Articles Posted in FINRA Enforcement Actions 2011

Fraud, Misrepresentation, Theft, Mismanagement, Selling Away, Unauthorized Outside Business 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.

Theft and Forgery FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

Miguel Alex Rosas (CRD #5159207, Registered Rep, Naperville, Illinois) 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, Rosas consented to the described sanction and to the entry of findings that he wrongfully converted a customer’s funds totaling $14,000 for his personal use by submitting withdrawal requests he forged to his member firm and an annuity company, without the customer’s knowledge or consent. The findings stated that Rosas completed and forged other customers’ signatures on variable annuity withdrawal forms and submitted them to annuity companies, without the customers’ knowledge or consent, in an effort to convert funds totaling $45,000 from the customers’ variable annuity accounts for his personal use. The findings also stated that, as indicated on these forms, the funds were to be made payable to a limited liability company for which Rosas was the president and CEO. The findings included that one of the annuity companies cancelled the withdrawal requests and the other annuity company placed stop payments on the checks that were issued.

Limited Partnership Fraud, Mismanagement, Negligent Supervision, Selling Away and Unauthorized Outside Business Activity FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

Ronald Marvin (CRD #722277, Registered Representative, Weston, Connecticut) 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, Marvin consented to the described sanction and to the entry of findings that he misused approximately $145,000 in funds obtained from investors in a limited partnership that he owned and controlled. The findings stated that Marvin established the limited partnership as a general investment fund and referred to it as a hedge fund; the limited partnership had investors who were Marvin’s long-standing friends/customers. The findings also stated that Marvin maintained the limited partnership’s brokerage account at his member firm and made all of the investment decisions for the fund, which primarily involved stock transactions; Marvin was also the registered representative for the limited partnership’s account and received commissions from trades in the account. The findings also included that the general partner of the limited partnership was another entity Marvin owned and controlled.

Boca Raton, Florida FINRA Arbitration Fraud, Mismanagement and Negligent Supervision Attorney, Russell L. Forkey, Esq.

October, 2011:

David Angelo Maltese (CRD #2562471, Registered Rep., Boca Raton, Florida) 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, Maltese consented to the described sanction and to the entry of findings that he failed to respond to a FINRA request to appear for investigative on-the-record testimony concerning an investigation into certain transactions he executed in customers’ accounts at his member firm. The findings stated that Maltese, through his counsel, stated that he would not appear for testimony. (FINRA Case #2008012546801).

Unauthorized Borrowing of Funds from Client and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

William James Lasko (CRD #303150, Registered Principal, Carrollton, Texas) submitted an Offer of Settlement in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for three months. The fine must be paid either immediately upon Lasko’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 allegations, Lasko consented to the described sanctions and to the entry of findings that he borrowed $12,000 from his customer while associated with his member firm, and signed a promissory note in which he agreed to repay the $12,000, plus interest. The findings stated that Lasko did not notify his firm of this loan and did not attempt to receive the firm’s approval of this loan contrary to his firm’s procedures that did not allow its registered representatives to borrow money from their customers. The findings also stated that Lasko did not repay the money he borrowed from the customer.  The suspension is in effect from August 15, 2011 through November 14, 2011. (FINRA Case #2009020174801).  

Unauthorized Borrowing of Money from Client and Negligent Supervision FINRA Arbitration and Litigation Lawyer, Russell L. Forkey, Esq.

October, 2011:

