Articles Tagged with options

shutterstock_188631644The Financial Industry Regulatory Authority (FINRA) brought an enforcement action (FINRA No. 2011025610501) against brokerage firm Braymen, Lambert and Noel Securities, Ltd. (BLNS) and the firm’s Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Compliance Officer (CCO) Shannon Braymen (Braymen) resulting in a monetary sanction. FINRA’s allegations were that from April 2007 to November 2011 BLNS, acting through Braymen, failed to supervise its private placement securities business and the activities of brokers located in two offices. The firm was also accused of failing to register those two branch office locations. In addition, FINRA found that BLNS failed to conduct or to adequately document branch office inspections, and had inadequate supervisory systems and written supervisory procedures for non-branch office locations. Finally, FINRA found that BLNS and Braymen failed to capture and retain certain email correspondence.

BLNS is a member of FINRA and registered as a broker-dealer since March 2003, as a full-service broker-dealer. BLNS currently employs approximately 24 brokers and operates out of 4 branch offices. The firm conducts a securities business in corporate debt securities, over-the-counter equity securities, US government securities, mutual funds, options, private placements and variable contracts. BLNS is also authorized to underwrite corporate securities, proprietary trading and investment advisory services. Braymen entered the securities industry in February 1995. During Braymen’s career she has obtained various securities licenses and had supervisory responsibility for each of the supervisory areas complained of by FINRA.

FINRA’s findings highlighted supervisory deficiencies in a number of areas. One of FINRA’s findings was that BLNS and two brokers located in an unregistered branch office in San Antonio, Texas participated in nine private placement offerings. BLNS and Braymen were accused of failing to adequately supervise the firm’s participation in these nine offerings. FINRA found that the firm had no documentation of principal review and approval of any of the private placement documents, no documentation that a principal of the firm had conducted due diligence, and no documentation of principal review and approval of customer subscription documents. Review of subscription documents are required to determine the suitability of the investments for customers.

shutterstock_102242143As we previously reported, The Financial Industry Regulatory Authority (FINRA) sanctioned and barred financial advisor Matthew Davis (Davis) concerning allegations of misconduct in several customer accounts. Davis was associated with Beneficial Investment Services, Inc. from November 2008, through April 2010. Thereafter, Davis was associated with OneAmerica Securities, Inc. (OneAmerica) from April 2010, through July 2013. The allegations of misconduct included claims of conversion, misrepresentation of customer holdings and account value, forgery, discretionary unauthorized trading, attempts to settle a customer complaint without the firm’s knowledge, and unsuitable investment recommendations.

In a new regulatory action, FINRA alleged that OneAmerica failed to supervise Davis and ignored numerous red flags of misconduct concerning his activities. For instance, FINRA alleged that two customers opened a OneAmerica account with Davis identifying the husband as a 65 years-old and earning between $50,001-75,000 per year. His wife was a “Homemaker” and the couple’s stated Net Worth, excluding their residence, was “$250,001-500,000″ and they had only two years of investment experience limited to stocks, bonds, and mutual funds.

Only three weeks later the couple signed an Option Agreement and were approved to trade options. FINRA found that Davis rapidly traded the options account executing 55 options transactions in May 2012; 52 options transactions in June 2012; and 53 options transactions in July 2012. This activity, according to FINRA, caused a rapid loss of account equity. FINRA found that there were multiple red flags that should have alerted the OneAmerica’s compliance department that Davis’ recommendations were unsuitable. For example, FINRA found that the couple’s account agreement reported minimal investing experience but their options agreement identified purported options (and commodities) trading experience. Also the couple’s new account agreement reported their Investment Objective as Long Term Growth but whereas their options agreement stated their objectives included speculation and hedging. Finally, FINRA alleged that the couple’s new account agreement reported their net worth was $250,000-500,000, whereas the options agreement stated their Net Worth was $640,000.

shutterstock_189006551The 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.

shutterstock_168853424The Financial Industry Regulatory Authority (FINRA) sanctioned broker-dealer J.P. Turner & Company, L.L.C. (JP Turner) concerning allegations JP Turner failed to establish and enforce reasonable supervisory procedures to monitor the outside brokerage accounts of its registered representatives. In addition, FINRA alleged that JP Turner failed to establish an escrow account on one contingency offering and broke the escrow without raising the required minimum in bona fide investments.

This isn’t the first time that FINRA has come down on JP Turner’s practices and that our firm has written about the conduct of JP Turner brokers. Those articles can be accessed here (JP Turner Sanctioned By FINRA Over Non-Traditional ETF Sales and Mutual Fund Switches), here (JP Turner Supervisor Sanctioned Over Failure to Supervise Mutual Fund Switches), here (Former JP Turner Broker Neil Winterrowd Has Been Accused of Misappropriating $1.5 Million in Customer Funds), and here (SEC Finds that Former JP Turner Broker Ralph Calabro Churned A Client’s Account).

JP Turner has been FINRA firm since 1997. JP Turner engages in a wide range of securities transactions including the sale of municipal and corporate debt securities, equities, mutual funds, options, oil and gas interests, private placements, variable annuities, and other direct participation programs. JP Turner employs approximately 422 financial advisors and operates out of 185 branch offices with principal offices in Atlanta, Georgia.

Rockwell Global Capital LLC (Rockwell) brokers Robert E. Lee Jr. (Robert Lee), Douglas Guarino (Guarino), and Lawrence Lee (Lee) have been the subject of at least 29 combined customer complaints.  All three brokers have been accused by clients of churning their accounts and making unsuitable investment recommendations.

Robert Lee first became registered in 1988.  From March 2005, through November 2009, Robert Lee was registered through former FINRA member firm GunnAllen.  Since November 2009, Robert Lee has been registered through Rockwell.

In August 2013, Robert Lee accepted a settlement with FINRA barring the broker from associating with any broker dealer.  FINRA found that between September 25, 2008, and October 31, 2008, while Robert Lee was registered with GunnAllen, Robert Lee failed to follow a customer’s instructions regarding the purchase of three securities.  FINRA also found that between September 2008, and at least December 2009, while Robert Lee was registered with two member firms, Robert Lee made material misrepresentations and omissions to a customer regarding the status of their investments.  Specifically, FINRA found that Robert Lee misrepresented to the client that certain investments had earned $49,591 in dividends when in fact the investments did not exist and no dividends had been earned.

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