Adam Gana, managing partner of Gana Weinstein LLP was quoted in an article by Suleman Din entitled “Hammered by FINRA in Dispute with Morgan Stanely, Advisor Pays $200k.” The article discusses an advisor who took on Morgan Stanley in a contract dispute who lost and was hit with a judgment of approximately $200,000.
The Financial Industry Regulatory Authority (FINRA) sanctioned broker Raymond Clark (Clark) and imposed findings: (1) suspending the broker for three months and fined $6,000 for using his personal email account to communicate with a customer; (2) suspended for four months and fined $10,000 for making false statements to his firm; and (3) suspended for two months and fined $4,000 for failing to report a customer complaint to his firm. FINRA imposed the suspensions to run consecutively and suspended Clark for an additional three months in all supervisory capacities and ordered him to requalify by examination as a securities representative and securities principal.
According to Clark’s BrokerCheck, the broker was registered with Paulson Investment Company, Inc. from December 2008 through May 2009. From June 2007 through January 2009, Clark was registered with J.P. Turner & Company, L.L.C. From May 2009 until August 2010, Clark was registered with First Midwest Securities, Inc. Finally, from August 2010, through August 2014, Clark was registered with Dynasty Capital Partners, Inc. (Dynasty Capital). Clark’s background check also reveals two regulatory complaints and at least nine customer complaints. Only a relatively small percentage of brokers have any complaints on their records and fewer still have as many as Clark.
The complaints against Clark include claims of unauthorized trading, inappropriate use of margin, securities fraud, breach of fiduciary duty, unsuitable investments, churning, and misrepresentations.
The Financial Industry Regulatory Authority (FINRA) brought a complaint against broker Anthony Diaz (Diaz) concerning a host of industry violations. Diaz entered the securities industry in January 2000 and has been registered with eleven different firms over fourteen years. Diaz is currently employed by IBN Financial Services, Inc., (IBN Financial) since September 2012.
Diaz has a long and troubled history of securities related violations and misconduct. There have been at least 14 customer complaints filed against Diaz, he has been subject to 5 firm terminations, and has two judgments. FINRA also found that Diaz was fired or permitted to resign by six of the eleven member firms with which he was registered for. On or about November 21, 2002, Edward Jones fired Diaz for providing inaccurate information during a supervisory review, was terminated by Raymond James Financial Services, Inc. because it was “no longer comfortable supervising”, was permitted to resign on April 1, 2009, by First Allied Securities, Inc. because he had a history of customer complaints and administrative infractions., was fired by SII Investments, Inc. for unauthorized trading, was fired by Kovack Securities, Inc. because of complaints alleging unauthorized trades, and finally was fired by Sandlapper Securities, LLC for soliciting sales of variable annuities without being properly appointed by the issuing company.
FINRA alleged that from March 2010, through May 2011, Diaz induced approximately eighty customers to enter into variable annuity exchanges causing significant surrender charges without a reasonable basis for recommending these exchanges. FINRA found that each customer invested in the same fund, had the same subaccount allocation, and had the same rider selected. FINRA alleged that Diaz recommended the annuity exchanges without having an understanding of the features of the new product and used the same three invalid justifications for nearly all of these exchanges.
The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm The Oak Ridge Financial Services Group, lnc. (Oak Ridge) in connection with allegations that Oak Ridge failed to establish and maintain a supervisory system regarding the sale of leveraged, inverse and inverse leveraged exchange-traded funds (Non-Traditional ETFs) that were reasonably designed to achieve compliance with the securities laws.
Oak Ridge became a FINRA member in 1997 and is headquartered in Golden Valley, Minnesota. Oak Ridge engages in a general securities business, employs 57 registered representatives, and operates out of a single office.
Non-Traditional ETFs contain drastically different characteristics, including risks, from traditional ETFs that simply seek to mirror an index or benchmark. Non-Traditional ETFs use a combination of derivatives instruments and debt to multiply returns on underlining assets. The leverage employed by Non-Traditional ETFs is designed not simply to mirror the index but to generate 2 to 3 times the return of the underlining asset class. Non-Traditional ETFs can also be used to return the inverse or the opposite result of the return of the benchmark.
