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Investors often hire a financial advisor to manage their money professionally because they lack the knowledge themselves and trust that their advisor will act in their best interest and uphold the industry rules and regulations set forth by the Financial Industry Regulatory Authority (FINRA), lest they be disciplined or even barred from the financial industry.  Unfortunately, as Senator Elizabeth Warren (D-Mass) writes in a letter she and Sen. Tom Cotton (R-Ark) sent to the chairman of FINRA, Richard G. Ketchum, “…FINRA is not doing nearly enough to fulfill its investor protection mission.”

A recent study of data from FINRA’s BrokerCheck database, conducted by the National Bureau of Economic Research (NBER), concluded that financial advisor misconduct is “broader than a few heavily publicized scandals” and that “one in thirteen financial advisers have a misconduct-related disclosure on their record” (See http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2739170).  Financial advisor misconduct disclosures include such things as bribery, forgery, and fraud.  The NBER study noted that only about half of the advisors who committed misconduct lost their job and 44% of those obtained a job at a different broker dealer within one year.  One of the more disturbing findings of the NBER study is that approximately one-third of all financial advisors with misconduct records are repeat offenders. Continue reading →

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Stephens, Inc. submitted a letter of Acceptance, Waiver, and Consent (AWC) in which it was censured and fined $900,000 by the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the content and dissemination of “flash” emails, along with the securities trading in connection with the content of these emails.

According to FINRA, Stephens, Inc., based out of Little Rock Arkansas, created the “flash” emails in order to supplement its published research with frequent communications between research analysts and sales and trading employees.  These emails were allegedly meant to provide a means of sharing publicly available information, such as press releases and earnings calls, with the firm’s sales personnel who would then share the publicly available information to interested clients.  However, FINRA found that from at least August 2013 through January 2016, Stephens, Inc. failed to properly supervise the content and dissemination of these flash emails, thereby creating the risk that they could potentially contain nonpublic information that could be misused by sales and trading staff. Continue reading →

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The Financial Industry Regulatory Authority (FINRA) slammed MetLife Securities, Inc. (MetLife) with a $25 million fine for negligent misrepresentations and omissions to customers regarding the costs and guarantees relating to variable annuities.  MetLife agreed to the fine, which includes a $20 million fine and $5 million to be paid to customers, without admitting or denying FINRA’s findings.

From approximately 2009 to 2014, FINRA found that MetLife falsely told customers that new variable annuities were less costly than the annuities they were replacing.  Further, MetLife made the replacement annuities appear more beneficial to the customer when they were typically more expensive.  According to FINRA, MetLife sold at least 43 billion in variable annuities which generated $152 million in gross dealer commissions for the firm.  Nonetheless, MetLife failed to supervise its registered representatives to ensure they were property trained and informed of the comparative analysis between the variable annuities and the recommended replacement annuities.  In fact, FINRA found that MetLife principals approved 99.79% of the variable annuity replacements, even though three-quarters (3/4) of the replacement applications contained at least one misrepresentation or omission. Continue reading →

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Merid Amde, a former registered representative with the Birmingham, Michigan office of Wunderlich Securities, Inc. (Wunderlich), submitted an Offer of Settlement in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he entered discretionary trades in a customer’s account without the necessary prior written customer authorization and made false and exaggerated account valuations.

According to FINRA, Merid Amde, of Bloomfield, Michigan, executed approximately 55 discretionary transactions in a customer’s accounts without the customer’s written authorization and without the accounts designated as discretionary by his member firm.  Further, FINRA found that Mr. Amde mismarked 36 order tickets as unsolicited when they were actually solicited in order to purchase low-priced equities and various unit investment trusts (UITs).  Continue reading →

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Robert Stein, a registered representative with the Boston, MA branch of Capitol Securities Management, Inc. (Capitol Securities), submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that he made unsuitable reverse convertible note (RCN) recommendations and purchases in the accounts of eight customers.

