Articles Posted in BrokerCheck

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)

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:

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.

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.

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.

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.

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.

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.

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.

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.