Articles Posted in FINRA Enforcement Actions 2011

FINRA Securities Fraud and Misrepresentation Attorney, Russell L. Forkey, Esq.

May, 2011

James Jerome Heffers Sr. (CRD #241577, Registered Representative, Kingston, Pennsylvania, formerly licensed with Fortune Financial Services, Inc. ) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Heffers consented to the described sanction and to the entry of findings that he failed to provide FINRA with information and documents. The findings stated that Heffers submitted a written response to FINRA, but in it he failed to respond to certain questions and thereby failed to provide information that was material to an investigation. The findings also stated that Heffers notified FINRA that he would not provide any additional information in writing and would not provide the requested documents. (FINRA Case #2010025152401).

FINRA Securities Fraud and Mismanagement Attorney, Russell L. Forkey, Esq.

May, 2011

Joshua Daniel Gould (CRD #4617397, Registered Representative, St. Louis, Missouri, formerly licensed with Woodbury Financial Services, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Gould consented to the described sanction and to the entry of findings that he converted more than $1,315,000 from customers who had purchased annuities from him by, among other deceptive means and devices, convincing his customers to sign blank annuity withdrawal request forms, which he subsequently completed with instructions to the insurance companies to transfer his customers’ funds to a bank account held in the name of a company he owned and controlled. The findings stated that in some instances, the withdrawal request forms contained a medallion signature guarantee that he improperly obtained. The findings also stated that Gould converted funds from other annuity customers by using withdrawal request forms that contained customers’ signatures to direct insurance companies to transfer funds from the customers’ annuities to his bank account. The findings also included that Gould unlawfully converted customer funds from customers’ brokerage accounts by, among other deceptive means and devices, improperly transferring funds from their brokerage accounts to the bank account he owned and controlled.  FINRA found that the customers either did not authorize or were not aware of the conversion resulting from the transfer of funds from their annuities and brokerage accounts to Gould’s bank account. FINRA also found that Gould used the unlawfully converted funds to pay for his own personal and business expenses; none of the customers were aware he was withdrawing funds for his personal use. In addition, FINRA determined that on numerous occasions, Gould falsified documents to make it appear that customers had authorized the transfer of funds from their annuities and brokerage accounts to his bank account, and in some instances, effectuated these transfers by convincing customers to sign withdrawal request forms, some of which were blank. (FINRA Case#2010024945501).

FINRA Fraud and Mismanagement Attorney, Russell L. Forkey, Esq.

May, 2011

Christian Genitrini (CRD #3277581, Registered Representative, New York, New York, formerly licensed with MML Investors Services, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $15,000, suspended from association with any FINRA member in any capacity for two years, and required to requalify by exam for Series 7 and Series 63 before becoming re-associated with a member firm after the expiration of the suspension term. The fine shall be paid in installments beginning 90 days after Genitrini’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Genitrini consented to the described sanctions and to the entry of findings that he advertised guaranteed returns on investments of up to 20 percent per year on a website belonging to a company he wholly owned; Genitrini claimed that his company was a fullservice investment firm and would, among other claims, provide high-yield investment opportunities. The findings stated that the website declared that the company invested nationwide and all industries were considered, but did not disclose the nature of the investment product or the risks of  investment. The findings also stated that Genitrini’s ads appeared on other websites guaranteeing returns, and his company’s contemplated private placement documents provided no assurance that by following its current investment strategy, it would be successful or profitable; the subscription agreement also stated that the investments the company carried might be volatile and present operational risks. The findings also included that Genitrini’s Internet ads constituted communications with the public; were not based on principles of fair dealing and good faith; were not fair and balanced; did not disclose risks associated with the investment; guaranteed promising returns that were exaggerated, unwarranted or misleading; and the predictions of performance were also exaggerated or unwarranted.  FINRA found that Genitrini’s private offering of securities, which involved promissory notes his company issued according to the private placement memorandum, was not made pursuant to an effective registration statement filed with the SEC; the offering was intended to be made pursuant to the exemption from registration in Section 4(2) of Rule 506 of Regulation D of the Securities Act of 1933, which prohibits offers or sales of securities by any form of general solicitation or general advertising. FINRA also found that Genitrini’s use of the Internet and his company’s website violated Section 5 of the Securities Act of 1933, and guaranteeing returns in the offer of securities over the Internet violated Section 17(a)(1) of the Securities Act of 1933. In addition, FINRA determined that Genitrini falsely described his work with his company on his member firm’s outside business activity disclosure form and also failed to disclose that he maintained a website for the company; Genitrini told his firm, in writing, that his business and website were for tax-planning services.  The suspension is in effect from April 4, 2011, through April 3, 2013. (FINRA Case #2010022859701)

South East United States FINRA Fraud and Mismanagement Arbitration Attorney, Russell L. Forkey, Esq.

