Has Your Broker Been Sued by FINRA – Part 2

Robert Charles Pollock (CRD #4490116, formerly a Registered Representative with Workman Securities Corporation, Palm Harbor, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $94,650, which includes disgorgement of $34,650 in commissions, suspended from association with any FINRA member in any capacity for one year, and ordered to pay $76,922, plus interest, in restitution to customers. The fine and restitution amounts must be paid either immediately upon Pollock’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, Pollock consented to the described sanctions and to the entry of findings that he sold to customers installment plan contracts offered by a non-profit corporation that represented itself to the public as a charitable organization, but Pollock lacked a reasonable basis to recommend the purchase of the contracts to his customers given his failure to perform a reasonable investigation concerning the product. The findings stated that while Pollock reviewed information on the non-profit corporation’s website and spoke to its personnel, he took their representations at face value and failed to independently verify those representations. The findings also stated that Pollock did not contact the Internal Revenue Service (IRS) to confirm the tax-exempt status or the availability of a tax deduction to investors, and did not seek to understand how the non-profit corporation arrived at its figures regarding tax benefits; Pollock also misrepresented to his customers that they could take charitable tax deductions in connection with their respective investments, which was not true. The findings also included that in connection with the solicitation of these installment plan contracts, Pollock provided his customers with illustrations and other sales materials that contained misleading and incomplete information. FINRA found that Pollock failed to provide his member firm with written notice of his participation in the above-referenced transactions or receive its written approval to participate in those transactions, and he did not present the flow chart and 1099 Statement for review to a registered principal of his firm prior to using them in connection with the sales of the installment plan contracts. The suspension is in effect from December 6, 2010, through December 5, 2011. (FINRA Case #2009019042301)

Andrew C. Powell (CRD #4826369, Registered Representative formerly registered with International Financial Solutions and J.P Turner & Company, LLC, Coral Springs, 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 six months. Without admitting or denying the allegations, Powell consented to the described sanctions and to the entry of findings that he failed to timely respond to FINRA requests for information. The suspension is in effect from December 6, 2010, through June 5, 2011. (FINRA Case #2009016221401)

Larrye Alfie Smith (CRD #1131839, Registered Principal with Questar Capital Corporation, Miami, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was censured, fined $7,500 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Smith’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, Smith consented to the described sanctions and to the entry of findings that he engaged in business activities for compensation outside the scope of his business relationship with his member firm without providing the firm with prompt written notice. The findings stated that Smith sold EIAs valued at $148,850 without notifying the firm. The findings also stated that Smith used a business card the firm had not approved, distributed a seminar invitation the firm had not approved and conducted a seminar of which the firm was unaware. The suspension is in effect from December 6, 2010, through June 5, 2011. (FINRA Case #2009020119101)

Cohen & Company Securities, LLC (CRD #104002, Philadelphia, Pennsylvania) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $50,000, ordered to pay $899,251, plus interest, in restitution to customers, and required to review its supervisory system and procedures concerning its pricing of principal transactions with customers for compliance with FINRA rules and the federal securities laws, and to certify to FINRA within 90 days that it has in place systems and procedures reasonably designed to achieve compliance with laws, regulations and rules concerning charging fair prices in principal transactions with customers, including transactions in debt securities. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it charged excessive mark-ups in the sales of investment grade Collateralized Debt Obligation (CDO) securities in which it acted as principal. The findings stated that the firm sold, as principal, CDO securities to institutional customers at prices that were not fair and reasonable taking into consideration all relevant circumstances, including that the price was not reasonably related to the amount the firm contemporaneously paid for the CDO securities and that the securities had an investment grade rating as determined in accordance with NASD IM-2440-2(b)(9). The findings also stated that at the time of these transactions, the firm had failed to establish, maintain and/or enforce a supervisory system and written supervisory procedures reasonably designed to ensure that prices at which it bought debt securities from, and at which it sold debt securities to, customers in principal transactions were fair and reasonable and to otherwise achieve compliance with all applicable laws, rules and regulations pertaining to effecting principal transactions with customers. (FINRA Case #2009016281001)

