FINRA Enforcement Actions 2012

Valmark Securities, Inc. (CRD #31243, Akron, Ohio) and Richard Michael Arceci (CRD#1173612, Registered Principal, Sagamore Hills, Ohio)

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

Private Placement and Direct Investment Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

January, 2012:

Valmark Securities, Inc. (CRD #31243, Akron, Ohio) and Richard Michael Arceci (CRD #1173612, Registered Principal, Sagamore Hills, Ohio) submitted an Offer of Settlement in which the firm was censured and ordered to pay $350,000 in restitution to investors through a receiver the U.S. District Court for the Central District of California appointed. Arceci was fined $10,000 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 Arceci consented to the described sanctions and to the entry of findings that the firm, through Arceci, approved an offering for sale based exclusively on its review of the issuer’s unverified and uncorroborated statements in the offering document. The findings stated that the firm, through Arceci, designated an individual to conduct the marketing review for the offering. The individual created a summary page by cutting and pasting language directly from the private placement memorandum (PPM), including a statement about the unblemished payment history of the offering’s affiliates. The individual then completed, signed and dated the requisite 18-question review checklist. The findings also stated that the firm, through Arceci, designated an associated person of the firm to conduct the due-diligence review of the offering. The person had not heard of the issuer prior to receiving the PPM and the other individual’s summary report, so he used the summary report and the PPM to conduct the due diligence review, including his assessment of the risks of the offering, and completed, signed and dated the requisite 14-question due diligence review checklist. The firm, acting through Arceci, approved the offering for sale based on the PPM, the checklists and the summary report. The findings also included that the firm, acting through Arceci failed to adequately supervise its due-diligence review, in that it failed to obtain or review financial statements for the issuer which would have informed it in more detail of the liquidity issues of the offering’s affiliates; failed to research background information on the offering’s officers, which would have informed it that the chief executive officer (CEO) had been barred from the insurance industry by a state and later charged with fraud; and failed to use the services of third-party due-diligence providers that conducted due diligence research and drafted reports that would have identified material risks of the later offerings. The firm’s due diligence review, completed in less than three days, was based solely on the self-serving representations the issuer made in the PPM.

2012 FINRA

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

Boca Raton, Florida Securities Fraud and Mismanagement FINRA Arbitration and Litigation Lawyer, Russell L. Forkey, Esq.

This page will provide monthly links to both the results of stipulated FINRA enforcement awards and FINRA complaints for the calender year 2012, by month in ascending order.

In addition to providing information relative to the results of certain publically available enforcement awards, we have recently added a new feature to our site. We are now providing FINRA generated information relative to FINRA complaints issued in the months reference below.

Headwaters BD, LLC, Paul Edward Janson Roberta Ann Laraway and Philip Williams Seefried Jr.

Published on: April 18, 2012 | By Russell L. Forkey, P.A.

Unregistered Investment Advisor and Broker/Dealer Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

April, 2012:

Headwaters BD, LLC (CRD #117042, Denver, Colorado), Paul Edward Janson (CRD #4992234, Registered Principal, Avon, Connecticut), Roberta Ann Laraway (CRD #4845302, Registered Principal, Lone Tree, Colorado) and Philip Williams Seefried Jr. (CRD #1747086, Registered Principal, Denver Colorado) submitted an Offer of Settlement in which the firm was censured and fined $60,000, of which $40,000 was jointly and severally with Janson, Laraway and Seefried. Janson was also suspended from association with any FINRA member in a General Securities Principal (Series 24) capacity for one year. Laraway was also suspended from association with any FINRA member in an Operations Professional (Series 99) capacity for one year and Seefried was suspended from association with any FINRA member in any General Securities Principal (Series 24) capacity for one month.

Cantone Research, Inc. and Christine L. Cantone

Published on: April 18, 2012 | By Russell L. Forkey, P.A.

