Articles Posted in FINRA Enforcement Actions 2011

FINRA Unsuitable Transaction Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011:

Richard Harold Byerly (CRD #848070, Registered Representative, Chester Springs, Pennsylvania) submitted an Offer of Settlement in which he was suspended from association with any FINRA member in any capacity for two years and ordered to pay $30,000 in partial restitution to customers. In light of Byerly’s financial status, no fine was imposed. Without admitting or denying the allegations, Byerly consented to the described sanctions and to the entry of findings that he engaged in unsuitable, excessive trading in elderly customers’ accounts. The findings stated that the customers were retirees with conservative investment objectives living on fixed incomes who suffered collective losses of approximately $390,000 during the period of excessive trading. The findings also stated that Byerly recommended and effected the transactions without having reasonable grounds for believing that such transactions were suitable for the customers in view of the size and frequency of the transactions, the transaction costs incurred, and in light of the customers’ financial situations, investment objectives and needs. The findings also included that Byerly exercised discretion in these accounts as well as in other customers’ accounts without the customers’ written authorization or his member firm’s written acceptance of the accounts as discretionary; his firm did not permit discretionary accounts. 

FINRA Churning and Unauthorized Transaction Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011:

Vishal Birsingh (CRD #4420546, Registered Principal, New Hampton, New York) submitted a Letter of Acceptance, Waiver and Consent in which he was suspended from association with any FINRA member in any capacity for one year. In light of Birsingh’s financial status, no monetary sanctions were imposed. Without admitting or denying the findings, Birsingh consented to the described sanction and to the entry of findings that he engaged in excessive and unsuitable trading in a customer’s brokerage account, which resulted in at least $43,000 in losses. The findings stated that Birsingh did not have reasonable grounds for believing that the transactions were suitable for the customer and the excessive trading in the account resulted in a turnover ratio of about 25.7. The findings also stated that Birsingh entered unauthorized transactions in that customer’s account.  The suspension is in effect from July 18, 2011, through July 17, 2012. (FINRA Case #2008014759401).

FINRA Outside Business and Negligent Supervision Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011:

Scott J. Baklenko (CRD #4632949, Registered Representative, Seattle, Washington)

FINRA Theft and Unauthorized Use of Customer Funds Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011:

Devin Raj Anand (CRD #5160369, Registered Representative, Calabasas, California) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Anand converted customer funds by wiring funds totaling $51,289 from the customer’s account to outside bank accounts of which Anand was associated; the customer did not authorize and had no knowledge of any of the wire transfers Anand made. The findings stated that Anand attempted to wire additional funds totaling $24,000 from the customer’s account but Anand’s member firm did not complete the wires. The findings also stated that Anand misappropriated funds from a non-customer by creating a false account, borrowing $49,500 in funds from her 401(k) account without her knowledge or authorization, depositing the money into a bogus account he created in the noncustomer’s name at his firm, and then wiring funds out of the account for his benefit; the individual was an employee of a business Anand’s relatives owned. The findings also included that the individual did not authorize Anand to open an account, did not complete or sign any new account opening documents and, in furtherance of the scheme, Anand created false documents related to the opening of the account which he submitted to his firm, thereby causing his firm to maintain inaccurate books and records. FINRA found that Anand failed to respond to FINRA requests for information and to appear and testify at an on-the-record interview. (FINRA Case #2009017302001).

FINRA Mutual Fund and Negligent Supervision Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011:

Veritrust Financial, LLC (CRD #106594, Austin, Texas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $90,000 and ordered to pay $34,105.40, plus interest, in restitution to customers. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to establish and maintain a supervisory system or WSPs reasonably designed to detect and prevent the charging of excessive commissions on mutual fund liquidation transactions. The findings stated that the firm failed to put in place any supervisory systems or procedures to ensure that customers were not inadvertently charged commissions, in addition to the various fees disclosed in the mutual fund prospectus, on their mutual fund liquidation transactions. The findings also stated that the firm’s failure to take such action resulted in commissions being charged on transactions in customer accounts that generated approximately $64,110 in commissions for the firm. The findings also included that the firm had inadequate supervisory systems and procedures to ensure that a firm principal reviewed, and the firm retained, all email correspondence for the requisite time period; the firm failed to review and retain securities-related email correspondence sent and received on at least one registered representative’s outside email account, and the firm did not have a system or procedures in place to prevent or detect non-compliance. 

