FINRA Broker Disciplinary Action Report September 2017
Each month, the agency that regulates the financial industry, FINRA (Financial Industry Regulatory Authority), produces a detailed report that runs down all disciplinary actions recently taken against brokerage firms and brokers. We strongly encourage any investor who suspects their broker and/or broker-dealer of having lost them money on dubious terms to at least skim this report to see if you recognize any names, schemes, products, or securities.
For our part, we like to pick out some of the highlights from each report. Specifically, we’re looking for schemes or abuses that might be more far-reaching than the individual cases brought through the FINRA arbitration process.
FINRA Firms & Brokers, Fined & Sanctioned
Spartan Securities Group, Ltd.
Without admitting or denying the allegations, the firm consented to the sanctions and to the entry of findings that it failed to establish and implement an appropriate anti-money laundering (AML) program related to its business of accepting low-priced securities for deposit and liquidation. The findings stated that the firm did not have a system to collectively analyze over time account opening documents, securities deposits, account transactions and public information in order to detect potentially suspicious patterns of activity.
Trident Partners Ltd.
Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish, maintain, and enforce a reasonable supervisory system and WSPs to ensure that recommendations were suitable for its sale of steepeners, a complex, structured product. The findings stated that the firm did not have any WSPs or supervisory system specific to steepeners or tailored to this line of the firm’s business, and failed to have any process in place to evaluate and conduct due diligence on steepeners it intended to sell to the public. In addition, the firm did not have and did not provide to its sales force any training or guidance to determine the risks of purchasing steepeners or to evaluate the suitability of this type of structured product for its customers. Thus, when the firm began recommending that firm customers buy steepeners, it had failed to provide its registered representatives the necessary tools and training to determine whether there was a reasonable basis to offer such products to the public. The firm did not employ a reasonable system to supervise its steepener business to monitor for, among other things, suitability and over-concentration of positions in customer accounts.
Thomas Edward Brenner Jr.
Without admitting or denying the findings, Brenner consented to the sanction and to the entry of findings that he refused to appear for FINRA requested on-the-record testimony regarding his involvement in the sale of three different private placements issued by persons or entities with which he had personal or business relationships. The findings stated that FINRA received tips or complaints from numerous investors who invested in one or more of these private placements, and who were concerned about their inability to contact the issuers, and the issuers’ failure to liquidate or redeem their investments and return the funds to these investors. These investors were generally citizens of Brenner’s hometown community in Ohio, and many of them were seniors.
Dale Christian Russell Sr.
Without admitting or denying the findings, Russell consented to the sanction and to the entry of findings that he refused to respond to FINRA’s request for documents and information relating to his termination from his member firm. The findings stated that the firm had filed a Form U5 terminating Russell’s registration for conduct inconsistent with firm standards regarding personal bank accounts
Kun Liang
Without admitting or denying the findings, Liang consented to the sanction and to the entry of findings that he refused to produce FINRA-requested documents and information in connection with allegations that he misappropriated funds from customers of his member firm’s affiliated bank.
Anthony Vincent Ferrone
Without admitting or denying the findings, Ferrone consented to the sanction and to the entry of findings that he appeared for on-therecord testimony, but refused to provide complete testimony and departed the testimony before its completion during the course of FINRA’s investigation into his potential unsuitable trading of unit investment trusts (UITs) in customer accounts.
Jason Michael Belajack
Without admitting or denying the findings, Belajack consented to the sanction and to the entry of findings that he created two fictitious letters, sent on the letterhead of his member firm, to an elderly former customer designed to cover up the fact that he had provided the customer with inaccurate information concerning the features of a variable annuity contract he sold to that customer while associated with another FINRA member firm.
Peter J. Doyle
Without admitting or denying the findings, Doyle consented to the sanction and to the entry of findings that he refused to appear for FINRA requested on-the-record testimony in connection with its investigation into the conduct that led to his termination from his member firm.
David Glenn Gott
Without admitting or denying the findings, Gott consented to the sanctions and to the entry of findings that he sold four individuals at least $546,000 in private equity and debt investments without providing his member firm with prior written notice. The findings stated that Gott did not receive selling compensation for arranging these investments, but his company, a disclosed outside business activity, benefited from them. At all relevant times, the firm’s policies and procedures regarding private securities transactions prohibited its registered representatives from engaging in such transactions without the firm’s prior express written permission, and further required associated persons to provide a written notice of their intention to participate in any private securities transaction before commencing such participation.
Daniel Joseph Hushek III
Without admitting or denying the findings, Hushek consented to the sanctions and to the entry of findings that he failed to adequately supervise the sales practice of a registered representative who recommended and engaged in unsuitable trading of non-traditional exchange-traded funds (ETFs). The findings stated that Hushek’s supervisory failure facilitated the representative’s ongoing sales practice violations. As a consequence, the representative’s customers’ accounts sustained realized and unrealized losses of more than $2.4 million.
Richard Lim
An OHO Decision became final in which Lim was fined a total of $17,500, suspended from association with any FINRA member in all capacities for nine months for unsuitable recommendations, and suspended from association with any FINRA member in all capacities for six months for willfully failing to timely disclose outstanding judgments on his Form U4. The suspensions shall run consecutively. The sanctions were based on findings that Lim recommended that his customers engage in an active trading investment strategy, which, when coupled with his high commissions, was so costly that it made it unlikely the trading could be profitable. The findings stated that because Lim never considered costs, he did not have any reasonable basis for believing the strategy was suitable. The customers lost money on most of the trades, and even when they made a profit, Lim’s commissions often consumed that profit—as Lim had to have known. The trading benefited him and not the customers.
For the full Disciplinary Action Report from FINRA, visit their website by clicking here.