Jo Ann Marie Head (CRD #3009195, Reg. Representative, Whittier, California) was barred from association with any FINRA member in any capacity and ordered to pay restitution to a customer in the principal amount of $19,000, which represents the amount of a loan that has not been repaid, plus interest. The sanctions were based on findings that Head conveyed false and exaggerated account values to customers verbally and with falsified documents. The findings stated that Head borrowed $20,000 from a customer and has repaid only $1,000 to the customer, contrary to the firm’s written procedures prohibiting representatives from borrowing from customers without branch manager or other supervisor approval and the written approval of the firm’s compliance department; Head did not request or obtain permission from her firm to borrow money from the firm’s customer. The findings also stated that Head settled and/or offered to settle a customer complaint without her firm’s knowledge or authorization. The findings also included that Head sent an unapproved and materially false letter to a bank by preparing, signing and mailing a letter to a bank stating that a customer’s assets totaled over $4 million in order to assist the customer in obtaining a mortgage loan; although the firm’s procedures required that outgoing correspondence be reviewed and approved before mailing, Head neither sought nor obtained approval for the letter. FINRA found that Head exercised discretion in customer accounts without written authorization; Head neither sought nor obtained authorization from customers or her firm to exercise discretion in their accounts.  FINRA also found that Head mischaracterized solicited trades in customers’ accounts as unsolicited, causing her firm’s books and records to be inaccurate. In addition, FINRA determined that Head submitted false and evasive information to FINRA in response to a written request for information. Moreover, FINRA found that Head repeatedly sent emails and text messages to customers from her personal email accounts, which violated her firm’s policies forbidding the use of personal email accounts and mandating that business related electronic communications with customers occur within the firm’s network; Head’s use of her personal email account prevented the firm from reviewing her email and text messages, and delayed the discovery of her misconduct in customers’ accounts.  Furthermore, FINRA found that Head failed to appear or otherwise respond to FINRA requests for testimony. (FINRA Case #2009017530101).

Sale of Unregistered Securities, Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

Patrick Francis Harte Jr. (CRD #1865650, Registered Principal, Plano, Texas) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Harte participated in the sale of unregistered securities, in violation of Section 5 of the Securities Act of 1933. The findings stated that Harte and a registered representative at his member firm sold millions of shares of a thinly traded penny stock, resulting in proceeds exceeding $9.3 million for firm customers; the total commissions generated were $481,398. The findings also stated that Harte failed to conduct any due diligence prior to the stock sales; the circumstances surrounding the stock and the firm’s customers presented numerous red flags of a possible unlawful stock distribution. The findings also included that Harte did not determine if a registration statement was in effect with respect to the shares or if there was an applicable exemption; Harte relied on transfer agents and clearing firms to determine the tradability of the stock. FINRA found that Harte failed to undertake adequate efforts to ensure that the registered representative ascertained the information necessary to determine whether the customers’ unregistered shares could be sold in compliance with Section 5 of the Securities Act of 1933; Harte did not consider the determination of the free-trading status of shares to be within his supervisory responsibilities. FINRA also found that Harte failed to follow up on red flags; he was on notice of the inconsistencies between customers’ trading experience and activity in their firm accounts but took no action. In addition, FINRA determined that Harte received customer emails which evidenced a greater level of market sophistication than reflected in their account forms but failed to investigate these discrepancies. (FINRA Case #2006004666601).

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

October, 2011:

Lonnie Lee Dusenberry (CRD #3084887, Registered Representative, Elk Grove, California) 

Selling Away, Fraudulent Private Securities Transactions FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

Frank Bianculli (CRD #5452027, Registered Representative, Plainview, New York) 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, Bianculli consented to the described sanction and to the entry of findings that he entered into an informal agreement with brokers at his member firm to share in commissions relating to undisclosed private securities transactions in an entity, which purported to advance cash to merchants in exchange for the merchants’ future credit card receivable; the entity promised returns of 4 percent or more per month, but it was a Ponzi scheme. The findings stated that Bianculli helped brokers with servicing a customer’s investment but failed to provide his firm with written notice of his involvement in an unapproved private securities transaction. The findings also stated that Bianculli provided false and misleading information to FINRA during sworn on-the-record testimony. The findings also included that Bianculli provided false and misleading statements to his firm in response to a compliance questionnaire distributed by the firm inquiring into the scheme. FINRA found that Bianculli denied meeting any of the owners or principals of the entity and failed to disclose his participation in the customer’s investment. (FINRA Case #2009016911202).

Fraud, Selling Away and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

Clyde Allen Benninghoff (CRD #18463, Registered Principal, Amelia Island, Florida)