FINRA Auction Rate Securities Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011:

Fidelity Brokerage Services LLC (CRD #7784, Smithfield, Rhode Island) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $375,000, and agreed to make an offer to repurchase illiquid auction rate securities (ARS) from certain customers who purchased ARS via the firm’s website between February 13, 2008, and March 4, 2008. For those customers who accept the firm’s offer, it will repurchase the illiquid ARS those customers held within 35 days of the acceptance of the firm’s offer.  No later than 30 days following the last of the payments, the firm shall certify to FINRA that it made the required payments and provide supporting documents to FINRA upon request. 

FINRA Arbitration Unapproved Outside Business Activity and Failure to Supervise Attorney, Russell L. Forkey, Esq.

September, 2011:

Thomas Michael Aretz (CRD #1083897, Registered Representative, Destin, Florida) was barred from association with any FINRA member in any capacity and ordered to pay $251,907, plus interest, in restitution to customers. The sanctions were based on findings that Aretz established an outside business activity and never made a written request to, or received permission from, his member firm to engage in the outside business activity. The findings stated that in connection with the outside business, Aretz borrowed approximately $242,800 from firm customers without requesting or obtaining permission from his firm, and has yet to repay the loans. The findings also stated that Aretz’ firm prohibited its registered representatives from borrowing funds from customers without the express written consent of the firm’s chief compliance officer or a member of the firm’s senior management. The findings also included that Aretz failed to disclose the loans on several annual firm compliance questionnaires and that he failed to respond to FINRA requests for information. (FINRA Case #2009017764301).

CMO FINRA Arbitration Fraud, Misrepresentation, Negligent Supervision Attorney, Russell L. Forkey, Esq.

September, 2011:

Investors Capital Corp. (CRD #30613, Lynnfield, Mass) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $200,000 and consented to undertake a comprehensive review of its policies and procedures concerning suitability of CMOs, and the firm’s Director of Compliance shall certify in writing to FINRA within 60 days that it has engaged in a review and has in place policies and procedures designed to ensure compliance with its suitability obligation pertaining to CMOs. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to establish and maintain an adequate supervisory system relating to retail CMO transactions that was reasonably designed to achieve compliance with applicable securities laws and regulations. The findings stated that the firm’s CMO systems and procedures were inadequate because they did not address the increased risks associated with inverse floater and interest-only CMOs, which were sold to firm customers.  The findings also stated that the limited written procedures the firm did have only required brokers to be knowledgeable about CMOs, in general, and only required generic disclosures to clients. The findings also included that the procedures failed to provide information to brokers regarding specific risks associated with inverse floater and interest-only CMOs or advise them that such tranches were only suitable for sophisticated investors with a high risk profile.

FINRA Fraudulent Cold-Calling Arbitration Attorney, Russell L. Forkey, Esq.

September, 2011:

iTRADEdirect.com Corp. (CRD® #18281, Boca Raton, Florida) was expelled from FINRA® membership. The sanction was based on findings that the firm’s registered representatives cold-called potential customers from a boiler room, opened accounts for people who never agreed to be firm customers and made unauthorized trades for those purported customers, as well as for their actual customers; the firm intentionally failed to disclose to its customers that it was engaging in unauthorized trading. The findings stated that the firm’s brokers predicted substantial increases in stock prices, often to specific levels, and the firm issued false trade confirmations and made other efforts to induce potential customers to pay for unauthorized transactions in furtherance of its fraudulent scheme. The findings also stated that the firm, through its registered representatives, made recommendations to customers without obtaining the necessary information, including investment objectives, risk tolerance, financial condition and investment experience, to make suitability determinations. The findings also included that the firm, through its registered representatives, created false new account documentation, including falsified new account information forms and new account applications that set forth false, inaccurate and baseless information regarding customers’ income, net worth, investment experience, risk tolerance and social security numbers. 

Fraud, Misrepresentation, Theft, Mismanagement, and Negligent Supervision FINRA Arbitration and Litigation Lawyer, Russell L. Forkey, Esq. is available for a free consultation if you have suffered investment losses relative to any of the matters set forth below:

Periodically, the Financial Industry Regulatory Authority, Inc. (FINRA) publically announces, on its website, enforcement actions that have either recently been settled by or commenced against broker/dealers and/or associated persons.

We review these settlements and filed actions each month and provide a brief description of those matters which we believe will be of interest to investors.