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Richard Happle, a former registered representative with Tampa, Florida-based Raymond James & Associates, Inc. (Raymond James) 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) findings that he failed to execute a customer trade order, thereby allegedly causing his customer to suffer approximately $28,000 in losses.

According to FINRA, Richard Happle, of St. Petersburg, Florida, was instructed by his customer to sell all shares of a certain stock held in his account at the market open the following day. The next day, Richard Happle allegedly decided not to sell the customer’s stock shares due to the fact that the stock price was falling rapidly and he wanted to talk over the decision to sell with his customer. The customer, however, lived in Alaska and Richard Happle delayed contacting him by a few hours due to the time zone difference. Continue reading →

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Arhonda T’Lene Guinn, a former registered representative with Vero Beach, Florida-based Stifel, Nicolaus & Company, Inc. (Stifel Nicolaus) submitted a Letter of Acceptance, Waiver and Consent in which she consented to, but did not admit to or deny, the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that she converted funds from a customer’s account for personal use.

According to FINRA, Arhonda Guinn transferred $12,100 from a customer’s account to a bank account belonging to her landlord. The Stifel Nicolaus customer had no knowledge of and did not consent to the transfer of funds. In order to complete the transfer, Arhonda Guinn allegedly falsified her customer’s previously signed Letter of Authorization. FINRA found that Arhonda Guinn used the customer’s funds to pay six months of rent. Consequently, Arhonda Guinn, of Vero Beach, Florida, was barred from association with any FINRA member in any capacity. Continue reading →

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Karl Robert Herrmann, a former registered representative with Smithfield, Rhode Island-based Fidelity Investments Institutional Services Company, Inc. (Fidelity) submitted an Offer of Settlement in which he consented to, but did not admit to or deny, the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that he converted his member firm’s funds for his personal use. According to FINRA, Karl Herrmann, of Tampa, Florida, identified corporate credit card transactions as business expenses, which caused Fidelity to pay the credit card company for the transactions. However, according to FINRA, Karl Herrmann allegedly falsified his expense reports, claiming that the expenses were business-related when they were personal expenses. Continue reading →

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The Financial Industry Regulatory Authority (FINRA) has fined and suspended Karen Lee Chafe, a former Berthel, Fisher & Co. Financial Services, Inc. (Berthel Fisher) registered representative in its Melbourne Beach, Florida offices, for admitting to altering customers’ variable annuity withdrawal forms and IRA distribution/withdrawal request forms. According to FINRA, Karen Chafe, a/k/a Karen Lee Linscott, modified and resubmitted withdrawal request forms at least 61 times on behalf of 14 customers.

According to FINRA’s Default Judgment, Karen Chafe reused old customer forms, whited out or obscured existing information, added new information, and then submitted the altered forms as originals to Berthel Fisher over a period of six years. Although Karen Chafe was authorized to make the withdrawals and distributions, she did not have the customers’ authorization to submit altered forms. Karen Chafe has been assessed a deferred fine of $5,000.00 and suspended from associating with any FINRA member in any capacity for a year. The suspension is in effect from June 16, 2014 through June 15, 2015. Continue reading →

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Lake Worth, Florida-based company Vertical Integration Group, LLC, along with its Managing Members Richard V. Morello, also of Lake Worth, and Boynton Beach, Florida-based Junior Alexis have been ordered by a Federal Court to pay monetary sanctions for their part in illegal, off-exchange precious metals transactions.

According to the Order of Default Judgment by the U.S. District Court for the Southern District of Florida, Vertical Integration Group, by and through Richard Morello and Junior Alexis, solicited investors to engage in off-exchange leveraged, margined, or financed precious metals transactions, executed through Hunter Wise Commodities LLC. The precious metals included gold, silver, platinum and palladium. The Order states that approximately 39 customers of Vertical Integration Group invested over $1 million and ended up losing $893,859 of their monies to trading losses, commissions, fees and other charges. The Order further states that Vertical Integration Group received commissions and fees totaling $554,566 for these precious metals transactions.

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The U.S. Commodity Futures Trading Commission (CFTC) has charged Jean Chauvel (Chauvel), Renaud Pierre-Charles (Pierre-Charles), Robert Tripode (Tripode) and their Miami, Florida-based company, Forex Monthly Income Fund, LLC (FMIF), with forex pool fraud, alleging that they misappropriated over $1 million of investors’ funds.

