FINRA Enforcement Actions 2011

Joel Arthur Hulke (CRD #2333013, Registered Representative, North Mankato, Minnesota)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Selling Away and Unapproved Outside Business Activity FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

November, 2011:

Joel Arthur Hulke (CRD #2333013, Registered Representative, North Mankato, Minnesota) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Hulke failed to respond to FINRA requests for information and on-the-record testimony. The findings stated that Hulke engaged in outside business activities through his association with an insurance company, but failed to notify his firm of this relationship or submit the required outside business activity disclosure form. The findings also stated that the firm uncovered Hulke’s association with the insurance company when it investigated Hulke’s reversal of a customer’s purchase of a fixed annuity entered through the firm; the firm discovered that Hulke had executed the same fixed annuity transaction for the same customer through the insurance company. The findings also included that Hulke received a commission for the purchase of the fixed annuity executed through the insurance company; the firm also discovered several other instances where Hulke sold annuity and life insurance policies to customers that resulted in additional commission payments to him outside of his firm. (FINRA Case #2009018295601).

Edgar Rhodes Hauser Jr. (CRD #723243, Registered Representative, Livingston, Alabama)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Outside Business and Unsuitable Activity FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

November, 2011:

Edgar Rhodes Hauser Jr. (CRD #723243, Registered Representative, Livingston, Alabama) 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, Hauser consented to the described sanction and to the entry of findings that at Hauser’s request, firm customers borrowed a total of $202,000 from the cash value accumulated in whole life insurance policies that Hauser previously sold to them. The findings stated that Hauser then borrowed the funds from these customers, pursuant to secured (as to two of the loans) and unsecured (as to one of the loans) promissory notes providing for annual interest. The findings also stated that Hauser has not made interest or principal payments on the notes. FINRA found that the firm’s WSPs prohibit associated persons from engaging in borrowing or loaning funds with a customer, unless the customer is an immediate family member and the firm provides prior written approval; none of the customers from whom Hauser borrowed funds were members of Hauser’s immediate family, and Hauser did not seek or receive prior approval for the loans. (FINRA Case #2010023178101).

Tom Douglas Hamsher (CRD #1708793, Registered Supervisor, Webb City, Missouri)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Preferred Stock Fraud and Misrepresentation FINRA Arbitration and Litigation Lawyer, Russell L. Forkey, Esq.

November, 2011:

Tom Douglas Hamsher (CRD #1708793, Registered Supervisor, Webb City, Missouri) 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, Hamsher consented to the described sanction and to the entry of findings that he made misrepresentations and omitted to disclose material facts to many of his customers in connection with the purchase or sale of preferred securities of financial institutions, in conversations and correspondence with multiple member firm customers who purchased the securities on Hamsher’s recommendation. The findings stated that after Hamsher’s resignation, the firm subsequently settled claims from many of Hamsher’s customers, including allegations of material misrepresentations and omissions involving preferred securities of financial institutions, for aggregate payments of approximately $8.9 million. (FINRA Case #2009018421001).

Frank A. Gutta aka Fazel A. Gutta (CRD #1705545, Registered Representative, Plantation, Florida)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Outside Business Activity and Unsuitable Investment FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

November, 2011:

Frank A. Gutta aka Fazel A. Gutta (CRD #1705545, Registered Representative, Plantation, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was suspended from association with any FINRA member in any capacity for two years. In light of Gutta’s financial status, no monetary sanction was imposed. Without admitting or denying the findings, Gutta consented to the described sanction and to the entry of findings that he formed a corporation for the business purpose of pooling funds to be used to finance investments in various small businesses, and he operated the company for more than four years without notice to his member firm. The findings stated that Gutta offered and sold company promissory notes to individuals, including some firm customers, for proceeds of approximately $2.9 million; the firm did not sponsor or approve the promissory notes, and Gutta did not provide written notice to, seek or obtain approval from, his firm prior to engaging in the offer and sale of the notes. The findings also stated that Gutta recommended the notes to a firm customer without having a reasonable basis to believe the investment was suitable for her; the customer invested a total of $235,000 in notes, which was inconsistent with her stated investment objective and risk tolerance. The suspension is in effect from September 19, 2011, through September 18, 2013. (FINRA Case #2009017447501).

John William Grant (CRD #227512, Registered Principal, Escondido, California)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Unauthorized Trading FINRA Arbitration and Litigation Lawyer, Russell L. Forkey, Esq.

November, 2011:

John William Grant (CRD #227512, Registered Principal, Escondido, California) 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, Grant consented to the described sanction and to the entry of findings that he executed unauthorized transactions in an account belonging to trustees of a family trust. The findings stated that the principal value of these unauthorized trades was $1,088,561.12; the commissions amounted to $11,517.90. The findings also stated that for 18 months prior to these unauthorized transactions, there was no activity in the account aside from interest and dividend credits and the ensuing automatic purchases of shares in a money market fund. (FINRA Case #2011025940601).