Cambridge Legacy Securities, L.L.C. (CRD #103722, Dallas, Texas) and Tommy Edward Fincher (CRD #1725266, Registered Principal, Mesquite, Texas) submitted a Letter of Acceptance Waiver and Consent in which the firm was censured and ordered to pay$218,400 in restitution to customers. If the firm fails to provide FINRA with proof of restitution, it shall immediately be suspended from FINRA membership until such proof has been provided. Fincher was fined $5,000 and suspended from association with any FINRA member in any principal capacity for six months. Without admitting or denying the findings, the firm and Fincher consented to the described sanctions and to the entry of findings that the firm failed to have reasonable grounds to believe that a private placement offered pursuant to Regulation D was suitable for any customer; and, acting through Fincher, its Chief Compliance Officer and registered principal, the firm failed to conduct adequate due diligence of the private placement offering before allowing its brokers to sell the security. The findings stated that Fincher was the principal responsible for conducting due diligence on the offering and approved the security as a new product available for firm brokers to sell to their customers; he allowed the firm’s brokers to continue selling the security despite its ongoing failure to make overdue interest and principal payments. The findings also stated that the firm failed to have reasonable grounds for allowing the continued sale of the security even though the firm, through Fincher, was aware of numerous red flags concerning liquidity problems, delinquencies and defaults, but allowed its brokers to continue selling the security. The findings also included that the firm, acting through Fincher, failed to maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations, and failed to enforce reasonable supervisory procedures to detect or address potential red flags as it related to the offering. Fincher’s suspension is in effect from January 3, 2011, through July 2, 2011. (FINRA Case #2009020319001)

Torrey Pines Securities, Inc. (CRD #17120, San Diego, California) and Nicolette Irisa Denney (CRD #1090644, Registered Principal, Temecula, California) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $17,500. Denney was suspended from association with any FINRA member in any principal capacity, other than the capacity of municipal securities principal, for 10 business days. In light of Denney’s financial status, no monetary sanctions have been imposed. Without admitting or denying the findings, the firm and Denney consented to the described sanctions and to the entry of findings that Denney, acting on the firm’s behalf, failed to ensure that a firm principal completed his annual certification as the firm’s procedure required, and did not follow up on the principal’s failure to provide information regarding both his outside business activities and the accounts for which he served as a custodian or trustee. The findings stated that Denney, acting on her firm’s behalf, conducted an inspection of a firm branch office, and that inspection did not comport with the firm’s written procedures and did not reasonably review the activities of that office. The findings also stated that Denney did not review the transmittal of funds between the principal’s customers and a third party as the firm’s written supervisory procedures required, and failed to obtain details regarding the principal’s outside business activities. The findings also included that the firm failed to reasonably supervise the principal by failing to take steps to inquire into “red flags” indicating his possible misconduct; failing to follow up on his outside business activities and excessive absences from the firm; failing to timely investigate allegations that he was participating in private securities transactions away from the firm; and when the firm confirmed his selling away activities, it did not take any steps to place him on heightened supervision. FINRA found that the firm’s written supervisory procedures were not reasonably designed to ensure principal review of wires from customers to third parties, so it was unaware the principal’s customers were transferring large sums to a third party and that he was executing Letters of Authorization (LOAs) on behalf of multiple customers. Denney’s suspension was in effect from December 20, 2010, through January 3, 2011. (FINRA Case #2007011125103)

FINRA Expels APS Financial, Bars Former President and Former Broker for Targeting an Elderly Investor With Fraudulently Excessive Mark-Ups

Elderly Investor was Overcharged $1.2 Million, Mark-Ups as High as 67 Percent

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WASHINGTON – The Financial Industry Regulatory Authority (FINRA) announced recently that it has expelled APS Financial Corporation, located in Austin, Texas, barred the firm’s former President, George Conwill, and barred Peter Aman, a former broker at the firm, in a scheme which overcharged an elderly investor by $1.2 million. FINRA found that Aman charged mark-ups ranging from 4.15 percent to fraudulently excessive mark-ups as high as 67 percent when executing 45 transactions for customers of APS Financial. Forty-three of these excessive or fraudulent mark-ups were related to transactions for the accounts of a single elderly investor. Aman overcharged this elderly investor by more than $1.2 million through undisclosed mark-ups, including $767,000 in fraudulently excessive mark-ups.

