The 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.