Securities Lawyers Blog

Cary Olson Sanctioned by FINRA Over Non-Traditional ETF Sales

March 3, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Cary Olson (Olson) concerning allegations that Olson made recommendations in non-traditional exchange-traded funds (ETFs) to several customers without having reasonable grounds to believe his recommendations were suitable in relation to the holding periods for the ETFs. FINRA also alleged that Olson permitted the execution of options transactions in the account of a customer who was not approved for options activity.

Olson entered the securities industry in 1993. In June 2006, Olson became registered at FlNRA firm Great Circle Financial until July 2013. From June 2013 until November 2013, Olson was registered with GBS Financial Corp. Finally, Olson is currently associated with Calton & Associates. This disciplinary matter is not the first time FINRA has sanctioned Olson. In January 2006, Olson consented to the entry of findings by NASD that he exercised discretion in customer accounts without obtaining written authorization. Olson was suspended for one month and fined $5,000.

FINRA alleged that from October 2010 through October 2012, Olson recommended transactions of various leveraged and inverse-leveraged ETFs in the accounts of five customers. As a background, these types of ETFs are designed to achieve their objectives over the course of a single day only and are generally not appropriate for long term holdings. By holding these ETFs over longer periods of time the value of the investment differs dramatically from the index it tracks because the investment is reset daily.

Broker Investigation: Stephen Dealy’s Alternative Investment Recommendations

March 2, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Stephen Dealy (Dealy) concerning allegations that Dealy willfully failed to timely amend his Form U4 to disclose a federal tax lien. FINRA also alleged that Dealy failed to report written complaints he received from his customers to Investors Capital Corp. (ICC).

Dealy first became registered with FINRA in 1983. From November 21, 2001 to September 12, 2014, Dealy was registered through ICC. On September 12, 2014, ICC filed a Form U5 terminating Dealy’s registration with the firm.

According to Dealy’s public disclosures the broker has been subject to seven customer complaints. These statistics are alarming because multiple customer complaints on a broker’s record are exceedingly rare. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. FINRA’s disclosure records do not just cover customer complaints but also include IRS tax liens, judgments, and even criminal matters. Therefore, the number of brokers with multiple customer complaints is constitutes only a very small percentage of licensed brokers.

FINRA Files Complaint Against Daniel McCourt Concerning Promissory Notes

February 27, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) filed a complaint against broker Daniel McCourt (McCourt) concerning allegations McCourt participated in private securities transactions, also known as “selling away”, without providing prior written notice to his member firm. In addition, FINRA alleged that McCourt provided false information and falsified documents to a mortgage company for a client to help the client qualify for a home loan.

McCourt first entered the securities industry in 1984. In 1985 McCourt associated with FINRA firm Foothill Securities, Inc. (Foothill). McCourt remained registered with Foothill until he was permitted to resign on or about June 7, 2013, due to “possible violations of firm policies and procedures.”

FINRA alleged that at various times from May 2005 through May 2009, McCourt participated in private securities transactions without providing Foothill prior written notice of the transactions. FINRA alleged that in or around 1990, McCourt notified Foothill that he wanted to begin an outside business activity in a coffee business. According to McCourt’s brokercheck the coffee business is called Surf City Coffee Co., Inc. (Surf City). Foothill approved McCourt’s involvement with Surf City.

Gana LLP Broker Spotlight: Wade Lawrence

February 27, 2015 | by Staff Attorney

According to the records kept by the Financial Industry Regulatory Authority (FINRA) broker Wade Lawrence (Lawrence) has been suspended following the broker’s failure to comply with an arbitration award or settlement and by failing to comply with the regulator’s request for information concerning compliance. In addition, FINRA permanently barred Lawrence for failing to respond to requests for information concerning allegations that he misappropriated funds from customers.

Lawrence first became registered with FINRA in 2002 with MML Investors Services, LLC. Thereafter, from June 2008 through July 2011, Lawrence was registered with Oppenheimer & Co. Inc. (Oppenheimer) Finally from August 4, 2011, until December 2013, Lawrence was registered with Southwest Securities, Inc. (Southwest). On December 12, 2013, Southwest filed a Form U5 that terminated Lawrence’s registration.

