Recently in BrokerCheck Category

May 1, 2014

March - April 2014 Disciplinary Actions

William Jeffrey Austin (WBB Securitiies, Redlands, California) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $7,500 and suspended from association with any FINRA member in any capacity for 30 business days. The fine must be paid either immediately upon Austin'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, Austin consented to the described sanctions and to the entry of findings that he exercised discretion in a customer account without obtaining the customer's written authorization or his firm's acceptance of the account as discretionary.

The findings stated that Austin's firm did not allow discretionary trading in customer accounts and did not accept the customer's accounts as discretionary. Austin provided a response on firm compliance questionnaires in which he falsely attested that he did not exercise discretionary authority over client accounts. The suspension was in effect from February 18, 2014, through March 31, 2014. (FINRA Case #2012031890301 )

Matthew Alan Trulli (Foothill Securities, Visalia, California) submitted a Letter of Acceptance, Waiver and Consent in which he was suspended from association with any FINRA member in any capacity for one year. In light of Trulli's financial status, no monetary sanction has been imposed. Without admitting or denying the findings, Trulli consented to the described sanction and to the entry of findings that he borrowed a total of approximately $197,500 from his member firm's customers. The loans were documented with promissory notes. The loans that have reached their maturity date have not been repaid in full. The findings stated that Trulli's firm prohibited its representatives from participating in borrowing transactions with customers under any circumstances. Trulli provided false information in response to two firm outside business activity reports regarding receiving loans from customers. The suspension is in effect from February 18, 2014, through February 17, 2015. ( FINRA Case #2012032304201)

Michelle Lee Kern (aka Michelle Lee Mertena) (Ameriprise Financial Services, Inc., Roseville/Sacramento, California) submitted a Letter of Acceptance, Waiver and Consent in which she was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Kern consented to the described sanction and to the entry of findings that she unlawfully converted to her own use approximately $569,000 from customers' brokerage accounts through unauthorized electronic withdraws and used the funds to pay her personal credit card bills. The findings stated that Kern also unlawfully converted approximately $100,000 from customers by using their checkbooks to write unauthorized checks to herself, and then used the funds to pay her personal credit card bills. Some of the customers were elderly. Kern accepted the checkbooks from the customers to destroy, and instead of destroying them, she forged their signatures and wrote personal checks to herself for approximately $100,000, and then deposited the funds into her personal checking account. Kern forged the customer signatures to create the false impression that the customers had authorized the deposit of checks into her personal checking account. ( FINRA Case #2013035458501)

January 8, 2013

Is FINRA's BrokerCheck Broken?

In my securities law practice, one of the first things I do after speaking with a new client is run a quick background check of the stockbroker using the BrokerCheck tool maintained by the Financial Industry Regulatory Authority (FINRA). FINRA is the self-regulatory organization that operates BrokerCheck, a publicly available database that is intended to help investors make informed choices when selecting a financial advisor. Individuals interested in obtaining a BrokerCheck report can do so online by visiting FINRA's BrokerCheck website and downloading a report that contains a summary of a prospective broker's professional qualifications, employment history and--most useful of all--a listing of customer disputes or disciplinary actions lodged against the broker. BrokerCheck is a powerful tool and I encourage all financial consumers to conduct a search before dong business with a broker or brokerage firm.

Expungement: BrokerCheck's Dirty Little Secret

obstacles.jpgWhat many investors don't know about BrokerCheck is that brokers can get customer disputes "expunged" or removed from their records in certain situations. Brokers that are involved in a securities arbitration claim can request that the arbitrators order the matter expunged. Expungement is given to protect brokers who are falsely accused of misconduct. Any decision to grant expungement must contain written findings specifically stating the reasons why expungement was ordered. The three reasons for which expungement can be granted are:


  1. The claim was factually impossible or clearly erroneous.

  2. The individual was not involved in the incident.

  3. The allegations are false.

I don't have a problem with having false or clearly erroneous claims expunged from a broker's files. However, it is a disservice to the investing public when arbitrators order expungement even if the broker was obviously involved in the incident and the allegations appear to have merit. When in doubt, arbitrators should always err on the side of public disclosure. Here are two examples of how the public can be misled.

In October 2012, an arbitration panel in Pittsburgh, Pennsylvania found that a broker and his employer were jointly and severally liable to the customer in the amount of $97,250. However, the arbitrators simultaneously granted the broker's request for expungement stating that his conduct "was not so egregious as to warrant a permanent stigma" on his record. This begs the question: How can a broker be jointly liable, yet be allowed to hide this fact from the investing public? Incidentally, this arbitration claim still shows up in BrokerCheck, as does a separate complaint alleged by another unhappy customer of this same broker.
In December 2012, an arbitration panel in Los Angeles, California granted expungement in a case that settled before hearing. The brokers requested a hearing solely on the issue of expungement. The investor did not participate in the expungement hearing or file any objections. After reviewing the evidence submitted by the two brokers involved, the arbitration panel granted expungement stating that there was no evidence that the brokers made any material misrepresentations or omissions to the customers. As a condition of settlement, brokerage firms sometimes require investors to refrain from objecting to any expungement requests.