May, 2011

John Matthew Dwyer III (CRD #2376954, Registered Representative, Atlanta, Georgia, formerly licensed with UBS Financial Services, Inc.) submitted an Offer of Settlement in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the allegations, Dwyer consented to the described sanction and to the entry of findings that he failed to respond to FINRA requests for information. (FINRA Case #2009020095001).

South Florida, FINRA Fraud and Mismanagement Arbitration Attorney, Russell L. Forkey, Esq.

May, 2011

John Godfried Croes Jr. (CRD #2778261, Registered Representative, Davie, Florida, formerly licensed with Princor Financial Services Corporation) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for eight months. The fine must be paid either immediately upon Croes’ reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Croes consented to the described sanctions and to the entry of findings that he sold EIAs outside the scope of his employment relationship with his member firm and received approximately $84,917.14 in compensation. The findings stated that Croes did not provide prompt written notice to his firm of his outside business activity, and represented on annual certification statements and/or outside business activity forms that he was either not engaged in outside business activity or that he had previously disclosed such activity; these representations were false. The findings also stated that despite a specific verbal warning by his firm to discontinue selling EIAs outside the firm’s agency, Croes continued to do so, despite the firm’s specific prohibition against doing so in its WSPs. The suspension is in effect from April 4, 2011, through December 3, 2011. (FINRA Case #2009017291201).

South Florida, FINRA Fraud and Mismanagement Arbitration Attorney, Russell L. Forkey, Esq.

May, 2011

Robin Fran Bush (CRD #1994431, Registered Principal, Coral Springs, Florida, formerly licensed with Newbridge Securities Corporation) submitted a Letter of Acceptance, Waiver and Consent in which she was fined $15,000 and suspended from association with any FINRA member in any principal capacity for six months. The fine must be paid either immediately upon Bush’s reassociation with a FINRA member firm following her suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Bush consented to the described sanctions and to the entry of findings that, as her member firm’s CCO, she was responsible for creating, maintaining and updating her firm’s WSPs and for conducting due diligence for private offerings. The findings stated that Bush’s firm approved for sale, and sold, various private offerings and for one offering, Bush’s due diligence consisted of reviewing the PPM and investor subscription documents, but she did not seek or obtain financial documents or information from the issuer regarding the offering, did not obtain any due diligence report, did not visit the issuer’s facilities or meet with its key personnel. The findings also stated that Bush did not take steps to ensure,  or otherwise verify, that other firm principals were conducting any due diligence of the offering’s issuer.  FINRA found that the firm and Bush obtained a third-party due diligence report after firm customers had already invested in the offering. FINRA also found that for a third private offering her firm approved for sale and sold, Bush conducted due diligence after the product had been sold to customers; Bush’s due diligence consisted of obtaining investor subscription documents without obtaining PPMs for the offerings, did not obtain any due diligence report from an independent third party and did not meet with any executives to understand the nature of the offerings. In addition, FINRA determined that Bush’s firm sold additional, different unregistered offering to customers, and Bush, acting in her capacity as CCO and the designed principal for private offerings, failed to conduct due diligence for each of these other offerings. Moreover, FINRA found that the firm’s supervisory system and the firm’s written procedures for private offerings Bush drafted and maintained were deficient; these procedures Bush drafted and maintained did not identify, in any detail, specific due diligence steps to be taken for private offerings or identify specific documents to be obtained for private offerings the firm was contemplating selling. Furthermore, FINRA found that the firm’s written procedures for private offering due diligence were conclusory, non-specific and lacking in the requisite minimum detail regarding steps to be taken and firm personnel responsible for such steps. The suspension will be in effect from September 7, 2011, through March 6, 2012. (FINRA Case #2009016159402).

FINRA Fraud and Mismanagement Arbitration Attorney, Russell L. Forkey, Esq.

