unregistered Regulation D offerings through misrepresentations and omissions. The findings stated that Connell and others at his member firm raised over $4.5 million from individual investors in connection with the sale of the three unregistered Regulation D offerings. The private placement memorandums (PPMs) for the three offerings provided that investors’ funds would be used to make investments in a variety of companies. However, the first offering was invested 85 percent in one penny stock company. The other two offerings were primarily undisclosed self-offerings. Investors’ funds were transferred to the firm’s holding company, and from there, to the firm. The third offering’s PPM did not disclose that the companies that received their funds, the firm and its holding company, were deeply in debt. The third offering’s PPM also did not disclose that investor funds would be used to pay non-firm expenses and money owed to prior offering investors. None of the investors recouped any of their principal investments. The findings also stated that Connell sold the offerings without a reasonable basis to believe that they were suitable for any investor.
Ellen Vratoric - McKees Rocks, Pennsylvania
An Office of Hearing Officers (OHO) decision became final in which Vratoric was barred from association with any FINRA member in all capacities. The sanction was based on findings that Vratoric failed twice to appear and provide sworn testimony at an on-the-record interview in connection with FINRA’s review of allegations contained in a Form U5 and subsequent amendments filed by her member firm, and after additional customers complained about her sales of variable and fixed annuities.
Frank Dominic Corto - York, Pennsylvania
An AWC was issued in which Corto was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for three months. Without admitting or denying the findings, Corto consented to the sanctions and to the entry of findings that while he was expecting to resign his association with his member firm, Corto directed his office assistant to remove the telephone numbers of firm customers whom Corto had serviced from the firm’s database. The findings stated that Corto’s office assistant then worked with an intern to remove the telephone numbers. In total, and pursuant to Corto’s instructions, they removed 322 customer telephone numbers from the firm’s database. As a result, Corto caused the firm’s books and records to be incomplete with respect to these customers.
Allen Bernard Holeman - Marlboro, New Jersey
Holeman was fined 20,000 and suspended from association with any FINRA member in all capacities for four months. The NAC affirmed the findings of the OHO decision but modified the sanctions imposed. The sanctions were based on findings that Holeman willfully failed to timely amend his Form U4 to disclose IRS tax liens filed against him. Holeman also failed to disclose his outstanding tax liens on the compliance questionnaire that he submitted to his firm, even though FINRA had contacted him about the tax liens only two months earlier.
Jianan Yang - Jersey City, New Jersey
An AWC was issued in which Yang was fined $5,000 and suspended from association with any FINRA member in all capacities for 15 business days. Without admitting or denying the findings, Yang consented to the sanctions and to the entry of findings that he engaged in work as a career coach through an online career coaching company for approximately $10,000 in total compensation, without providing prior written notice or obtaining prior written approval from his member firm. The findings stated that Yang completed certain annual acknowledgements in which he incorrectly reported that he had no outside business affiliations.
For the full Disciplinary Action Report from FINRA, visit their website by clicking here.