I recently negotiated a settlement on behalf of one of our clients. The amount paid in settlement was significant because, in my opinion, the case had merit. Nevertheless, the investment advisor involved has asked the arbitrators to order expungement on the basis that the claim was "clearly erroneous." We are vigorously opposing the expungement request. I will update this blog post once the arbitrators' decision is received.

-----------------------------------------
Updated April 25, 2013: The expungement request was denied.

September 20, 2012

Brokers Behaving Badly: Elder Financial Abuse

In my securities law practice, I've encountered numerous instances of elder financial abuse. Often the abuse is caused by a family member. Other times, a financial advisor is the root cause. According to the Consumer Financial Protection Bureau, seniors lost over $2.9 billion to financial exploitation in 2010. As the percent of the population over 65 continues to grow, instances of elder financial abuse will be on the rise. Here are three examples of elder financial abuse that recently caught my eye:

RBC Capital Markets: RBC Capital Markets was fined $200,000 by FINRA and required to pay $70,000 in restitution to an elderly customer for engaging in unsuitable and excessive trading of closed-end funds ("CEFs") that were purchased at the initial public offering ("IPO"). See related blog posting regarding the unsuitability of purchasing CEFs at the IPO.

Wells Fargo Investments Inc.: Former Wells Fargo broker Alfred Chi Chen entered into a settlement barring him from acting as a stockbroker for improprieties associated with sale of reverse convertible notes to elderly and retired individuals. See related blog post: Wells Fargo Investments Fined $2 Million for Unsuitable Reverse Convertible Note Sales. Alfred Chi Chen also reportedly conducted unauthorized trades in the accounts of deceased clients.

H.D. Vest Investment Services: Former broker Charles Duane Lewis was permanently barred from acting as a broker after pleading guilty to the charges of misappropriating more than $500,000 from a customer in her late 80s using a power of attorney which allowed him to draw checks on her account.

For more information about elder financial abuse, please click here.

May 8, 2012

Are Stockbrokers Required to Tape Record Customer Conversations?

As a general rule, most brokerage firms don't bother to tape record conversations with their customers. Many brokers do, however, maintain a log of any customer contact. Under the little known "Taping Rule," securities brokerage firms that have employed a large number of brokers who came from firms with a history of regulatory violations must tape record all conversations between the broker and customers for a period of two years. The purpose of the rule is to prevent the reoccurrence of sales and telemarking abuses.

If a brokerage firm is subject to the "Taping Rule," this should raise a giant red flag for investors. Below is the current list of firms subject to the "Taping Rule." The Rule must be having a positive affect, because none of the firms listed below are still in business.

  • AIS Financial, Inc.
  • APS Financial Corporation
  • Aura Financial Services, Inc.
  • Brewer Financial Services, LLC
  • Cambridge Legacy Securities, LLC
  • Dolphin & Bradbury Incorporated
  • Genesis Securities
  • iTRADEdirect.com Corp.
  • Maxxtrade, Inc.
  • Meeting Street Brokerage, LLC
  • Melhado, Flynn & Associates, Inc.
  • MICG Investment Management LLC
  • Mission Securities Corp
  • MMR, Inc.
  • Mortgages LTD Securities, LLC
  • Pinnacle Partners Financial Corporation
  • Prestige Financial Center, Inc.
  • Provident Asset Management, LLC

One of the best precautions against becoming a victim of securities fraud is to conduct a background check of your your investment advisor or stock broker using BokerCheck.

March 31, 2012

California Stockbroker Discipline Report for January - March 2012

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary actions taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) for the period January through March 2012:

January 2012

Michael William Bozora and Timothy Roberts Redpath, formerly with Capital Solutions Distributors LLC, in Corte Madera, California, were fined $50,000 and suspended from association with any FINRA member in any capacity for two years in relation to findings that as the firm's principals they failed to conduct adequate initial and/or ongoing due diligence in relation to a private placement offered and sold through their firm. The findings further stated that there was no reasonable basis for believing the offering to be suitable for any of the firm's customers.

Patricia Collantes was fined $8,000 and suspended from association with any FINRA member in any principal capacity in relation to findings that while acting as Operating Manager at Citigroup Global Markets Inc. in Palo Alto, California, Ms. Collantes failed to supervise an individual resulting in the misappropriation of nearly $750,000 from customers over an eight period. Brandon James Thompson (aka Brandon Lumpkins) was also fined $10,000 and suspended from association with any FINRA member in any capacity for 15 business days in relation to the findings for his role in failing to ensure supervision adequate to prevent the misappropriation.