FINRA also barred Conwill and expelled APS Financial for rule violations relating to trading in corporate high yield bonds, collateralized mortgage obligations and collateralized debt obligations. Both APS Financial and Conwill were cited for charging excessive mark-ups and supervision violations.

“FINRA is committed to ensuring that firms charge their customers reasonable fees in connection with the purchase and sale of fixed income and other debt securities. There is no room in the securities industry for those who prey upon elderly investors,” said Thomas Gira, Executive Vice President of FINRA’s Department of Market Regulation.

In total, APS Financial Corporation overcharged customers on 59 transactions. Conwill approved all 53 mark-ups above 5 percent, including 42 of the 43 excessive or fraudulent mark-ups for the elderly investor’s accounts.

FINRA also determined that APS Financial Corporation failed to establish and maintain an adequate supervisory system and otherwise failed to reasonably and properly supervise the firm and its registered representatives so as to detect and prevent the mark-up violations. FINRA found that Conwill, as the firm’s president at the time of the violations, failed to take reasonable steps to ensure that the firm established and maintained an adequate supervisory system, and failed to reasonably and properly supervise the firm’s registered representatives.

APS Financial Corporation, Aman and Conwill settled these matters without admitting or denying the allegations, but consented to the entry of FINRA’s findings.

FINRA Moves to sHut Down ‘Boiler Room’ B-D

Regulator says Pinnacle Partners was hawking fraudulent Reg D offerings; also says firm destroyed documents

Finra is seeking to shut down a broker-dealer it alleges is selling fraudulent oil and gas private placements. The Financial Industry Regulatory Authority Inc. today filed a notice seeking a temporary cease-and-desist order against Pinnacle Partners Financial Corp. and its president and owner, Brian K. Alfaro.

The case involves sales of eight private placements. Finra charged that Mr. Alfaro operates a “boiler room where numerous registered representatives place thousands of cold calls weekly to solicit investments in Alfaro’s captive oil and gas drilling joint ventures.”

Pinnacle has raised over $10 million from over 100 investors for offerings that Finra alleges “materially misrepresented or omitted facts,” according to its complaint.

The regulator’s department of enforcement filed the order today with a Finra hearing panel. That panel has about two weeks to make a decision on the regulator’s request to close down the operation.

The alleged fraud began in August 2008. In one offering, Mr. Alfaro deleted the following language from an investment summary offered to clients: “All currently producing wells are very marginal,” according to Finra’s complaint. In another placement offering, Mr. Alfaro’s documentation stated that the deal had made “cash distribution to partners” of $14.3 million, when the actual figure was $1.5 million, Finra alleged.

“Pinnacle and Mr. Alfaro also provided investors with maps that omitted numerous dry, plugged and abandoned wells near their projected drilling states,” the complaint alleged. “In the investment summaries, Pinnacle and Mr. Alfaro grossly inflated natural gas prices, projected natural gas reserves, estimated gross returns, and estimated monthly cash flows.”

The complaint said that from January 2009 to last month, Mr. Alfaro misused customer funds to meet obligations for previous offerings, cover personal expenses and take cash payments, according to the complaint. Pinnacle and Mr. Alfaro also is charged with destroyed documents, maintained inaccurate books and records and failed to report investor complaints.

