FINRA Broker Disciplinary Action Report: August 2020
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
Newport Coast Securities, Inc. (CRD® #16944, New York, New York)
A Securities and Exchange Commission (SEC) decision became final in which 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. The SEC sustained the findings and sanctions imposed by the National Adjudicatory Counsel (NAC). The sanctions were based on the findings that the firm, acting through its representatives, excessively traded in customer accounts. The findings stated that the representatives exercised de facto control over the customer accounts. None of the representatives’ customers indicated investment objectives that would support high levels of trading. The customers at issue were retail customers that had limited investment experience who generally sought to invest with minimal risk, and none sought to invest in high-risk investments, to speculate, or to trade at the quantity and pace that their representatives did. Several customers were also older and at or near retirement.
J.P. Morgan Securities LLC (CRD #79, New York, New York)
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish and maintain a supervisory system reasonably designed to achieve compliance with its obligations under the applicable FINRA rules in connection with its sale of volatility-linked exchange traded products (volatility ETPs).
Moors & Cabot, Inc. (CRD #594, Boston, Massachusetts)
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to disclose in writing to customers approximately $7.5 million in compensation it earned for trades in preferred securities effected in the customers’ accounts.
Matthew Vincent Muratori (CRD #6255633, Clearwater, Florida)
Without admitting or denying the findings, Muratori consented to the sanction and to the entry of findings that he refused to appear for onthe-record testimony or to produce documents and information requested by FINRA in connection with its investigation into his potential involvement in the conversion of funds belonging to a senior customer at his member firm.
Dee Dee Brooks (CRD #2559233, Huntington Beach, California)
Without admitting or denying the findings, Brooks consented to the sanction and to the entry of findings that she engaged in private securities transactions without providing prior notice to or obtaining approval from her member firm. The findings stated that Brooks solicited investors to purchase more than $1.77 million in securities in a purported real estate investment fund and in a company representing itself as a structured cash flow investment company. Brooks, through an entity that she worked with as an outside business, solicited investors, over half of whom where customers of her firm, to invest $906,497 in the real estate investment fund’s promissory notes. Later, the fund filed a voluntary Chapter 11 bankruptcy petition. In a lawsuit brought by the Securities and Exchange Commission, the U.S. District Court for the Southern District of Florida issued final judgments against, among others, the fund and its former owner. Those judgments required the fund and its owner to, among other things, disgorge their ill-gotten gains and pay a civil penalty. In addition, Brooks sold $866,895 in company purchase agreements to investors, most of whom were firm customers. Later, the investment company ceased business, owing nearly $300 million in unpaid investor payments. In a subsequent indictment, the U.S. charged the investment company and its owner with conspiracy to engage in mail and wire fraud related to the investment company’s operations.
David Austin (CRD #6702519, Grand Rapids, Michigan)
Without admitting or denying the findings, Austin consented to the sanction and to the entry of findings that he converted approximately $144,000 from three customers of his member firm’s affiliated bank. The findings stated that Austin forged withdrawal slips for the bank customers, two of whom were over 90 years old, and made unauthorized cash withdrawals from their accounts, which he kept for his personal use. Austin also transferred funds from two of these customers’ joint bank account to his personal bank account without authorization
For the full FINRA Disciplinary Report, please click here.