Mathew Morgan Dooley, formerly with Internet Securities in Oakland, California, was barred from association with any FINRA member in any capacity in relation to a finding that he failed to respond to FINRA requests for information and documents related to recommendations he made to customers. The findings stated that Dooley recommended purchase speculative exchanged-traded funds (ETFs) designed from intra-day trading when he knew customers' investment objections were growth and income as opposed to speculative day trading.

February 2012

Bank of America Securities LLC, was censured, fined $12,000 and ordered to pay $6,068.42, plus interest, in restitution to customers in relation to a finding that the firm, in certain transactions for or with a customer, failed to use reasonable diligence resulting in less than favorable transactions to such customers under prevailing market conditions.

Kristopher William Bush, with Merrill Lynch in La Jolla, California, was fined $10,000 and suspended from association with any FINRA member in any capacity for 20 business days in relation to a finding that he conducted impermissible communications with clients. In written communications to clients containing a model fund portfolio comprised of mutual funds approved by his member firm, Bush failed to include: adequate risk disclosures, statements indicating that projections were created with the benefit of back-testing and hindsight, and any indication that Bush was associated with the firm. Some communications indicated that Bush and a partner managed the supposed fund.

Robert John Clark, formerly with Cullum & Burks Securities, Inc., in Carlsbad California, was fined $25,000 and suspended from association with any FINRA member in any capacity for six months in relation to a finding that he sold a private placement to customers totaling $350,000 despite knowing that the entity had missed interest payments in earlier offerings and had received a default notice from a trustee for one of the earlier offerings. Clark failed to conduct adequate due diligence and did not have reasonable grounds to believe the private placement was suitable for any customer.

Sung Hyun Min, formerly with Etech Securities Inc., in Pasadena, California, was fined $5,000 and suspended from association with any FINRA member in any capacity for 30 business days in relation to a finding that he permitted a non-registered person to service his customer accounts resulting in a loss of $60,000 in one of those accounts.

Kim Nazarek, formerly with Questar Capital Corporation, Inc., in Santa Rosa, California, was fined $25,000 and suspended from association with any FINRA member in any capacity for one year in association with findings that he conducted a number of retirement seminars without prior approval that contained false and misleading statements.

March 2012

Morgan Stanley & Co. LLC of New York, New York, was censured and fined $600,000 in connection with a finding that the firm had sold structured products to customers that did not meet the firm's own suitability recommendations, and failed to implement procedures to notify supervisors of such sales.

Stone & Youngberg LLC of San Francisco, California, was censured and fined $15,000 in connection with a finding that it created and distributed a brochure about reverse-convertible notes (RECONs) that FINRA determined was not fair and balanced, did not provide a sound basis for evaluating the facts pertaining to RECONs, omitted material facts that caused it to be misleading, and included a statement that was false for most of the time period during which the brochure was used.

Javier Rivera Jimenez, formerly with Wedbush Morgan Securities, Inc., in Los Angeles, California, was fined $14,432 including disgorgement of $6,932 of commissions received and suspended from association with any FINRA member in any capacity for two months in connection with a finding that he effected discretionary transactions in a customer's account without prior written authorization from the customer and without the firm's having accepted the account as such.

Melissa Rae Reppert, formerly with Edward Jones in Ventura, California, was fined $25,000 and suspended from association with any FINRA member in any capacity for five months in connection to a finding that she recommended and sold to her firm's customers shares in an unregistered and not publicly traded company. Reppert's firm did not participate in the sales nor knew of the transactions, but did have a policy in place prohibiting the practice.

January 16, 2012

California Stockbroker Discipline Report for September - December 2011

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary actions taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) for the period September through December 2011:

September 2011

John-Eric Bonilla, formerly with U.S. Bancorp Investments Inc., in Sacramento, California, was barred from association with any FINRA member in connection with finding that Bonilla failed to respond to FINRA requests for information related to a claim that Bonilla falsified documents in which he overstated an investor's net worth, annual income, and investment experience and misstated the fee associated with investor's security instrument.

Jerry Jason Rice, formerly with WAMU Investments, Inc., in Fresno, California, was barred from association with any FINRA member in connection with a finding that Rice failed to respond to FINRA requests for information related to allegations that he made misrepresentations and engaged in unauthorized and unsuitable trades.

October 2011

Vikas Goel, with Newport Cost Securities, Inc., in Irvine, California, was fined $7,500 and suspended from association with any FINRA member in connection with findings that Goel placed a customer's signature on statements he prepared without the customer's knowledge, authorization, or consent as a rationale for recommending the customer sell mutual funds to invest the proceeds in various annuities.

Jo Ann Marie Head, formerly with Morgan Stanley Smith Barney in Whittier, California, was barred from association with any FINRA member and ordered to pay restitution to a customer in the amount of $19,000, which represented a loan granted Head by a customer. FINRA further found that Head conveyed false and exaggerated account values to customers, exercised discretion in customer accounts without authorization, and mischaracterized unsolicited trades as solicited in customers' accounts.