Fox Financial Management Corporation (CRD® #134277, Carrollton, Texas) and James Edward Rooney Jr. (CRD #1857754, Registered Principal, Carrollton, Texas) submitted an Offer of Settlement in which the firm was censured and fined $40,000, and Rooney was fined $20,000 and suspended from association with any FINRA member in any principal capacity for 15 business days. Without admitting or denying the allegations, the firm and Rooney consented to the described sanctions and to the entry of findings that the firm, acting through Rooney, sold zero-coupon bonds to customers and negligently omitted material facts concerning the fund’s manager, who the State of Texas had charged with forgery of a financial instrument, and was sentenced to five years deferred adjudication and had been the subject of a Temporary Order of Prohibition for selling unregistered securities by the State of Illinois. The findings stated that the firm, acting through Rooney, sold zero-coupon bonds to customers that were secured by interests in life insurance policies, and limited liability companies, which Rooney controlled and were affiliated with the firm, issued the bonds, and negligently omitted material facts to customers relevant to the criminal records of the bonds’ manager and owning companies. The findings also stated that the firm, acting through Rooney, participated in private placement offerings of zero-coupon bonds limited liability companies issued, and each of the offerings claimed an exemption from registration under the Securities Act of 1933; however, the offerings were not separate and distinct, and were, therefore, subject to integration, and to the securities registration requirements of public offerings. The findings also included that the firm, acting through Rooney, sold zero-coupon bonds, failed to establish a proper escrow account by using a limited liability company not chartered as a bank as the escrow agent, and falsely represented that customer funds would not be commingled. FINRA found that Rooney failed to detect that customer funds had been commingled because he had neglected to obtain copies of the escrow account statements and to maintain such statements among the firm’s records. FINRA also found that the firm’s test of its system of supervisory controls was flawed because it failed to include a review of its private placement business, and Rooney stated in his annual certification of compliance that the firm had established and maintained policies and Other FINRA Actions procedures reasonably designed to ensure compliance with FINRA rules. In addition, FINRA determined that the firm failed to evidence its supervision over Rooney, in that Rooney was the only principal who had signed Subscription Agreements indicating approval of the customer’s investment in an offering. The suspension is in effect from December 6, 2010, through December 24, 2010. (FINRA Case #2008011592201)

FINRA Orders Ferris, Baker Watts to Pay Nearly $700,000 for Inappropriate Sales of Reverse Convertible Notes. Firm to Pay Restitution of $189,723 for Unsuitable Sales

The Financial Industry Regulatory Authority (FINRA) announced that it has fined the former Ferris, Baker Watts LLC, acquired by RBC Wealth Management, $500,000 for inadequate supervision of sales of reverse convertible notes to retail customers as well as unsuitable sales of reverse convertibles to 57 accounts held by elderly customers who were at least 85 years old and customers with a modest net worth.

The firm was ordered to pay nearly $190,000 in restitution to the 57 account holders for net losses incurred as a result of purchasing reverse convertibles.

“Reverse convertible notes are complex investments that often entail significant risk of loss and also involve terms, features and risks that can be difficult for retail investors to evaluate,” said James Shorris, FINRA Executive Vice President and Acting Chief of Enforcement. “Ferris, Baker’s inadequate written procedures resulted in recommendations of sales to customers for whom the purchase of these securities was not suitable, including elderly customers and investors who had very modest assets.”

Reverse convertibles are notes with a coupon interest rate set for a fixed duration – three, six or twelve months – that are tied to the performance of a particular stock. If the price of the underlying stock drops below a certain level during the duration of the reverse convertible, the customer receives a predetermined number of shares of the stock at maturity of the note.

Conversely, if the underlying security maintains its price level, at maturity, the customer receives return of the dollar amount invested and a final coupon payment. In most of the instances where customers received the underlying stock at maturity, the customer ended up with an investment loss. Reverse convertibles not only come with the risks associated with fixed income products, such as issuer default and inflation, but with the additional risk that the value of the underlying asset can significantly depreciate.

FINRA found that during the period January 2006 to July 2008, Ferris, Baker engaged in sales of reverse convertibles to approximately 2,000 retail accounts without providing sufficient guidance to its brokers and supervising managers on how to assess suitability in connection with their brokers’ recommendations of reverse convertibles.

Additionally, the firm did not have a system to effectively monitor customer accounts for potential over-concentrations in reverse convertibles. The firm also made recommendations without a reasonable basis to believe that the investment was suitable for elderly customers and those with modest net worth. The firm also failed to detect and respond to indications of potential over-concentration in reverse convertibles.

In one instance, the firm sold an 86-year-old retired social worker five reverse convertibles in the amount of $10,000 each. At various times, these represented between 15 percent and 25 percent of her investment portfolio. In another instance, the firm sold a 20-year-old clerk making less than $25,000 annually five reverse convertibles in his Roth IRA and regular accounts. These securities represented 51 percent of the IRA account and 44 percent of the regular account’s value.