Donald Anthony Duarte Jr. (CRD #2879683, Registered Representative, La Puente, California)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Unauthorized Customer Loans, Unapproved Outside Business Activities and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

November, 2011:

Donald Anthony Duarte Jr. (CRD #2879683, Registered Representative, La Puente, California) was barred from association with any FINRA member in any capacity and ordered to pay $25,000, plus interest, in restitution to a customer. The sanctions were based on findings that Duarte failed to timely respond to FINRA requests for information and testimony. The findings stated that Duarte borrowed $50,000 in the form of a promissory note from a customer to start a business buying up distressed properties, and in order to do this, he needed money to establish a credit line; he has not fully repaid the loan. The findings also stated that when Duarte received the loan, his member firm’s written procedures prohibited employees from accepting or soliciting loans from firm customers. The findings also included that Duarte engaged in an outside business activity without providing his firm with written notice of the activity; Duarte failed to disclose or obtain his firm’s written permission of his outside business activity of purchasing distressed properties. FINRA found that Duarte made misrepresentations to his firm in an annual compliance certification that he had not accepted any loans from customers and was not engaged in any outside business activities when, in fact, he had already obtained a loan from the customer and was engaged in an outside business activity. (FINRA Case #2009018133802).

Corey Vernon Darling (CRD #4005873, Registered Representative, Anacortes, Washington)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Outside Business and Selling Away FINRA Arbitration and Litigation Lawyer, Russell L. Forkey, Esq.

November, 2011:

Corey Vernon Darling (CRD #4005873, Registered Representative, Anacortes, Washington) submitted a Letter of Acceptance, Waiver and Consent in which he was suspended from association with any FINRA member in any capacity for 18 months. In light of Darling’s financial status, no monetary sanctions were imposed. Without admitting or denying the findings, Darling consented to the described sanction and to the entry of findings that he engaged in outside business activity without providing written notice to his member firms; Darling formed and operated, as the managing member, a limited liability company for the purpose of securing and managing a commercial office building. The findings stated that Darling borrowed a total of $218,484.28 from a few customers while he was associated with firms without receiving the required written pre-approval. The findings also stated that in a firm compliance questionnaire that asked whether Darling had a debt obligation to a non-institutional lender or person, Darling falsely answered “no” to that question.

Jaime Xavier Coronado (CRD #4001702, Registered Representative, Friendswood, Texas)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Stock Fraud, Misrepresentation and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

November, 2011:

Jaime Xavier Coronado (CRD #4001702, Registered Representative, Friendswood, Texas) 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, Coronado consented to the described sanction and to the entry of findings that he failed to respond to FINRA requests for information and documents. (FINRA Case #2010023618301).

Nathan Eugene Calhoun (CRD #716257, Registered Representative, Little Rock, Arkansas)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

FOREX Fraud, Misrepresentation and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

November, 2011:

Nathan Eugene Calhoun (CRD #716257, Registered Representative, Little Rock, Arkansas) 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, Calhoun consented to the described sanction and to the entry of findings that FINRA received investors’ complaints alleging that Calhoun had solicited them to invest in a foreign currency exchange trading (FOREX) program a foreign entity operated; with his assistance, the investors invested a total of $150,000 in the FOREX program. Ultimately, the entity’s FOREX scheme was the subject of federal actions by both the SEC and the Commodity Futures Trading Commission (CFTC). The findings stated that Calhoun solicited the investors to invest in the entity while he was employed as a registered representative with his member firm; Calhoun’s participation in the private securities transactions was outside the regular course or scope of his employment with his firm. The findings also stated that Calhoun failed to provide prior written notice of his role in the transactions to his firm and did not receive the firm’s written approval or acknowledgment concerning his participation in the private securities transactions. The findings also included that Calhoun failed to appear for a FINRA on-the-record interview. (FINRA Case #2011026223401).

Brian Wade Boppre (CRD #2778187, Registered Principal, Minot, North Dakota)

Published on: July 6, 2012 | By Russell L. Forkey, P.A.

Common and Preferred Stock Fraud and Misrepresentation Litigation and FINRA Arbitration Attorney, Russell L. Forkey, Esq.

November, 2011:

Brian Wade Boppre (CRD #2778187, Registered Principal, Minot, North Dakota) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $10,000 and suspended from association with any FINRA member in any principal capacity for six months. The fine must be paid either immediately upon Boppre’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, Boppre consented to the described sanctions and to the entry of findings that he was a member of his firm’s new product committee, which was responsible for conducting due diligence and approving new products at the firm. The findings stated that Boppre knew of an issuer’s failure to make payments to its investors and was also aware of other indications of the issuer’s problems but approved the offering as a product available for his firm’s brokers to sell to their customers; Boppre also suspended the offering sales and then reopened the sales after further discussions with issuer executives. The findings also stated that Boppre allowed his firm’s brokers to continue selling the offering despite the issuer’s ongoing failure to make principal and interest payments, and despite other red flags concerning the issuer’s problems. The findings also included that Boppre, acting on his firm’s behalf, failed to conduct adequate due diligence of the offering before allowing firm brokers to sell this security; without adequate due diligence, the firm could not identify and understand the inherent risks of the offering and therefore could not have a reasonable basis to sell it. By not conducting adequate due diligence, Boppre failed to reasonably supervise firm brokers’ sales of the offering.