Yaman Huseyn Sencan, formerly with Mercator Associates, LLC, in Rancho Santa Fe California, was fined $20,000 and barred from association with any FINRA member in any principal capacity and suspended from association with any FINRA member for six months in connection with a finding by FINRA that Sencan failed to reasonably supervise the activities of firm personnel engaged in charging excessive commissions, sharing commissions with a non-member and misusing funds on deposit with the firm.

November 2011

UBS Financial Services Inc., in Weehawken NJ was censured and fined $300,000 in connection with a finding by FINRA that the firm failed to reasonably supervise resulting in a failure to prevent improper, excessive, and unsuitable short-term trading for multiple customer accounts.

John William Grant, formerly with Torrey Pines Securities, Inc., in Red Bluff, California, was barred from association with any FINRA member in connection with a finding by FINRA he executed unauthorized transactions in accounts belonging to trustees of a family trust in excess of $1 million.

Larry Alan Prelesnik, formerly with LPL Financial LLC, in Palm Desert, California, was fined $7,500 and suspended from association with any FINRA member for 20 business days in connection with a finding that Prelesnik sent oversimplified and incomplete solicitations to clients in connection with a 100 percent bond positioning strategy.

Krittibas Ray, formerly with White Pacific Securities, Inc., in San Francisco, California, was barred from association with any FINRA member in connection with a finding by FINRA that after soliciting investors to purchase promissory notes as a vehicle to fund the startup of a hedge fund he used some of the $675,000 in proceeds for personal expenses and proceeds from later sales to pay interest and principal amounts due on the notes earlier purchasers held.

December 2011

Internet Securities and Chief Compliance Officer Michael Wayne Beardsley of Oakland, California, were censured, fined $12,500, and required to retain an outside consultant to review and prepare a report concerning the adequacy of the firm's supervisory, and compliance policies and procedures and supervisory controls in connection with a finding by FINRA that as a result of Beardsley's failure to supervise, the firm's representative was able to conduct numerous unsuitable transactions.

Walter Louis Howerton formerly with Wachovia Securities, LLC, in Modesto, California, was fined $12,500 and suspended from association with any FINRA member for six months in connection with a finding that he made unsuitable recommendations related to a customer's account. The losses on the account forced the customer to closer her position at a substantial loss. FINRA further found that Howerton did not have reasonable grounds to believe that the recommendations were suitable for the customer based on her financial situation and needs.

Fred Ralph Schwartz formerly with Wells Fargo Advisors, LLC, in Los Angeles, California, was fined $5,000 and suspended from association with any FINRA member for three months and was ordered to pay $42,599 restitution to customers in connection with a finding by FINRA that he engaged in excessive, unsuitable trading in the customers' accounts.

Jeffrey Alan Smith with Accelerated Capital Group in Irvine, California, was suspended from association with any FINRA member in any principal capacity for 20 business days in connection with a finding by FINRA that Smith failed to effectively supervise the activities of the firm's associated persons.

September 1, 2011

California Stockbroker Discipline Report for May - August 2011

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary actions taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in May, June, July and August 2011:

Midas Securities, LLC, in Anaheim, CA, was fined $80,000 in connection with a finding by FINRA that they failed to reasonably supervise registered representatives in the sale of unregistered securities.

Brecek & Young Advisors, Inc., in Folsom, CA, was censured and fined $125,000 in connection with a failure maintain adequate supervisory procedures and a failure to supervise its representatives in complying with applicable securities laws with respect to variable annuities.

Ronald Lee Gershon, with Oppenheimer & Co. Inc in Los Angeles, CA, was suspended from association with any FINRA member for 10 days and fined $5,684.75 in connection with the recommendation and sale of unsuitable securities to a customer of Oppenheimer, including auction rate securities and preferred securities that were below investment grade.

Ernesto Zuniga Gomez, formerly with Merrill Lynch, Pierce, Fenner & Smith in San Diego, CA, was barred from association with any FINRA member in connection with the use of verbal authorization forms that falsely stated customer approval for the transfer of funds from their accounts to other customers' accounts.

Jerrold Robin Sexton, formerly with Capital Growth Resources in El Cajon, CA, was barred from association with any FINRA member in connection with findings that Sexton received checks from a customer to be invested in a company he represented as safe. The customer did not know that the company was Sexton's company and that Sexton would use the funds for personal and business expenses.

Mark Andrew Sibert, formerly with Uvest Financial Services Group, Inc. in San Diego, CA, was barred from association with any FINRA member in connection with findings that he engaged in private securities transactions without approval from Uvest and solicited his firm's customers to invest in his company, which was supposed to raise money to invest in real estate and gold-mining.