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The Securities and Exchange Commission (SEC) has brought charges against Westmont, Illinois-based Positron Corporation (Positron), then-CEO of Positron, Patrick G. Rooney of Westmont, Illinois, and John R. Rooney, of Jupiter Florida. The SEC has charged them with orchestrating a market manipulation scheme involving the company’s stock.

The SEC’s complaint alleges that Positron, Patrick Rooney, and John Rooney made an inducement payment to a stock promoter who would purchase shares of Positron ahead of planned press releases in order to manipulate the stock by giving the appearance of market activity, thereby increasing the trading price and volume.

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Alex Court Brown, a former registered representative with Fidelity Brokerage Services, LLC (Fidelity) of Jacksonville, Florida, submitted a Letter of Acceptance, Waiver and Consent in which he consented to, but did not admit to or deny, the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that on seven different occasions, he used his business credit card for personal expenses. Mr. Brown then falsified his expense reports and submitted them to Fidelity. Alex Brown, of Bunnell, Florida, was allegedly reimbursed approximately $1,475.00 for his personal expenses. Mr. Brown’s misconduct violated FINRA Rule 2010, which relates to commercial honor and principles of trade. Consequently, Alex Brown was permanently barred from association with any FINRA member in any capacity.

Stockbrokers and other financial industry professionals have been known to engage in many types of fraudulent and unlawful behavior which violate industry rules and procedures. In order to protect investors from such misconduct, FINRA rules require brokerage firms to establish and implement a supervisory system. The implementation of the rules requires supervisors to monitor employees to ensure they comply with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker-dealers and their supervisors do not establish and implement these protective measures, they may be held liable to investors for losses flowing from the misconduct. As a result, investors who have suffered losses stemming from a stockbroker or registered representative’s fraudulent and unlawful misconduct can bring forth claims to recover damages against brokerage firms like Fidelity, which have a duty to supervise its employees in order to prevent stockbroker misconduct.

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The Securities and Exchange Commission (SEC) has brought charges against two former Wells Fargo employees, Gregory T. Bolan Jr. (Bolan) of Nashville, Tennessee and Joseph C. Ruggieri (Ruggieri) of Raleigh, North Carolina, for an alleged insider trading scheme involving buying or short selling stocks ahead of research analyst reports which contained ratings changes.

According to the SEC order, Bolan was a research analyst at Wells Fargo Securities, LLC (Wells Fargo) and provided Ruggieri, a former trader at Wells Fargo, with advance notice of forthcoming rating changes. This advanced information allegedly led to Ruggieri trading ahead of the ratings changes; short selling stock ahead of a downgrade and buying stock ahead of upgrades. Ruggieri allegedly generated over $117,000 in gross profits for Wells Fargo and was terminated from Wells Fargo after compliance questioned him about communications involving Bolan. Bolan resigned from Wells Fargo after being questioned by compliance personnel. The SEC’s order, instituting a litigation proceeding, charged Bolan and Ruggieri with violating Sections 17(a) and 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. The administrative proceeding will determine what, if any, relief is in the public interest, including disgorgement of ill-gotten gains, prejudgment interest, monetary penalties and other remedial measures.

Illegal insider trading is the act of buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about a company. Insider trading violations may also include “tipping” such information; trading by the person tipped – the “tippee,” and trading by those who misappropriate such information. Section 10(b) of the Securities and Exchange Act of 1934 makes it unlawful for any person to “use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” To implement Section 10(b), the SEC adopted Rule 10b-5, which makes it unlawful to engage in fraud or misrepresentation in connection with the purchase or sale of a security.

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The Securities and Exchange Commission (SEC) has awarded over $30 million to a whistleblower, the largest ever award for a whistleblower’s information which led to a successful SEC enforcement action. The SEC program, in place since 2011, is meant to motivate tipsters from all over the world to come forward with credible information about violations of U.S. securities laws.

The whistleblower in this case, from a foreign country, brought forward information about an ongoing fraud. According to the SEC, the award of over $30 million could have been even larger had the tipster come forward sooner. The award was reduced due to the whistleblower’s delay in reporting the misconduct. This award is more than double the previous high for an SEC award of $14 million, which was awarded to a whistleblower in October 2013.

Under the SEC’s whistleblower program, tipsters are encouraged to come forward with credible, quality, original information about violations of U.S. securities laws that lead to a successful enforcement action of more than $1 million. The whistleblower awards can range from 10-30% of the money collected in a case. Most importantly, the whistleblower’s identity and confidentiality are strictly protected, so that tipsters can safely come forward.

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