In addition to the FINRA regulatory actions Lawrence has been the subject of at least nine customer disputes. These statistics are troubling because multiple customer complaints on a broker’s record are rare. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. FINRA’s disclosure records do not just cover customer complaints but also include IRS tax liens, judgments, and even criminal matters. The number of brokers with multiple customer complaints is far smaller.

Broker Marc Evans Sanctioned Concerning Selling Away Global Safety Labs and Real Estate Investments

February 26, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Marc Evans (Evans) concerning allegations that between October 2006 and October 2012, Evans participated in private securities transactions, also referred to as “selling away”, without prior approval of his brokerage firm. In addition, FINRA found that Evans did not disclose his membership on the board of directors of a corporation.

Marc W. Evans entered the securities industry in 1978. From November 2005 through December 2012, Evans was registered with brokerage firm Sanders Morris Harris, Inc. (Sanders Morris). Thereafter, Evans became associated with Wunderlich Securities, Inc.

FINRA alleged that between October 2006 and October 2007, Evans introduced 11 of his brokerage clients to invest in a company called Global Safety Labs, Inc. (GSL), a Tulsa, Oklahoma company. GSL develops and manufactures fire-retardant products. FINRA found that the eleven clients ultimately invested a combined total of $3,430,000 in GSL stock shares. FINRA found that Evans received commissions totaling $79,500 from GSL from these sales.

FINRA Sanctions Broker Douglas Campbell Jr. Over Unsuitable Investment Advice

February 26, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Douglas Campbell Jr. (Campbell) concerning allegations that between May 2008 and September 2008, while registered with Wedbush Morgan Securities, Inc. (Wedbush), he engaged in unsuitable trading a customer’s account by recommending purchases of three speculative private placement investments that were not consistent with the customer’s investment objectives, resulting in an overconcentration in the customer’s account. FINRA found that Campbell’s recommendations were made without reasonable grounds for believing that they were suitable for the customer.

In addition, according to Campbell’s public records four customers have filed complaints concerning Campbell’s investment advice. These statistics are troubling because multiple customer complaints on a broker’s record are rare. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. These disclosures do not necessarily have to include customer complaints but can include IRS tax liens, judgments, and even criminal matters. The number of brokers with multiple customer complaints is far smaller. The complaints against Campbell alleged fraud, breach of fiduciary duty, excessive trading, and unsuitable investments.

Campbell first became registered with FINRA in 1994. On July 9, 2007, Campbell became registered Wedbush. On November 29, 2012, Wedbush filed a Form U5 reporting that Campbell voluntarily terminated his employment on November 26, 2012.

FINRA Sanctions Financial Advisor Tory Duggins Over Unauthorized Discretionary Trading

February 19, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned broker Tory Duggins (Duggins) concerning allegations that between November 2011 through May 2012, Duggins exercised discretionary power in two customer accounts by making 17 transactions without obtaining prior written authorization from the customers. Under NASD Conduct Rule 2510(b) Duggins was required to provide written authorization to his firm in order to engage in discretionary trading activity. In addition, FINRA alleged that Duggins made false statements on a member firm semi-annual compliance questionnaire concerning his exercise of time and price discretion in customer accounts.

Duggins entered the securities industry in July 2002. Since that time Duggins has been associated with a total of nine different brokerage firms. Most recently from October 2008 through December 2012 Duggins was associated with vFinance Investments, Inc. (vFinane). Thereafter, Duggins was associated with National Securities Corporation (National Securities) until January 2014. Currently, Duggins is associated with Avenir Financial Group.

In addition to FINRA’s claims, Duggins public disclosures reveal that Duggins has been subject to multiple tax liens totaling over $300,000. Often times such extensive debts influence brokers to engage in excessive trading and churning in order to generate commissions to pay down personal debts. Often times, authorized trading goes hand and hand with churning. In Duggins’ case, three customers have brought complaints against the broker alleging excessive trading designed to generate commissions for the broker.