Ace Diversified Capital, Inc. and chief compliance officer Lynnwood Jen in San Gabriel, CA, were jointly fined $25,000 in connection with a failure maintain adequate supervisory procedures for complying with applicable securities laws with respect to private placements. The findings state that the firm sold interest in Medical Capital Holdings, Inc. without a permit to engage in the sale of private placements.

Carla Wendy Cooper, formerly with Crowell, Weedon & Co. in Los Angeles, CA, was barred from association with any FINRA member in connection with forging a LOA for a customer to authorize the transfer of funds into the account of Cooper's relatives' account.

Priscilla Sabado, formerly with AXA Advisors in Irvine, CA, was barred from association with any FINRA member in connection with findings that she sold investments in Texas oil and gas projects without consent of her member firm.

May 2, 2011

California Stockbroker Discipline Report for the First Quarter of 2011

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary actions taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in January, February, March and April 2011:

Michael Timothy Rodman, with USA Advanced Planners, Inc. in Rancho Santa Fe, California, was suspended from association with any FINRA member for 10 business days in connection with the execution of variable life settlement transactions and charging of excessive commissions.

Paul Richard Soto, formerly with Metlife Securities Inc. in Sacramento, California, was suspended from association with any FINRA member for 10 business days and fined $5,000 in connection with a finding that he exercised discretions in customer accounts without written authorization from his firm.

Robert John Zamecki, with Lighthouse Capital Corporation in Oakland, California, was suspended from association with any FINRA member for 30 days and fined $12,500 in connection with a failure to supervise a registered representative's private securities transactions.

Allen Michael Kay, formerly with Wachovia Securities, LLC in Bermuda Dunes, California, was suspended from association with any FINRA member for one year and fined $50,000 in connection with misleading risk-averse customers to invest in mutual funds that did not comply with their investment objectives or risk tolerance. Kay allegedly misrepresented the nature of the investment, leading his customers to believe that they were being place in the type of safe and secure investments they were interested in such as government bonds or bank instruments.

Hansel Clarence Cua Lee, formerly with Morgan Stanley & Co. Incorporated in Glendale, California, was barred from association with any FINRA member in connection with the sale of $500,000 worth of Treasury and municipal securities in a customer's account without the permission of the customer and requested that a check be drawn for the $500,000 to be made payable to a company in his ownership and control.

Timothy Robert Mays, formerly with Financial Network Investment Corporation in Santa Barbara, California, was suspended from association with any FINRA member for eight months and fined $5,000 in connection with the falsification of firm records of client accounts including, when customers did not sign necessary documents, placing the signatures himself rather than giving those documents back to clients to sign.

Matthew David Osborn, formerly with Edward Jones in Yreka, California, was suspended from association with any FINRA member for 10 business days and fined $5,000 in connection with exercising discretion in a customer account without the customer's authorization.

Lawrence Ira Goldstein, with Oppenheimer & Co. Inc in Los Angeles, California, was suspended from association with any FINRA member for 10 business days and fined $6,623 in connection with the recommendation of unsuitable investments for his customer that were contrary to that customer's investment objectives. Goldstein allegedly recommended that the customer invest in auction rate securities and preferred securities that were rated below investment grade.

Stuart Phillip Miller, formerly with Merrill Lynch, Pierce, Fenner & Smith Incorporated in La Jolla, California, was suspended from association with any FINRA member for one year and fined $10,000 in connection with the joint solicitation and handling of customer accounts with another individual - where Miller and the individual created a model fund portfolio to present to potential customers and misrepresenting that they managed the portfolio. Miller and the individual failed to include any information about risk associated with the funds in the portfolio.

Mission Securities Corporation in San Diego, California, was expelled from FINRA membership and Registered Principal, Craig Michael Biddick in Rancho Santa Fe, California, was barred from association with any FINRA member. Both Biddick and Mission Securities were ordered to pay $38,946.06 to firm customers in connection with the misuse of customer securities.

Daniel A. Contreras, formerly with Multi-Financial Securities Corporation in Ontario, California, was barred from association with any FINRA member in connection with recommending customers to invest in promissory notes not approved by his member firm. The company that issued the promissory notes filed for Bankruptcy and Contreras' customers lost all of their investment.

Alvin Waino Gebhart Jr., formerly with AFA Financial Group, LLC in Calabasas, California, was barred from association with any FINRA member and Donna Traina Gebhart, formerly with AFA Financial Group, LLC in Calabasas, California, was suspended from association with any FINRA member for one year and fined $15,000 in connection with engaging in private securities transactions without approval of their firm.

Richard Mark McKinnon, formerly with First Allied Securities, Inc. in Sacramento, California, was barred from association with any FINRA member in any capacity in connection with the recommendation of bonds, bond funds and annuities to an elderly customer who entrusted funds to make the investment with McKinnon. According to the findings, McKinnon deposited the customer's funds in his personal bank account and improperly used the funds for personal expenses.

