November, 2011:
FINRA Fines Wells Investment Securities $300,000 for Use of Misleading Marketing Materials for REIT Offering
January, 2011:
Newbridge Securities Corporation (CRD #104065, Ft. Lauderdale, Florida) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $37,500 and ordered to pay $4,063.95, 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 sold (bought) corporate bonds to (from) customers and failed to sell (buy) such bonds at a price that was fair, taking into consideration all relevant circumstances, including market conditions with respect to each bond at the time of transaction, the expense involved and that the firm was entitled to a profit. The findings stated that the firmfailed to report the correct price of the transaction to the FNTRF in last sale reports of transactions in designated securities, and failed to report the correct execution time to the FNTRF in one last sale report of a designated security transaction. The findings also stated that the firmfailed to submit to the FNTRF, for the offsetting “riskless” portion of “riskless” principal transactions in designated securities, either a clearing-only report with a capacity indicator of “riskless principal” or a non-tape, non-clearing report with a capacity indicator of “riskless principal.” The findings also included that the firm failed to report to the FNTRF the correct symbol indicating the capacity in which it executed transactions in reportable securities.
November, 2011:
Lone Star Securities, Inc. (CRD #20452, Addison, Texas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $35,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to provide the required financial statements for oil and gas private placement offerings to non-accredited investors who invested in the offerings, and negligently failed to disclose material information to customers who invested in some of the oil and gas private placement offerings. The findings stated that the firm failed to disclose certain state regulatory orders against the sole owner of some of the offerings, a portion of the expenses of one firm were paid by the issuer of an offering, and an arbitration award of $526,186 against the controlling shareholder of the general partner of another offering. The findings also stated that the firm conducted a securities business while failing to maintain its required minimum net capital, which resulted in inaccurate books and records and a net capital deficiency. The findings also included that the firm filed an SEC Rule 17a-11 notification reporting the net capital deficiency; the notifications to FINRA and the SEC were not timely. (FINRA Case #2009016271001).
November, 2011:
Legent Clearing LLC, dba Legent Clearing (CRD #117176, Omaha, Nebraska) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $200,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it cleared transactions in accounts a former FINRA member firm introduced, including a corporate account the former member firm’s customer, an entity, maintained. The findings stated that the trading activity in the entity’s account generated multiple margin calls. The findings also stated that through a course of conduct FINRA later determined involved improper agreements, misleading statements and omissions to disclose material information by the entity and the former member firm, the entity acquired control over assets in qualified and non-qualified accounts customers of another former FINRA member firm previously owned and controlled. The findings also included that those assets, including assets previously held in qualified accounts, were transferred into the entity’s account held at the firm, where they secured margin debits resulting from options trading and short-selling. FINRA found that the firm provided material assistance to the former member firm and the entity in connection with their efforts to obtain additional assets in the entity’s account in order to support continued trading on margin. FINRA also found that although there were relevant facts that the former member firm and the entity withheld from, or misrepresented to, the firm, the firm was, or should have been, aware of other facts and circumstances that should have caused it to decline to take, or to inquire further before taking, certain actions the former member firm and its customer requested, which facilitated the asset transfers and placed the other former member firm customers at risk of loss; more specifically, two senior managers of the firm, who are principals, had access to facts and circumstances that, at the very least, should have prompted them to inquire further regarding the nature of the assets being transferred. In addition, FINRA determined that as a result of trading in the entity’s account after it was transferred from the firm to another broker-dealer, some customer assets were liquidated to meet margin calls, assets that would not have been available for liquidation but for their improper transfer into the entity’s account while it was held at the firm. (FINRA Case #2008013543501).
November, 2011:
Euro Pacific Capital, Inc. (CRD #8361, Westport, Connecticut) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $150,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it failed to timely report quarterly statistical information concerning most of the customer complaints it received to FINRA’s then 3070 System.
November, 2011:
CP Capital Securities, Inc. (CRD #15029, Miami, Florida) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $35,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it allowed persons to act in registered capacities without being registered and qualified in such capacities. The findings stated that one individual, who held the title of operations manager, signed off as the registered representative on check and wire funds request forms and sometimes was the only member firm employee who signed the form. The findings also stated that another unlicensed individual signed checks and contracts on the firm’s behalf and signed off as the registered representative on one check and wire funds request form; this individual was listed in the firm’s WSPs as the secondary anti-money laundering (AML) compliance officer (AMLCO), and held the titles of vice president and operations manager. The findings also included that neither individual ever held any securities licenses while associated with the firm. FINRA found that the firm conducted a securities business while below its minimum net capital requirement. FINRA also found that the firm maintained investment advisor services and managed accounts that were fee-based, and despite the fact that a significant portion of the firm’s revenues were derived from the management fees, the firm did not establish and implement any WSPs regarding managed accounts. (FINRA Case #2009015970101)
November, 2011:
BGB Securities, Inc. (CRD #36716, Arlington, Virginia) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that the firm, acting through a research analyst, published research reports on subject companies that failed to disclose that the research analyst or a member of his household had a financial interest in the securities of the subject companies. The findings stated that the firm published a research report in which it failed to disclose that it had received trading commissions from the subject company in the past 12 months. The findings also stated that the firm failed to detect and prevent personal trading by a research analyst associated with the firm, and failed to disclose ownership and material conflicts of interest in research reports; the firm failed to adopt and implement WSPs and failed to establish and maintain a supervisory system, and establish, maintain and enforce WSPs reasonably designed to achieve compliance with applicable rules and regulations regarding its research reports and the supervision of its research analysts. The findings also included that the firm failed to prepare accurate order tickets for any of its corporate bond transactions and the order tickets, which were prepared after the transactions were executed, reflected execution times that were later than the actual execution time. FINRA found that the firm failed to accurately report transactions to the Trade Reporting and Compliance EngineTM (TRACETM), double-reported transactions and reported transactions with execution times that were later than the actual execution time. (FINRA Case #2010021055301).