This post picks up on our first article on The Financial Industry Regulatory Authority (FINRA) sanctioning brokerage firm B. C. Ziegler and Company (B. C. Ziegler) and ordering the brokerage firm to pay $150,000 on allegations that the firm failed to implement a supervisory system reasonably designed to ensure that material economic information regarding Church Bonds was disclosed to the firm’s brokers, trading desk, and customers.
FINRA found that while the firm maintained a Credit Watch List to check for delinquent and missed Church Bond payments, this list was only produced periodically and not every time a Church Bond issuer fell five weeks behind on its sinking fund payments. Accordingly, FINRA found that B. C. Ziegler violated NASD Rule 3010 by failing to establish and maintain a supervisory system reasonably designed to ensure that material economic information, such as delinquent sinking fund payments, was disclosed to the firm’s brokers and customers who were sold Church Bonds in secondary market transactions.
FINRA found that prior to September 2010, B. C. Ziegler did not inform its brokers, trading desk, or customers when an issuer was more than 30 days behind on its sinking fund payments, an indicator of financial distress. Further, it was alleged that from September 2010, through at least May 2012, B. C. Ziegler’s registered representatives and trading desk were informed only periodically when a Church Bond issuer fell five weeks behind on its sinking fund payments through the Credit Watch List causing B.C. Ziegler’s supervisory system to not be reasonably designed to consider material economic information in the pricing of Church Bonds in secondary market transactions. The result, FINRA found, was that the firm had similar pricing for secondary market trades in Church Bonds that were current and delinquent with sinking fund payments.
The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm B. C. Ziegler and Company (B. C. Ziegler) and ordering the brokerage firm to pay $150,000 in connection with allegations that from January 1, 2009, through May 30, 2012 B. C. Ziegler failed to implement a supervisory system reasonably designed to ensure that material economic information regarding Church Bonds, including information concerning delinquent sinking fund payments, was disclosed to the firm’s brokers, trading desk, and customers, and was factored into the pricing of Church Bonds sold to customers in secondary market transactions. In addition, it was alleged that B. C. Ziegler used Church Bond sales material with customers that was not fair and balanced. The sales material prominently promoted the yields associated with Church Bonds without balancing the presentations by disclosing the risks. FINRA also alleged that B. C. Ziegler distributed unbalanced internal-use-only Church Bond sales material to its registered representatives, causing the firm to violate NASD Rule 2211(d)(1) and FINRA Rule 2010.
B. C. Ziegler has been a registered broker-dealer since 1948 and is a full service brokerage firm headquartered in Chicago, Illinois. A primary business of the firm is the underwriting and sale of fixed income products, including debt issued by religious institutions known as “Church Bonds” and senior living facilities (Senior Living Bonds). The firm has approximately 22 branch offices and 200 registered representatives.
According to FINRA, B. C. Ziegler specializes in underwriting and selling Church Bonds for religious institutions. Church Bonds are generally issued by nonprofit religious entities and as such are exempt from registration as a security with the SEC. While there is no established secondary market for Church Bonds, FINRA found that B. C. Ziegler frequently facilitated secondary trading among its customers for Church Bonds it underwrote. A Church Bond sinking fund is a pool of money funded with periodic payments by an issuer for the purpose of accumulating money to make annual or semi-annual coupon payments due to investors of Church Bonds. A Church Bond issuer behind on its sinking fund payments is not in strict compliance with its trust indenture and may be a sign of an issuer’s financial distress.