February 24, 2011

Five Ways to Help Others Avoid Securities Fraud

FINRA's Investor Education Foundation recently posted information on its website encouraging investors to discuss securities fraud with friends, family and colleagues. The posting is entitled Five Ways to Warn Others About Fraud. The best warning given to investors was the importance of asking plenty of questions before investing and, in particular, to verify whether the salesperson is properly registered. A good starting point is to use FINRA's BrokerCheck, which provides a summary of the qualifications and disciplinary history of registered brokers and broker-dealers.

Click here to read the entire article on FIRNA's website.

December 31, 2010

California Stockbroker Discipline Report for the Fourth Quarter of 2010

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in October, November and December 2010:

Michael Scott Silva, with Charles Schwab & Co., Inc. in Santa Rosa, CA, was fined $5,000 and suspended from association with any FINRA member in any capacity for 10 business days in connection with the recommendation to a customer to invest approximately $140,000 in a principal-protected note (PPN) without having reasonable grounds for believing the recommendation was suitable.

Ernest Park Kim, previously with Wells Fargo Investments, LLC in Los Angeles, CA, was fined $5,000 and suspended from association with any FINRA member in any capacity for 30 business days in connection with altering the date on a document that firm customers had previously signed and dated without the customers' knowledge, authorization or consent.

Ronald Arthur Knight, with Royal Alliance Associates, Inc. in Chino, CA, was barred from association with any FINRA member in any capacity in connection with the sale of interests in Universal Life Policies (ULPs) to members of the public, failing to provide his member firm with prior written notice about the sales, receiving approximately $30,270 in commissions from the sales.

Betty Lynn Saleh, previously with Wedbush Morgan Securities Inc. in Woodland Hills, CA, was named as a respondent in a FINRA complaint alleging that she recommended unsuitable transactions to customers without a reasonable basis to believe that the recommendations and resultant transactions would benefit the customers or were consistent with the customers' financial position, investment goals and objectives. The complaint also alleges that Saleh engaged in a pattern of withdrawing funds from annuities primarily to raise cash, with which she generated production credits and applied the proceeds to purchase of Closed-End Funds, Unit Investment Trusts, and mutual funds or reverse convertibles and then engaged in unsuitable excessive and short-term trading, causing the customer to incur cost with no substantial benefit for their portfolios. The complaint also alleges that Saleh placed false customer signatures on firm records and executed transaction in customer accounts without their prior knowledge or consent.
Wedbush Securities Inc. was censured and fined $28,000 in connection with stating incorrect written information to its customers, in that the firm failed to provide written notification disclosing its correct capacity in transactions to its customer; when it acted as principal for its own account, failed to provide written notification disclosing the correct reported trade price to its customer; and failed to provide written notification disclosing to its customer its correct capacity in transactions and the correct reported trade price.

Junior Kim, previously with UBS Financial Services in Beverly Hills, CA, was fined $5,000 and suspended from association with any FINRA member in any capacity for 30 days in connection with changing customer telephone numbers to report inaccurate information, without the customers' knowledge or authorization.

David Gustav Much, previously with AIG Financial Advisors, Inc. in El Segundo, CA, was fined $25,000 and suspended from association with any FINRA member in any capacity for five months in connection with recommending that his customers participate in a "Stock to Cash" program under which customers would pledge stock to obtain loans, the proceeds of which were, in many case, used to purchase non-securities insurance products; and some of Much's customers participated in that strategy at this recommendation, obtaining loans of more than $4.2 million. The findings stated that Much failed to conduct adequate due diligence concerning the Stock to Cash program lender, and did not understand the potential risks inherent in the strategy and therefore did not have a reasonable basis for his recommendations.

Cory Todd Schmelzer, with Sagepoint Financial, Inc. in San Diego, CA, was fined $7,500 and suspended from association with any FINRA member in any principal capacity for 15 days in connection with his failure to fulfill his supervisory responsibilities over the activities of a registered representative under his supervision, who recommended that his insurance business customers participate in a Stock to Cash program, obtaining loans of more than $4.2 million.

Kelvin Shaw, previously with Brecek & Young Advisors, Inc. in Temecula, CA, was barred from association with any FINRA member in any capacity in connection with his recommendation to certain customers to invest in a non-FINRA regulated investment group that operated as a commodity pool, which was exposed as a Ponzi scheme. Most of Shaw's firm customers lost a total of approximately $660,000 of their investments.

Shlomi Steven Eplboim, with Brookstone Securities Inc. in Tarzana, CA, and previously with Maxxtrade, Inc., was named as a respondent in a FINRA complaint alleging that Eplboim charged customers markups or markdowns in corporate bond transactions, which were not fair and reasonable, were not disclosed to customers and nothing in the nature of its business or in the bond trades justified the size of the markups or markdowns.