FINRA Sanctions Former Ameriprise Broker Radcliffe Daly Over Sloud Recommendations

February 18, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned former Ameriprise Financial Services, Inc. (Ameriprise) broker Radcliffe Daly (Daly) concerning allegations that between May 2013 and November 2013, while Daly was registered with Ameriprise, Daly mismarked more than 250 order tickets for solicited transactions as unsolicited. In addition, FINRA alleged that during the same period Daly engaged in private securities transactions (also known as “selling away”) without providing written notice to Ameriprise. FINRA also alleged that Daly exercised unauthorized discretion in customer accounts.

Daly entered the securities industry in 2003 and left the industry in June 2014. During the majority of this time Daly was associated with Ameriprise until January 2014.

FINRA alleged that Daly recommended a penny stock, Sloud, Inc. (SLOU), to numerous customers during 2013. According to FINRA Daly placed 292 buy transactions for 43 different customers in the Sloud stock between May 3 and November 7, 2013. However, instead of properly marking the transactions as solicited, Daly allegedly falsely marked 253 of these purchases as unsolicited. FINRA also found that Daly continued to solicit purchases of Sloud and to inappropriately mark the trades as unsolicited even after being told by his firm in June 2013 that he could not solicit purchases of the stock because it was a penny stock and not supported by firm research. From the allegations made by FINRA it appears that Daly attempted to circumvent Ameriprise’s instructions by mismarking the tickets as unsolicited.

FINRA Sanctions Felt & Company Over Leveraged ETF Recommendations to Clients

February 16, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned brokerage firm Felt & Company (Felt) alleging that between January 2009, and September 2012, Felt failed to establish and supervisory system that was reasonably designed to ensure that sales leveraged or inverse exchange-traded funds (Non-Traditional ETFs) complied with all applicable securities laws.

Feltl is headquartered in Minneapolis, Minnesota, has approximately 114 registered representatives operating out of eight branch offices in Minnesota and Illinois. Felt derives revenue from securities commissions, underwriting, and investment company activity and has been a FINRA member since 1975. This most recent FINRA action is not the first time the regulatory has brought an action concerning issues of how Felt sells securities products to investors. As we previously reported, FINRA sanctioned Feltl and imposed a $1,000,000 fine concerning allegations that the firm, between January 2008, and February 2012. failed to comply with the suitability, disclosure, and record-keeping requirements engaging in a penny stock business.

In the most recent disciplinary action, FINRA alleged that the securities laws requires a firm to have a reasonable basis for believing that a product is suitable for any customer before recommending any purchase of that product. In order to meet this requirement, a firm must understand the terms and features of the product including how they are designed to perform, how they achieve that objective, and the impact that market volatility on the product. In the case of Non-Traditional ETFs the use of leverage and the customer’s intended holding period are significant considerations in recommending these products.

FINRA Sanctions Former LPL Financial Broker Marc Baldinger Over Private CMO I/O Strip Sales

February 13, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned former LPL Financial LLC (LPL) broker Marc Baldinger (Baldinger) concerning allegations that between August 2010 and November 2012, Baldinger participated in private securities transactions (a/k/a “selling away”) without prior approval of LPL. In addition, FINRA alleged that in connection with these private securities transactions Baldinger failed to disclose his position as a managing partner of two limited liability companies.

Baldinger entered the securities industry on in 1989. Thereafter, from 2001 onward Baldinger was associated with LPL until Baldinger’s employment with LPL ended on November 24, 2012. On December 13, 2012, LPI, filed a Form U5 terminating Baldinger’s registration.

The FINRA rules require that all brokers report securities transactions to their employer. However, FINRA alleged that between August 19, 2010 and November 24, 2012, Baldinger introduced 20 customers to brokerage firms by the initials “RS” and “AFS” and purchased inverse strips of Government National Mortgage Association Interest Only bonds (GNMA I/Os). According to FINRA, the 20 clients invested a combined total of at least $12 million in GNMA I/Os. FINRA found that Baldinger received compensation for these investment recommendations of approximately $233,427.