November, 2011:
Beta Capital Management, L.P. (CRD #38964, Miami, Florida) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $450,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that for at least two years, it failed to maintain an order entry system reasonably designed to prevent an improper post-execution allocation of trades. The findings stated that the firm’s third-party order entry system permitted trades to be entered into the system without assigning an account to the trades, and the firm’s operations department sometimes allocated trades in the system based on written order tickets provided to it well after the trades had been entered, at times after the close of trading and thus after securities may have increased or decreased in value. The findings also stated that the firm did not require its registered representatives to provide order tickets to its operations department as soon as trades were entered into the system and allowed order tickets to be completed and turned into the operations department later in the day. The findings also included that the firm facilitated the improper post-execution allocation of trades at the direction, and to the benefit, of a customer; the customer directed and controlled two accounts at the firm, one account of which the customer was the beneficial owner and a second, institutional account.
November, 2011:
J.P. Turner & Company, LLC (CRD #43177, Atlanta, Georgia) and James Edward McGrath (CRD #1582846, Registered Principal, Brick, New Jersey) submitted an Offer of Settlement in which the firm was censured and fined $20,000. McGrath was fined $5,000 and suspended from association with any FINRA member in any principal capacity for 10 business days. Without admitting or denying the allegations, the firm and McGrath consented to the described sanctions and to the entry of findings that McGrath failed to reasonably supervise a registered representative who recommended and effected unsuitable and excessive trading in a customer’s account. The findings stated that McGrath had supervisory responsibility over the registered representative and was responsible for reviewing his securities recommendations to ensure compliance with member firm procedures and applicable securities rules. The findings also stated that McGrath failed to reasonably supervise the registered representative by, among other things, failing to enforce firm account procedures and failing to respond to red flags regarding the registered representative’s trading activity in the customer’s account. The findings also included that the firm’s supervisory procedures required McGrath to review account transactions, such as the registered representative’s recommended transactions in the customer’s account, on a daily and monthly basis for, among other things, general suitability, excessive trading and churning, in-and-out trading and excessive commissions and fees; the firm’s procedures also required that McGrath review all exception reports related to the individuals who he supervised and take appropriate measures as necessary.
November, 2011:
Brookstone Securities, Inc. (CRD® #13366, Lakeland, Florida), David William Locy (CRD #4682865, Registered Principal, Overland Park, Kansas), Mark Mather Mercier (CRD #1884246, Registered Principal, Lutz, Florida) and Antony Lee Turbeville (CRD #1721014, Registered Principal, Lakeland, Florida) submitted Offers of Settlement in which the firm was censured and fined $200,000; Locy was fined $10,000 and suspended from association with any FINRA member in any principal capacity for three months, Mercier was fined $5,000 and suspended from association with any FINRA member in any principal capacity for three months, and Turbeville was fined $10,000 and suspended from association with any FINRA member in any principal capacity for three months. Mercier’s fine must be paid either immediately upon his 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 allegations, the respondents consented to the described sanctions and to the entry of findings that registered representatives, while associated with the firm, made misrepresentations or omissions of material fact to purchasers of unsecured bridge notes and warrants to purchase common stock of a successor company. The findings stated that the registered representatives guaranteed customers that they would receive back their principal investment plus returns, failed to inform investors of any risks associated with the investments and did not discuss the risks outlined in the private placement memorandum (PPM) that could result in them losing their entire investment. The registered representatives had no reasonable basis for the guarantees given the description of the placement agent’s limited role in the PPM. The findings further stated that the registered representatives provided unwarranted price predictions to customers regarding the future price of common stock for which the warrants would be exchangeable and guaranteed the payment at maturity of promissory notes, which led customers to believe that funds raised by the sale of the anticipated private placement would be held in escrow for redemption of the promissory notes. The findings also stated that the firm, acting through a registered representative, made misrepresentations and/or omissions of material fact to customers in connection with the sale of the private placement of firm units consisting of Class B common stock and warrants to purchase Class A common stock; the PPM stated that the investment was speculative, involving a high degree of risk and was only suitable for persons who could risk losing their entire investment. The findings also included that the representative represented to customers that he would invest their funds in another private placement and in direct contradiction, invested the funds in the firm private placement.
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