Articles Posted in FINRA Enforcement Actions 2011

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

October, 2011:

Woodbury Financial Services, Inc. (CRD #421, Oak Dale, Minnesota) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $75,000.  Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that a firm registered representative converted approximately $990,000 from the firm’s customers, through separate wire requests; these wire requests directed that funds be withdrawn from the firm’s customer accounts that he serviced, and wired to a bank account that he controlled. The findings stated that the firm’s supervisory control system in this area failed to include a policy or procedure requiring a review to detect or prevent multiple wires, from one or numerous customers, going to the same third-party account. The findings also stated that the firm’s system failed to include exception reports that would have identified multiple customer wires going to the same third-party account. The findings also included that the firm failed to detect that the registered representative had submitted separate wire requests, from different firm customers, resulting in the transmittal of approximately $990,000 of those customers’ funds to a bank account that he controlled. FINRA found that the firm failed to establish, maintain and enforce a supervisory system reasonably designed to adequately review and monitor all transmittals of funds from customers’ accounts to third-party accounts and outside entities.

Mutual Fund Fraud, Misrepresentation and Negligent Supervision Attorney, Russell L. Forkey, Esq.

October, 2011:

TD Ameritrade, Inc. (CRD #7870, Bellevue, Nebraska) submitted a Letter of Acceptance,

Municipal Securities Fraud and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

RBC Capital Markets, LLC (CRD #31194, New York, New York) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $95,000 and ordered to pay $32,913.50, plus interest, in restitution to investors. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that in several transactions, it purchased municipal securities for its own account from a customer and/or sold municipal securities for its own account to a customer at an aggregate price (including any markdown or markup) that was not fair and reasonable, taking into consideration all relevant factors, including the best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction; the expense involved in effecting the transaction; the fact that the broker, dealer or municipal securities dealer is entitled to a profit; and the total dollar amount of the transaction. (FINRA Case #2008013634901).

Mutual Bond Fraud and Negligent Supervision FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

October, 2011:

Continental Investors Services, Inc. (CRD #29775, Longview, Washington) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $35,000 and required to revise its WSPs regarding fair pricing for municipal securities transactions.  Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it sold municipal securities for its own account to a customer at an aggregate price (including any markdown or markup) that was not fair and reasonable, taking into consideration all relevant factors, including the best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction, the expense involved in effecting the transaction, the fact that the broker, dealer or municipal securities dealer is entitled to a profit and the total dollar amount of the transaction. The findings stated that the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and Municipal Securities Rulemaking Board (MSRB) rules concerning fair pricing for municipal securities transactions. (FINRA Case #2009018104501).

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

October, 2011:

CBG Financial Group, Inc. (CRD #6578, Boca Raton, Florida) submitted a Letter of

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

October, 2011:

Carty & Company, Inc. (CRD #7001, Memphis, Tennessee) 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 it failed to deliver official statements to customers who purchased new issue municipal securities during the primary offering disclosure period by the settlement date; the firm was neither an underwriter nor part of the underwriting syndicate, but was required to deliver an official statement to each customer by the settlement date. The findings stated that the firm failed to adopt, maintain and enforce adequate WSPs pertaining to the firm’s requirement to deliver official statements to customers purchasing new issue municipal securities in secondary market transactions. (FINRA Case #2009018036501).

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

October, 2011:

Brookstone Securities, Inc. (CRD #13366, Lakeland, Florida) submitted a Letter of

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

October, 2011:

BATS Trading, Inc. (CRD #136734, Lenexa, Kansas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $307,500. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it executed numerous short sale transactions on its subscribers’ behalf and failed to report each such transaction as short; as a result, the firm failed to report each of these transactions to the NASDAQ Market Center with the correct symbol indicating whether the transaction was a buy, sell, sell short or cross. The findings stated that the firm executed numerous short sale transactions and failed to report each of these transactions to the NASD/NASDAQ Trade Reporting Facility® (NNTRF) with the correct symbol indicating whether the transaction was a buy, sell, sell short or cross. The findings also stated that the firm executed over 10 million short sale transactions and failed to report each of these transactions to the FINRA/New York Stock Exchange (NYSE) Trade Reporting Facility with the correct symbol indicating whether the transaction was a buy, sell, sell short or cross. The findings also included that the firm failed to accept or decline in the NNTRF transactions in reportable securities within 20 minutes after execution that the firm had an obligation to accept or decline as the order entry identification (OEID) firm. (FINRA Case #2006006862401).

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

October, 2011:

Tradespot Markets Inc. (CRD #29683, Davie, Florida) and Mark Bedros Beloyan (CRD #1392748, Registered Principal, Davie, Florida) submitted an Offer of Settlement in which the firm was censured and fined $25,000, and Beloyan was suspended from association with any FINRA member in any capacity for one month and suspended from association with any FINRA member in any principal capacity for an additional month. In light of Beloyan’s financial status, FINRA did not impose any monetary sanctions upon him. Without admitting or denying the allegations, the firm and Beloyan consented to the described sanctions and to the entry of findings that the firm, through Beloyan, sold over one billion shares of a low-priced stock that was neither registered with the Securities and Exchange Commission (SEC) nor exempt from registration. The findings stated that the firm, through Beloyan, its Chief Compliance Officer, failed to establish and maintain a supervisory system, including written supervisory procedures (WSPs), reasonably designed to ensure compliance with Section 5 of the Securities Act of 1933, the applicable rules and regulations regarding the distribution of unregistered and non-exempt securities. The findings also stated that the firm, through Beloyan, the firm’s Anti-Money Laundering (AML) Compliance Officer (AMLCO), failed to implement or enforce the firm’s AML program by failing to identify suspicious activity, properly investigate it, and report it through Form SAR-SF, as appropriate. The findings also included that the suspicious activity consisted of deposits of billions of shares of the low-priced stock of issuers in certificate form into accounts controlled by a person with a regulatory and criminal history, liquidated those shares generally soon after their deposit, and wired of the sales proceeds out of the accounts soon after liquidation.

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.