Ernesto Zuniga Gomez, previously with Merill Lynch, Pierce, Fenner & Smith Incorporated in San Diego, CA, was named as a respondent in a FINRA complaint alleging that he created Verbal Authorization Forms (VAFs) that falsely represented that clients had given him verbal authorization to transfer client funds from their account to other client accounts, thereby misusing customer funds.

September 23, 2010

California Stockbroker Discipline Report for August and September 2010

Thumbnail image for Thumbnail image for Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in August and September 2010:

Michael Frederick Siegel, formerly with BMA Securities and FSC Securities was fined $30,000 and suspended from association with any FINRA member in any capacity for two consecutive six-month terms in connection with the sale of securities to customers that were unsuitable and also for participating in private securities transactions without approval from his employing firm.

Michael Alcide Poutre, formerly of Brookstone Securities and also Maxxtrade was suspended from association with any FINRA member in any capacity for 30 days for charging excessive markups in connection with the sale of corporate bonds. According to FINRA, because the corporate bonds were readily available and involved large transactions of higher priced securities, a percentage rate of less than 3 percent was appropriate.

Craig Lee Randall with Planmember Securities Corporation and formerly with National Planning Corporation was censured, fined $35,000 and suspended from association with any FINRA member in any capacity for seven months in connection with the use of presentation materials that contained misleading, exaggerated and unwarranted statements that violated NASD advertising rules.

Steven Craig Vanderhoof, formerly with Linear Financial Services in Santa Ana, California, was fined $10,000 and suspended from association with any FINRA member in any capacity for 30 business days in connection with the misleading use of a website and television advertisements which marketed an "equity repositioning strategy" to investors that involved investing home equity loan proceeds in mutual funds with the goal of having the investment returns more than offset the cost of the home loan.

Thomas George Fullerton, formerly with Liberty Partners Financial Services in Bakersfield, California, was barred from association with any FINRA member in any capacity in connection with allegations that he intentionally or recklessly excessively traded customers' accounts without their authorization.

Christopher Anthony Lee, formerly with LPL Financial, IFMG Securities, and Citigroup Global Markets, was named as a respondent in a FINRA complaint alleging that he altered customer documents causing annuity companies to mail customer checks to his home address so that he could deposit the checks in his personal bank account and use the funds for his own purposes.

Hansel Clarence Cua Lee, formerly with Morgan Stanley & Co. and also Banc of America Securities was named as a respondent in a FINRA complaint alleging that he misappropriated customer funds by depositing the proceeds from customer securities sales in a checking account he opened in the customer's name without the customer's consent or knowledge.

August 2, 2010

California Stockbroker Discipline Report for July 2010

Thumbnail image for Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in July 2010:

Stephen White Wilson (Westlake Village and Thousand Oaks, California) formerly with AFA Financial Group, Brookstreet Securities, Wedbush Morgan Securities, Securities America and Wachovia Securities, among others, was barred from association with any FINRA member in any capacity for making fraudulent and material misrepresentations in the sale of mutual funds, inducing customers to switch mutual funds, and for engaging in unauthorized trading when switching customers from Class B to Class C mutual fund shares. Mr. Wilson has appealed this decision.

First Allied Securities, Inc. (formerly known as FFP Securities, Inc.) of San Diego, California, was fined $27,500 and, without admitting liability, consented to an entry of findings that the firm failed to provide customers with a confirmation and other information disclosing the total price paid or the amount of commission paid by customers in connection with the purchase of variable life settlements. The findings also noted that the firm failed to supervise the broker that handled the life settlement transactions.

Seyed Ahmad Hashemian formerly with Centaurus Financial and formerly with First Allied Securities/FFP Securities was censured and fined $10,000. Without admitting or denying the findings, Hashemian consented to findings that he failed to provide customers with a confirmation and other information disclosing the total price paid or the amount of commission paid by customers in connection with the purchase of variable life settlements.

Wedbush Securities, Inc. based in Los Angeles, California, was fined $10,000 and made restitution totaling $581.38. Without admitting liability, the firm consented to an entry of findings that it failed to fully and promptly execute orders and use reasonable diligence to ascertain the best inter-dealer market and also failed to take steps to ensure that the resultant price to its customer was as favorable as possible under prevailing market conditions.

Stephen A. Hancock formerly with Wells Fargo Investments and Wells Fargo Bank in San Francisco, California, was barred from association with any FINRA member in any capacity for misappropriating $11,320 in funds from an elderly bank customer's account.

Jeffrey Scott Mayer formerly with The Seidelman Companies Incorporated and now with Crowell, Weedon & Co. was fined $5,000 and suspended effective June 21, 2010, through July 16, 2010, for failing to supervise a broker who improperly handled customer accounts in his branch office.

Michael Alcide Poutre (Tarzana and Beverly Hills, California), formerly with Brookstone Securities, Maxxtrade, Inc. and GunnAllen Financial California was fined $5,000 and suspended from association with any FINRA member in any capacity for two years for failing to provide complete responses to FINRA requests for information and documents in a pending investigation.

