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BGC Financial L.P. (BGC) of New York submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Regulation for the Financial Industry Regulatory Authority (FINRA) for an alleged “pattern or practice” of late reporting  and failing to report transactions to regulators.  BGC became associated with FINRA in July 1987 and has faced 15 regulatory events since its formation.

Between August 31, 2012 and January 21, 2015, BGC submitted five AWC’s in relation to SEC Rule 17a-3 and FINRA Rule 6730(a) which “prescribes minimum standards for the creation, retention and preservation of records applicable to broker-dealer.” From January 2015 to March 2015, FINRA’s Department of Regulation reviewed BGC’s reporting to the Trade Reporting and Compliance Engine (TRACE) and found that BGC failed to report 100 transactions of TRACE-eligible Securitized Products within 15 minutes of their execution.

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The Securities and Exchange Commission (SEC) has brought insider trading charges against a former software executive, Christopher Salis, and his three close friends, Douglas Miller, Edward Miller and Barrett Biehl, who allegedly made  over half a million dollars based upon an illegal tip regarding a corporate merger.

According to the SEC complaint, Christopher Salis was a global vice president at SAP America, Inc. (SAP) when he became aware of plans for an upcoming SAP merger with Concur Technologies, Inc. (Concur).  Salis allegedly tipped his close friend, Douglas Miller, who allegedly then passed on the tip to his brother, Edward Miller and another friend, Barrett Biehl.  Douglas Miller and his brother, Edward, allegedly rushed to open brokerage accounts in order to quickly begin trading in securities of Concur based upon the tip from Mr. Salis.  In total, the complaint notes that the tip from Mr. Salis yielded illicit trading profits of over $545,000 for Douglas and Edward Miller, Barrett Biehl, the Miller’s parents and another friend.  The SEC complaint further alleges that Mr. Salis received at least $10,400 in kickbacks and his startup company later received nearly $80,000 from Mr. Miller and his family.  Continue reading →

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Oppenheimer & Co., Inc. (Oppenheimer) has been hit with a fine of $2.25 million and ordered to pay restitution to affected customers of over $716,000 for failing to supervise the unsuitable sales of leveraged, inverse and inverse-leveraged exchange-traded funds (non-traditional ETFs).

According to FINRA, Oppenheimer failed to enforce its own policies with respect to the solicitation and recommendation of ETFs by its registered representatives. Although Oppenheimer put ETF-related policies in place in 2009 (in response to FINRA Regulatory Notice 09-31), its representatives continued to solicit customers and to execute non-traditional ETF transactions despite the customers not meeting Oppenheimer’s criteria for suitability, e.g. having liquid assets of more than $500,000.  FINRA’s findings state that Oppenheimer representatives carried out more than 30,000 ETF transactions, totaling approximately $1.7 billion during the relevant time period. Continue reading →

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The Securities and Exchange Commission (SEC) has filed a Complaint against Jaswant “Jason” Gill and Javier Rios, both California residents, and their company, JSG Capital Investments, with operating a classic Ponzi scheme aimed at middle-class investors with promises of exclusive investment opportunities and guaranteed annual returns of up to 60%, according to the SEC’s press release.

The SEC alleges that Mr. Gill and Mr. Rios, through their company JSG Capital Investments, raised approximately $10 million by catering to average retail investors and promising exorbitant returns by investing in hot pre-IPO stocks of well-known companies like Uber and Airbnb.  According to the SEC Complaint, Mr. Gill and Mr. Rios used most of the investors’ funds to pay returns to earlier investors, in classic Ponzi scheme fashion.  Further, the Complaint alleges that Mr. Gill and Mr. Rios personally pocketed at least $2.8 million of investors’ funds for their personal use, including excursions to Las Vegas casinos, gentlemen’s clubs, and professional sporting events. Continue reading →

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Dennis Mark Adam Merritt, a registered representative  formerly employed with the Palm Harbor, Florida branch of Wells Fargo Advisors, LLC was named a respondent in a Financial Industry Regulatory Authority (FINRA) complaint alleging that he failed to perform adequate due diligence in connection with unsuitable private securities recommendations he made to several of his customers.

The complaint alleges that Dennis Merritt, of Palm Harbor, Florida, recommended that four of his customers invest in a speculative investment, namely, a company called SavvyPhone, LLC, without having conducted proper due diligence to have made such recommendations. According to FINRA’s complaint, Mr. Merritt participated in three private securities transactions in which his customers invested a total of $115,000 in SavvyPhone based upon his unsuitable recommendations. Continue reading →

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Eric Erb, a General Securities Representative formerly employed with the Babylon, NY branch of AXA Advisors, LLC, 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 forged and copied customer signatures, misrepresented material information on the purchase forms of eight customers, and made unsuitable recommendations to a 74 year old retiree.

FINRA’s findings state that Eric Christopher Erb, of Bay Shore, New York, used photocopied signatures to open three customer accounts and forged the initials and signatures of two other customers in connection with securities purchases.  Further, Mr. Erb photocopied his branch manager’s signature on approval forms related to these securities purchases.  FINRA also found that Mr. Erb misrepresented or omitted material information to eight customers by noting on purchase forms that they would not incur surrender charges, redemption fees or costs for relinquishing their annuity contracts.  According to FINRA, however, these customers incurred fees and penalties ranging from $3,000 to $12,000. Continue reading →

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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 →