FINRA Broker Disciplinary Action Report: April 2019
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, and/or Fined by FINRA
Sigma Financial Corporation (CRD #14303, Ann Arbor, Michigan)
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 supervisory system and WSPs reasonably designed to achieve compliance with securities laws, regulations and FINRA rules applicable to the sales of leveraged, inverse and inverse-leveraged ETFs. The findings stated that prior to receiving an exam report from FINRA, no written materials were created to provide guidance to representatives on determining the suitability of leveraged, inverse and inverse-leveraged ETF products. The firm also failed to train its representatives regarding the unique risks and features of leveraged, inverse and inverseleveraged ETFs. As a result, firm customers often held these ETF positions in their accounts for extended periods of time, in some cases, longer than two years.
Accelerated Capital Group, Inc. (CRD #41270, Costa Mesa, California)
An Office of Hearing Officers (OHO) decision became final in which the firm was censured, fined $400,000 and ordered to pay $422,029.53, plus interest, in restitution to six customers. The sanctions were based on findings that the firm failed to establish and maintain a supervisory system and written procedures reasonably designed to achieve compliance with applicable federal securities laws, regulations and NASD®/FINRA rules. The findings stated that the firm’s supervisory system was not reasonably designed to identify unauthorized, excessive, or unsuitable trades effected by representatives in their customers’ accounts. The system failed to ensure that representatives made customers aware of all commissions and fees, that investment recommendations were suitable for them, and that the customers understood those recommendations and were aware of the costs and breakpoints associated with mutual fund transactions. It also failed to ensure that customers understood that Class A mutual funds contained front-loaded fees making them generally unsuitable as short-term investments.
Raymond Keith Malicki (CRD #2120836, Coopersburg, Pennsylvania)
Without admitting or denying the findings, Malicki consented to the sanction and to the entry of findings that he refused to appear for on-therecord testimony requested by FINRA after it received an amended Uniform Application for Securities Industry Registration or Transfer (Form U4) filed by his member firm that disclosed that his prior firm had learned of allegations regarding his access to, and conducting transactions in, a client’s account at a third-party financial institution.
Dennis Allen Hayes (CRD #4403550, Charlotte, North Carolina)
Without admitting or denying the allegations, Hayes consented to the sanction and to the entry of findings that he participated in private securities transactions without providing prior written or any other notification to his member firm. The findings stated that Hayes recommended that investors, most of whom were firm customers, invest a total of $2.7 million in five companies, and facilitated those investments.
Sam Aziz (CRD #1721932, Powell, Ohio)
Without admitting or denying the findings, Aziz consented to the sanction and to the entry of findings that he refused to appear for on-the-record testimony requested by FINRA in connection with its investigation into his sales practices at his member firms. The findings stated that FINRA was investigating allegations of excessive trading and unsuitable recommendations involving the use of margin, whether Aziz attempted to settle a customer’s complaint away from his firm, and whether he used an undisclosed personal email account and text messages to conduct securities business, among other allegations.
Ellen Jane Donnelly (CRD #2357999, Holmdel, New Jersey)
Without admitting or denying the findings, Donnelly consented to the sanction and to the entry of findings that she borrowed $30,000 from one of her brokerage customers without seeking or obtaining her member firm’s pre-approval. The findings stated that FINRA began an investigation after the firm filed a Form U5 reporting that Donnelly was terminated for concerns relating to her borrowing from a client. While experiencing financial difficulties, Donnelly borrowed the funds from a longtime friend and customer of the firm. The funds for the loan were wired from the customer’s brokerage account. In order to conceal the purpose of the withdrawal, Donnelly submitted a wire transfer form to the firm that inaccurately described the reason for the wire as for a car purchase. When the firm learned about the loan, it terminated Donnelly and reimbursed the customer.
For the full FINRA Disciplinary Report, please click here.