Robert Anthony Cataldo (CRD #1056971, formerly a registered representative with UBS Financial Services, Lexington, Massachusetts) 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, Cataldo consented to the described sanction and to the entry of findings that he engaged in several outside business activities without providing prompt written notice to his member firm and failed to disclose these outside activities on his firm’s compliance questionnaires. The findings stated that Cataldo failed to completely respond to FINRA requests for information. (FINRA Case #2009017809101)

Everett Bryant Ellis (CRD #4046494, currently registered with BBVA Compass Investment Solutions, Inc., formerly registered with SunTrust Investment Services, Gulf Breeze, Florida) submitted a letter of Acceptance, Waiver and Consent in which he was fined $5,000, suspended from association with any FINRA member in any capacity for 15 business days, and ordered to pay $9,334.85, plus interest, in restitution to a customer. Without admitting or denying the findings, Ellis consented to the described sanctions and to the entry of findings that he recommended that a customer, to whom he had sold a variable annuity with a seven-year surrender period, surrender 50 percent of the total value of her variable annuity and invest the proceeds in municipal bond mutual funds. The findings stated that the customer incurred a surrender charge of $5,684.13 in connection with the annuity surrender and sales charges of $3,650.72 in connection with the mutual fund purchases. The findings also stated that Ellis’ recommendation to the customer was unsuitable in light of the customer’s age and financial situation; and considering both the costs associated with the surrender of the variable annuity and purchase of the mutual fund, he had no reasonable basis for his recommendation to switch from the variable annuity to the mutual funds. The suspension was in effect from November 15, 2010, through December 6, 2010. (FINRA Case #2008014615501)

Benjamin Burl Abbott III (CRD #5317757, formerly registered with Edwards Jones, Mount Dora, Florida) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for one year. The fine must be paid either immediately upon Abbott’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, Abbott consented to the described sanctions and to the entry of findings that he maintained personal margin accounts at his member firm and met initial margin calls in his personal margin accounts by liquidating the position that created the margin call because he did not have sufficient equity in the account to pay for the securities purchased on margin, nor did he deposit sufficient funds to meet the margin calls. The findings stated that Abbott placed an unauthorized short sell order of a company’s stock, at a total cost of $90,331.71, in a customer’s account, and the trade was marked “unsolicited” although the customer had not authorized a short sale of the stock or any other specific transaction. The findings also stated that Abbott maintained that he made an error and meant to enter an order for a short sale for a smaller number of shares, but the customer did not authorize this trade transaction either. The findings also included that the firm canceled the transaction, resulting in a market loss of proximately $20,000, which the firm absorbed. FINRA found that, in connection with joint accounts he held with his relative at the firm, Abbott knowingly entered information that overstated his net worth and annual income on new account forms. FINRA also found that Abbott entered the false information on the new account forms so he could engage in trading activity the firm would not have allowed if he disclosed his true net worth and annual income. In addition, FINRA determined that Abbott’s actions resulted in the creation of false books and records The suspension is in effect from November 1, 2010, through October 31, 2011. (FINRA Case #2008015676801)

Next Financial Group, Inc. was recently fined $400,000 by FINRA and required to pay $102,000 in restitution to clients based on the fact that FINRA concluded that the company did not have a reasonable system in place to review the transactions of its registered representatives for excessive trading. FINRA noted that one representative was found to be churning client accounts and that Next’s oversight system, which relied on compliance and branch managers, fell short of its responsibility to detect and half the activity. Due to the lack of a reasonable supervisory system, the firm failed to detect excessive trading by a registered representative in five accounts, resulting in about $102,000 in unnecessary sales charges.