Unauthorized Outside Business Activity and Selling Away Broker/Dealer Fraud and Mismanagement FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

April, 2012:

Cantone Research Inc. (CRD® #26314, Tinton Falls, New Jersey) and Christine L. Cantone (CRD #2687618, Registered Principal, Thompson, Pennsylvania) submitted an Offer of Settlement in which the firm was censured, fined $25,000, $10,000 of which was jointly and severally with Christine Cantone, and ordered to pay a total amount of $200,000 in partial restitution to customers, jointly and severally with Christine Cantone. Christine Cantone was suspended from association with any FINRA member in any principal capacity for three months. Without admitting or denying the allegations, the firm and Christine Cantone consented to the described sanctions and to the entry of findings that Christine Cantone, as the firm’s vice president and chief compliance officer (CCO), failed to reasonably supervise a registered representative who was able to continue engaging in a scheme through which he sold fictitious investments to firm customers and misappropriated more than $1.6 million of their funds. Throughout the time of the registered representative’s association with the firm, Christine Cantone was aware of certain “red flags” that should have alerted her to the misconduct but failed to reasonably follow up on those indications of possible misconduct. The findings stated that Christine Cantone was responsible for enforcing the firm’s procedures regarding the monitoring and review of employee transactions in outside accounts, and for reviewing incoming and outgoing paper and electronic correspondence for the firm’s registered representatives. The findings also stated that upon the registered representative’s association with the firm, he disclosed an account at another member firm. Christine Cantone asked him to transfer the account to the firm and he objected, citing several reasons, including that he needed to pay certain bills from the account. Christine Cantone acquiesced and permitted the registered representative to retain his account at the other member firm. The findings also included that Christine Cantone regularly reviewed statements from the account, which alerted her to unusually large deposits in the account. Concerned that the registered representative might be engaging in outside business activities or private securities transactions, Christine Cantone questioned him about the origin of the funds but accepted the registered representative’s explanation that the deposits were related to real estate sales or to his relative’s supposed antique business, and did not request supporting documentation or make any other efforts to verify those representations.

David Lerner Associates, Inc. and William Mason

Published on: April 7, 2012 | By Russell L. Forkey, P.A.

Unreasonable Markup and Markdown FINRA Arbitration and Litigation Attorney Russell L. Forkey, Esq.

April, 2012:

FINRA Hearing Panel Fines David Lerner Associates $2.3 Million for Selling Municipal Bonds, CMOs to Retail Customers at Unfair Prices, and for Supervisory Violations

Ray Alexander Thompson

Published on: March 31, 2012 | By Russell L. Forkey, P.A.

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

March, 2012

Ray Alexander Thompson (CRD #3209494, Registered Principal, Houston, Texas) 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, Thompson consented to the described sanction and to the entry of findings that he failed to provide FINRA requested testimony. (FINRA Case #2010024707901).

Ralph Edward Thomas, Jr.

Published on: March 31, 2012 | By Russell L. Forkey, P.A.

Senior and Other Vulnerable Victims of Fraud and Theft FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

March, 2012:

Ralph Edward Thomas Jr. (CRD #2179751, Registered Representative, Reisterstown, Maryland) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Restitution is being required in connection with a separate criminal proceeding against Thomas arising from the same conduct. Without admitting or denying the findings, Thomas consented to the described sanction and to the entry of findings that he misappropriated more than $800,000 from vulnerable customers. The findings stated that a trust account was established for the benefit of a child with the proceeds of a $3 million medical malpractice settlement on the child’s behalf. The child’s relative was appointed guardian and trustee; the settlement proceeds were used to purchase an annuity for the child’s benefit. The findings also stated that Thomas convinced the relative to move the trust account to the institutions where he worked and he advised her on both the brokerage and banking accounts. The findings also included that Thomas executed a scheme to obtain money through false pretenses by establishing complete control over the brokerage and banking accounts in the customer’s trust account. Thomas ensured that the annuity payments which averaged $6,287.53 per month were deposited directly into the bank trust account; Thomas disbursed only $1,000 to $1,500 a month from the trust account for the child’s care and converted the remainder of the money for his benefit. FINRA found that Thomas withdrew money from the trust account by obtaining the relative’s signature on blank withdrawal slips and used the signed withdrawal slips to withdraw money from the bank trust account and purchase cashier’s checks, which were made payable to other financial institutions where Thomas held personal accounts. Thomas went to the bank numerous times to withdraw a total of $756,963.98 from the bank trust account, which he converted for his personal benefit. Thomas also converted $12,500 from the mother’s personal bank account. FINRA also found that Thomas was the financial advisor for an elderly customer with an account at his member firm. Thomas withdrew $42,000 from an annuity held by the customer in her account with him, without the customer’s knowledge, and used the withdrawn funds to purchase cashier’s checks made payable to cash or to credit card companies where he, not the customer, held accounts. (FINRA Case #2010022861802).