The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm 79 Capital Securities, LLC (79 Capital) and broker Michael Ward (Ward) concerning allegations around June and July 2012, 79 Capital and Ward posted on the website of a business networking organization sales material regarding GWG Renewable Secured Debentures (GWG Debentures), an illiquid and high-risk alternative private placement investment that omitted material information concerning the debentures. Additionally, FINRA alleged that the firm and Ward failed to record basic suitability information and create new account forms for customers involved in two transactions for the purchase of debentures. Finally, FINRA found that respondents also permitted an employee whose FINRA registration had not been approved, to sell the GWG Debentures and in doing so failed to enforce the firm’s written procedures requiring the creation of new account forms and prohibiting unregistered persons from effecting securities transactions.
According to our investigation, 79 Capital is the third brokerage firm or broker to be sanctioned by FINRA in the past year concerning the improper sale of GWG Debentures. See Broker Sanctioned Over Unsuitable Sales of Private Placement Securities (FINRA sanctioned Karen Geiger); FINRA Sanctions Michael Wurdinger and Anil Vazirani Over GWG Debenture Sales (FINRA sanctioned brokers associated with Center Street Securities, Inc.).
As a background, GWG Holdings, Inc. purchases life insurance policies on the secondary market at a discount to the face value of the policies. Once purchased, GWG pays the policy premiums until the insured dies and then GWG collects the face value of the insurance hoping to earn returns by collecting more upon the maturity of the policies than it has paid to purchase the policy and service the premiums. FINRA found that the company has a limited operating history and has yet to be profitable.
The Financial Industry Regulatory Authority (FINRA) sanctioned broker George Zaki (Zaki) concerning allegations that between June 2010, and August 2012, Zaki implemented and/or executed approximately 3,600 discretionary trades in the accounts of approximately 80 Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch) customers without the customers’ prior written authorization.
Zaki entered the securities industry in October 2007 joining Neuberger Berman LLC. In June 2010, Zaki became registered with Merrill Lynch. Zaki remained registered with Merrill Lynch until he was terminated on October 8, 2012 when Merrill Lynch filed a Form U-5 stating that Zaki was terminated for “conduct involving exercising discretion in non-discretionary client accounts.” In November 2012, Zaki became registered with Barclays Capital Inc. until March 2014. Thereafter, Zaki became registered with Janney Montgomery Scott LLC where he is presently employed.
Under the FINRA rules, unauthorized discretionary trading is not allowed. NASD Rule 2510(b) provides that registered representative may exercise discretionary power in a customer’s account unless such customer has given prior written authorization and the account has been accepted by the firm. FINRA has stated that subsequent ratification of the transaction by the customer does not excuse this violation. In addition, FINRA Rule 2010 requires members and associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.
Congratulations to Scott Woller who was recently featured on LawCrossing.com. LawCrossing, one of the largest legal career advice websites, contacted Scott and asked to profile him on their website. “We are very proud of Scott and all of our attorneys’ many accomplishments,” said Adam Gana, the firm’s managing partner, “Scott’s career is impressive to say the least.” Scott explained in the article (which can be read in its entirety here) that his role with Gana Weinstein LLP and his role with Airfasttickets, Inc. have placed him in a position to both do corporate work and litigation. Scott has had a storied career to date having clerked at both the trial and appellate level in the federal courts and having worked at some of the most prestigious law firms in the country. Scott graduated number 1 in his class at New York Law School and continues to push his careers to new heights. Congratulations Scott!
The Financial Industry Regulatory Authority (FINRA) sanctioned broker Richard Lewis (Lewis) concerning allegations that Lewis exercised discretion in a customer’s account without obtaining prior written authorization from the customer. FINRA found that his conduct violated NASD Conduct Rule 2510(b) and FINRA Rule 2010.
Lewis first became registered with FINRA firm in 1989. Since then, he has been associated with several firms and from December 2010, to March 2013, Lewis was associated with LPL Financial LLC (LPL). Currently, Lewis is associated with J.W. Cole Financial, Inc.
FINRA alleged that from April 2012, to February 2013, while Lewis was associated with LPL, he effected approximately 81 discretionary transactions in the securities account of a customer without obtaining prior written authorization and without LP accepting the account in writing as discretionary.
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