John William Pena (CRD #2780628, Registered Principal formerly licensed with the Concord Equity Group, Margate, Florida) 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, Pena consented to the described sanction and to the entry of findings that he borrowed $20,000 from customers contrary to his member firm’s written procedures forbidding registered representatives from borrowing funds from firm customers except in cases where the customer was an immediate family member; neither customer was a member of Pena’s immediate or extended family. The findings stated that Pena failed to notify his firm of the loan, obtain the firm’s approval prior to accepting the loan or repay the loan. The findings also stated that Pena failed to timely and completely respond to FINRA requests for information and documents. (FINRA Case #2007010533701)

Dean Allen Raber (CRD #2214667, Registered Principal formerly licensed with PFS Investments, Sarasota, Florida) was barred from association with any FINRA member in any capacity and ordered to pay $14,000, plus interest, in restitution. The sanction was based on findings that Raber misappropriated $44,000 from an individual and $10,000 from a customer, both of whom had entrusted him with their funds for investment purposes. The findings stated that rather than investing the funds as he represented, Raber used the funds for his own use and benefit. The findings also stated that Raber’s member firm repaid $30,000 of the individual’s funds and reimbursed the customer in full. The findings also included that Raber failed to respond to FINRA requests for information. (FINRA Case #2008016254501)

Brookstone Securities, Inc. (CRD # 13366, Lakeland, Florida), Richard Joseph Buswell (CRD #4770105, Registered Representative, Lafayette, Louisiana) and Herbert Steven Fouke (CRD #5523938, Registered Representative, Lafayette, Louisiana) were named as respondents in a FINRA complaint alleging that the firm, acting through Buswell and Fouke, made misrepresentations and/or omissions of material fact in connection with the sale of unsecured bridge notes and warrants. The complaint alleges that Buswell and Fouke, acting on the firm’s behalf, told purchasers of the bridge notes that they were guaranteed without any reasonable basis given the description of the placement agent’s limited role in the Private Placement Memorandum (PPM) and disclosed no risks regarding the financing or financial health of the placement agent or the issuer of the bridge notes and warrants. The complaint also alleges that Buswell and Fouke provided unwarranted price predictions to customers regarding the future price of common stock for which warrants would be exchangeable. The complaint further alleges that Buswell and Fouke, acting on the firm’s behalf, guaranteed the payment at maturity of promissory notes although the PPM made clear that the placement agent had no commitment to provide financing for the private placement or a later public offering. In addition, the complaint alleges that Buswell and Fouke, acting on the firm’s behalf, recklessly or knowingly failed to disclose the risk that the financing would not occur and recklessly or knowingly failed to disclose the other risks outlined in the PPM. The complaint alleges that Buswell and Fouke, acting on the firm’s behalf, guaranteed to customers that they would receive back their principal investments plus returns, failed to inform investors of any risks associated with the investments and did not discuss the risks outlined in the PPM that could result in investors losing their entire investment. The complaint also alleges that the firm, acting through Buswell, made misrepresentations and/or omissions of material fact 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 to customers; the PPM for the firm self-offering 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, and the PPM also stated that the investment was illiquid, contrary to Buswell’s representations. The complaint further alleges that Buswell represented to customers that he would invest their funds in another private placement, and in direct contradiction, invested the funds in the firm’s private placement. In addition, the complaint alleges that the firm, acting through Buswell and Fouke, recommended and effected the sale of securities without having a reasonable basis to believe that the transactions were suitable given the customers’ financial circumstances and conditions; Buswell recommended a trading strategy that relied upon frequent trading, use of margin and concentration of the accounts in a small number of financial stocks. The complaint alleges that Buswell exercised discretion in customers’ accounts without the customers’ prior written authorization or the firm’s acceptance of the accounts as discretionary. The complaint also alleges that the firm, acting through its chief executive officer (CEO) and its president, failed to reasonably supervise Buswell, and failed to follow up on red flags 28 Disciplinary and Other FINRA Actions that should have alerted them to the need to investigate Buswell’s sales practices and determine whether trading restrictions, heightened supervision or discipline were warranted. The complaint further alleges that the firm, acting through its CEO, president and chief compliance officer, failed to establish, maintain and enforce supervisory procedures reasonably designed to prevent violations of NASD Rule 2310 regarding suitability; the firm’s procedures were also inadequate to prevent and detect unsuitable recommendations resulting from excessive trading, excessive use of margin and over-concentration. The complaint alleges that the firm’s new account application process was flawed so that a reviewing principal was unable to obtain an accurate picture of customers’ financial status, investment objectives and investment history when reviewing a transaction for suitability. The complaint also alleges that the firm’s procedures failed to identify specific reports that its compliance department was to review and provided no guidance on the actions or analysis that should occur in response to the reports. (FINRA Case #2009017275301)