FINRA found that Robert Gerald Stein, of Sudbury, MA, recommended and effected 24 purchases of RCNs in 8 customer accounts.  The customers were primarily over 60 years old and had conservative investment objectives.  According to FINRA, Mr. Stein’s recommendations and purchases totaled approximately $4 million in the 8 customers’ accounts.  Moreover, all of the accounts were heavily concentrated in RCNs, constituting a substantial portion of their net worth. Continue reading →

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Matthew Maberry, a Registered Principal with the Alton, Illinois branch of Alton Securities Group, Inc. (Alton Securities) submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the exchange-traded fund (ETF) and mutual fund recommendations and sales by registered representatives under his supervision.

Matthew Dale Maberry, of Bethalto, Illinois, was the Chief Executive Officer and Chief Compliance Officer with Alton Securities and was responsible for the design and implementation of the firm’s supervisory system.  FINRA found that Mr. Maberry failed to ensure that this supervisory system was implemented to supervise the sales activity of its registered representatives.  Specifically, FINRA stated that the supervisory system was not reasonably designed to ensure that employees made suitable recommendations of complex investment products such as non-traditional ETFs and non-traditional mutual funds. Continue reading →

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Stuart Horowitz, a former registered representative with the Coral Springs, Florida branch of Securities America, Inc., submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanction and findings that he made unsuitable recommendations and trades in CSMIF preferred notes of an unregistered limited partnership investment fund despite numerous red flags that the fund was not a viable investment.

FINRA found that Stuart Horowitz requested that his member firm, Securities America, quickly approve the CSMIF preferred notes fund so he could begin selling them.  While awaiting a third-party due diligence report, the firm agreed to allow Mr. Horowitz to offer the CSMIF preferred notes for sale to existing fund investors.  Mr. Horowitz emailed his customers with an interest in the fund and recommended they move forward with an investment conversion.  FINRA noted that recommendations were made despite the fact that Mr. Horowitz was aware of numerous red flags, including that his previous member firm had decided not to allow the sale of the CSMIF preferred notes due to concerns about the fund’s ability to generate income for investors. Continue reading →

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Byron A. Echeverria, a General Securities Representative formerly employed with the Houston, Texas branch of Morgan Stanley, submitted a Letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the described sanctions and the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that he falsified customer account documents without the customers’ knowledge.

FINRA’s findings state that Byron A. Echeverria, of Katy, Texas, falsified ten documents related to ten customer accounts. Some of the falsified documents included disclosure forms, transfer forms and IRA distribution forms. Mr. Echeverria allegedly re-used original customer signatures from previously executed documents, recycled customers’ signed signature pages from expired forms, affixed customer initials to handwritten changes, and altered tax withholding amounts in order to expedite transactions. None of the customers were aware of the altered forms or that their signatures had been affixed by Mr. Echeverria. Continue reading →

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Valentino Infante, a former General Securities Registered Representative with the Miami, Florida office of Wells Fargo Advisors, LLC (Wells Fargo), has been permanently barred from acting as a broker or otherwise associating with firms that sell securities to the public by the Financial Industry Regulatory Authority (FINRA) due to findings that he engaged in outside business activities without providing his member firm with prior written notice and for failing to appear at a FINRA on-the-record interview.

According to FINRA, Valentino Infante, of Miami, Florida, established a limited liability company in Florida and, on two occasions, solicited a Wells Fargo customer to provide funding for the business. Mr. Infante neglected to obtain his member firm’s approval to engage in the outside business activities, as required by FINRA Rule 3270. Continue reading →

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Richard A. McGuire, of Bay Shore, New York, has been permanently barred from acting as a broker or otherwise associating with firms that sell securities to the public for allegedly taking $95,000 from a customer under false pretenses and refusing to give the money back when the customer requested it.

The National Adjudicatory Council (NAC) of the Financial Industry Regulatory Authority (FINRA) affirmed the findings and sanctions imposed by the Office of Hearing Officers (OHO) which found that Richard McGuire converted $95,000 of a former customer’s money by using the money for his personal use and forged her signature on two loan agreements. FINRA’s Department of Enforcement had found that Mr. McGuire was allegedly given the money to invest in an annuity-like product and neither loaned him the money nor signed any loan documents. Continue reading →