Angel Luis Suarez

Published on: March 31, 2012 | By Russell L. Forkey, P.A.

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

March, 2012:

Angel Luis Suarez (CRD #3116550, Registered Principal, Briarwood, New York) was barred from association with any FINRA member in any capacity. The sanction was based on findings that Suarez executed trades in the account of a customer at his member firm without the customer’s knowledge, authorization or consent. The findings stated that Suarez intentionally executed unauthorized trades in the customer’s account, and attempted to conceal his misconduct. When Suarez’ firm confronted him with the allegations of unauthorized trading, he first tried to conceal the unauthorized trading by claiming that the customer had authorized the trades. When the firm threatened to check Suarez’ telephone records, he stated that he had been desperate, and engaged in the unauthorized trading to generate commissions. The findings also stated that the firm cancelled the unauthorized trades and restored the customer’s holdings so that the customer did not suffer any losses, and Suarez did not receive commissions for his unauthorized trades. The unauthorized trades would have generated $5,000 in commissions, if paid to Suarez, and would have resulted in a net loss of $1,930.97 to the customer. The findings also included that Suarez failed to respond to FINRA requests for information and documents. (FINRA Case #2009019953501).

Allan Anthony Scheer

Published on: March 31, 2012 | By Russell L. Forkey, P.A.

Index Linked Certificates of Deposit Fraud, Misrepresentation and Mismanagement FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

March, 2012:

Allan Anthony Scheer (CRD #2775825, Registered Principal, Melbourne, Florida) submitted an Offer of Settlement in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for four months. The fine is to be paid upon reentry to the securities industry. Without admitting or denying the allegations, Scheer consented to the described sanctions and to the entry of findings that he misrepresented material information to potential customers regarding the returns associated with the index-linked certificates of deposit (CDs) that they each purchased from his member firm. The findings stated that the misrepresentations to the customers were material, as a reasonable investor considering whether to purchase the product would consider the rate of return to be considered significant. The findings also stated that Scheer’s member firm terminated his employment for misrepresentation of product returns.

Ricard Patrick Sandru

Published on: March 31, 2012 | By Russell L. Forkey, P.A.

Broker/Dealer, Investment Advisor and Hedge Fund Fruad, Mismanagement and Misrepresentation FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

March, 2012:

Richard Patrick Sandru (CRD #2470082, Registered Principal, Fort Myers, 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, Sandru consented to the described sanction and to the entry of findings that he caused financial planning forms for investment advisory customers to be submitted to the corporate accounting office that services his member firm and its investment advisor affiliate without the customers’ knowledge or authorization, and without providing the financial planning services described in the forms so that the customers were improperly charged fees ranging from $500 to $5,000 per financial plan. The findings stated that Sandru generated approximately $321,350 in unauthorized financial planning fees, which he converted for his personal benefit; Sandru received approximately $292,428.50 in accordance with his payout. The findings also stated that Sandru failed to respond to FINRA requests for information and documents and, through counsel, notified FINRA that he would not respond to any requests for information. (FINRA Case #2011027854301).