Kevin Lawrence Cohen (CRD #4527236, Registered Principal, Stuart, Florida), Dennis Stanley Kaminski (CRD #1013459, Registered Principal, Wellington, Florida), and Gari Craig Sanfilippo (CRD #4151931, Registered Principal recently licensed with GWN Securities, Contemporary Solutions, Wellington, Florida) were each suspended from association with any FINRA member in any capacity for 18 months and required to requalify before acting in any capacity requiring qualification. In addition, Kaminski was fined $50,000. The National Adjudicatory Council (NAC) imposed the sanctions following appeal and call for review of an Office of Hearing Officers (OHO) decision. The sanctions were based on findings that Kaminski failed to supervise his member firm’s timely review of variable annuity transactions and failed to address the breakdown of the compliance department’s Trade Review Team’s review of Red Flag Blotters. The findings stated that Cohen and Sanfilippo created and maintained inaccurate books and records relating to the firm’s variable annuity trading. Cohen’s and Sanfilippo’s suspensions are in effect from October 18, 2010, through April 19, 2012. Kaminski has appealed to the SEC, and the sanctions are not in effect pending consideration of the appeal. (FINRA Case #EAF0400630001)

Ronald Gabriel Klebba (CRD #1935556, Registered Representative recently licensed with Met Life Securities, Canton, Georgia) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FIINRA member in any capacity. Without admitting or denying the findings, Klebba consented to the described sanction and to the entry of findings that he financially exploited elderly women by convincing them to grant him general power of- attorney and to sign a document waiving any conflict of interest that Klebba might have, name him as beneficiary on assets, name him as a joint owner on bank accounts, name him as joint tenant on a warranty deed for real estate and to give him a $50,000 gift from the proceeds of the sale of a condominium. The findings stated that Klebba’s acts directly violated his employer’s rules prohibiting registered representatives from being the beneficiary of a contract policy or from accepting a grant of power-of attorney from customers. (FINRA Case #2008014974201)

Joshua Kohn (CRD #2419594, Registered Representative last licensed with Wachovia Securities, Deerfield Beach, Florida) 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, Kohn consented to the described sanction and to the entry of findings that he failed to appear for a FINRA on-the-record interview and failed to contact FINRA to reschedule the interview. (FINRA Case #2009020974501)

John Christopher Romanoff (CRD#3097147, previously registered with Summit Brokerage Services, Inc. and Raymond James & Associates, Inc., Cape Coral, Florida) was barred from association with any FINRA member in any capacity and ordered to pay $70,000, plus interest, in restitution to customers. The sanctions were based on findings that Romanoff borrowed $70,000 from customers and evidenced the loan by a promissory note, even though his member firm’s written procedures prohibited registered representatives from borrowing funds from firm customers. The findings stated that Romanoff did not notify his firm of the loan or obtain the firm’s permission to borrow funds from the customers, defaulted on the promissory note and failed to repay any of the principal balance due to the customers, even though the customers complained to his firm. The findings also stated that Romanoff that Romanoff provided his firm with a Financial Advisor Compliance Questionnaire which falsely represented that he had not entered into any loan with a customer. The findings also included that Romanoff failed to respond to FINRA requests for information. (FINRA Case #2008014858101)

Jason Michael Mutascio (CRD #4156832, previously Registered Representative with Brewer Financial Services and Newbridge Securities , Aventura, Florida) was named as a respondent in a FINRA complaint alleging that he falsified multiple third-party wire request forms, submitted the falsified forms to his member firm, and obtained and exercised control over at least $52,500 in funds from a customer’s account without the customer’s knowledge or authorization. The complaint alleges that Mutascio’s submission of the falsified wire requests caused his firm’s books and records to be inaccurate. The complaint also alleges that Mutascio failed to appear and provide a FINRA on-the-record sworn statement. (FINRA Case #2009017814901)