May, 2011

Reba Rose Cope (CRD #5056512, Associated Person, Crossnore, North Carolina) was barred from association with any FINRA member in any capacity. FINRA did not seek restitution because a bank reimbursed the customer for the amount Cope converted, plus interest. The sanction was based on findings that Cope converted customer funds. The findings stated that a customer of Cope’s member firm’s bank affiliate instructed her to use the proceeds from a maturing certificate of deposit (CD) to purchase new CDs in the names of different people. The findings also stated that Cope purchased one of the CDs, took the remaining proceeds of $9,878.89, converted them to a cashier’s check payable to the person for whom the CD should have been purchased, and later cashed the cashier’s check and kept the money for her personal use. The findings also included that Cope failed to respond to FINRA requests for information and documents. (FINRA Case #2009020243101).

South Florida, FINRA Securities Fraud and Misrepresentation Attorney, Russell L. Forkey, Esq.

May, 2011

Charles Hyman Brown (CRD #858501, Registered Principal, Coconut Creek, Florid, currently licensed with Newbridge Securities Corporation)submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any principal capacity for 30 days. Without admitting or denying the findings, Brown consented to the described sanctions and to the entry of findings that he failed to reasonably supervise a registered representative of his member firm who churned a customer trust account and recommended investments to the elderly beneficial owner of the trust account that were inconsistent with the customer’s investment objectives, financial situation and needs. The findings stated that Brown served as the assistant branch manager for his firm’s branch office and, as such, was one of the individuals at the firm with supervisory responsibility over the registered representatives at the branch office. The findings also stated that there were numerous red flags indicating that the registered representative was churning the trust account and recommending unsuitable investments to the customer. The findings also included that the red flags were the appearance of the account on numerous exception reports concerning active and aggressive trading; the account’s relatively substantial fluctuations in value, including relatively significant declines in value in a certain year; the customer’s age; the $2,500 monthly withdrawals that the customer was taking from the account; and the prior customer complaints against the registered representative.  FINRA found that despite these red flags, Brown failed to take adequate supervisory action reasonably designed to prevent the representative’s churning of the trust account and recommendations of unsuitable investments to the customer.  The suspension is in effect from April 18, 2011, through May 17, 2011. (FINRA Case #2008011707003).

FINRA Fraud and Mismanagement Arbitration Attorney, Russell L. Forkey, Esq.

May, 2011

Carl Henry Blanchard (CRD #3175596, Registered Representative, West Roxbury, Massachusetts, formerly licensed with New England Securities) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $31,434, which includes disgorgement of $16,434 to be paid to the firm, and suspended from association with any FINRA member in any capacity for six months. The disgorgement must be paid to the firm within 60 days of the acceptance of the AWC, and the remaining fine must be paid either immediately upon Blanchard’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Blanchard consented to the described sanctions and to the entry of findings that he participated in private securities transactions when a client of his accounting firm purchased promissory notes an individual issued. The findings stated that Blanchard failed to provide written notice to his firm describing in detail the proposed transactions with the individual issuing the promissory notes, his proposed role therein, and stating whether he had received or might receive selling compensation in connection with the transactions. The findings also stated that Blanchard introduced the client to the individual, and the client invested a total of approximately $325,000 in the individual’s promissory notes as a result of Blanchard’s referrals. The findings also included that the individual paid Blanchard about $16,434 in selling compensation for his referral. FINRA found that the customer lost approximately $290,000 as a result of the investment, and the firm made full restitution to Blanchard’s client even though he was not a customer of the firm. The suspension is in effect from March 21, 2011, through September 20, 2011. (FINRA Case #2010021436501).

FINRA Fraud and Mismanagement Arbitration Attorney, Russell L. Forkey, Esq.

May, 2011

Steven John Argo (CRD #4418605, Registered Representative, Lockport, New York, formerly licensed with Thrivent Investment Management, Inc.) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Argo consented to the described sanction and to the entry of findings that he converted $72,800 of customer funds by improperly obtaining checks from the customers purportedly to be used for the purchase of a customer’s universal life insurance policies, for customers’ unspecified investments and for adding to a customer’s variable annuity. The findings stated that Argo deposited the customers’ checks into his own personal bank account and converted the customers’ funds for his own use. (FINRA Case #2010025731101).