July 9, 2010

California Stockbroker Discipline Report for June 2010

Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in June 2010:

Donald Edwin Derieg, formerly with Wedbush Morgan Securities in Encino, California, was barred from association with any FINRA member in any capacity for what appears to be a case of elder financial abuse. According to FINRA, Mr. Derieg acted as a successor co-trustee in an elderly customer's account, was appointed as a beneficiary of the client's trust and life insurance policy, borrowed money from the client and made unsuitable investment recommendations.

Carlos Suazo of Marina del Rey, California, formerly with MetLife Securities, Inc. in Los Angeles, California, was barred from association with any FINRA member in any capacity for misusing $12,000 in customer funds that were supposed to be used to purchase a variable annuity.

June 1, 2010

California Stockbroker Discipline Report for May 2010

Thumbnail image for warning_flag.jpgThe following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in May 2010:

Mission Securities Corporation of San Diego, California, was expelled from FINRA membership and the firm's principal Craig Michael Biddick was barred from association with any FINRA member in any capacity. The firm and Mr. Biddick were also ordered to pay $38,946.06, plus interest, to customers, for converting and misusing securities held in customer accounts to pay firm operating expenses.

Wedbush Morgan Securities Inc. of Los Angeles, California was censured and fined $12,500 and required to make restitution to customers totaling $5,986.26 for allegedly selling municipal securities to customers from its own account at unfair and unreasonable prices.

Martin David Batstone with Independent Financial Group in San Diego, California, and formerly with QA3 Financial Corporation was fined $5,000 and suspended from association with any FINRA member in any capacity for 10 business days for allegedly participating in the sale of equity indexed annuities when his employing brokerage firm did not have a selling agreement with the issuing companies.

Jason Allen Groth with Independent Financial Group in San Diego, California, and formerly with QA3 Financial Corporation was fined $5,000 and suspended from association with any FINRA member in any capacity for 90 business days for allegedly participating in the sale of equity indexed annuities when his employing brokerage firm did not have a selling agreement with the issuing companies. Mr. Groth consented to the described sanctions and to the entry of findings that he failed to disclose to his employing firm that he sold equity-indexed annuities with a face-value of $4,800,000 for which he earned approximately $524,142 in commissions.

Reed Theodore Johnson with CUSO Financial Services in San Diego, California, was fined $7,500 and suspended from association with any FINRA member in any principal capacity for 10 business days for allegedly approving the unsuitable sale of securities by a broker under his supervision.

Harold ("Hal") Sheldon Minsky with J.H. Darbie & Co., Inc.--recently with Strasbourger Pearson Tulcin Wolff Incorporated; Peak Securities Corporation; and also National Securities Corporation--was fined $10,000 and suspended from association with any FINRA member in any capacity for 30 days for allegedly selling unregistered stock that was not exempt from registration resulting in net proceeds of $6 million that was wired to offshore accounts.

May 1, 2010

California Stockbroker Discipline Report for April 2010

warning_flag.jpgThe following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in April 2010:

Heriberto Americo Artiga Sr. of Sylmar, California, formerly with Lincoln Financial Securities Corporation in Downey, California, was barred from association with any FINRA member in any capacity for engaging in private securities transactions involving the sale of $2.5 million of promissory notes to individuals that were promised to be risk-free, high yield investments.

Horus River Brown, formerly with Banc of America Investment Services in La Jolla, California, was barred from association with any FINRA member in any capacity for engaging in a private securities transaction outside the scope of his employment involving the investment of $200,000 in a convertible debenture that Brown promised would return 10 percent within ten months.

Keevin Lorenzo Gillespie of Santa Ana, California, formerly with National Securities Corporation in Irvine, California, was suspended from association with any FINRA member in any capacity for nine months for exercising control over elderly individuals' accounts and effecting excessive and unsuitable securities transactions in the accounts causing a total net loss of approximately $135,414 and generating gross commissions totaling approximately $182,820.26.

Scott Daniel Hendrickson of Yorba Linda, California, formerly with Ameriprise Advisor Services, was fined $10,000 and suspended from association with any FINRA member in any capacity for two years. Hendrickson was terminated by Ameriprise for misappropriation/conversion of customer funds and unauthorized trading.

Richard Alan Mechikoff Jr., formerly with Securities America in Fresno, California, was fined $10,000 and suspended from association with any FINRA member in any capacity for two years for making unauthorized and unsuitable recommendations resulting in the excessive concentration of speculative and volatile stocks in customer accounts.

William Frederick Nord, formerly with Morgan Stanley in Newport Beach, California, was fined $2,500 and suspended from association with any FINRA member in any capacity for 10 business days for settling a customer's complaint by paying the customer and agreeing to lower commission rates on the customer's future stock purchases without his member firm's knowledge or approval.