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According to a Default Decision recently issued by the Financial Industry Regulatory Authority (FINRA), David Cannata, formerly employed by Craig Scott Capital, has been permanently barred from working as a stockbroker in the securities industry. Mr. Cannata was named in a FINRA Complaint for allegedly engaging in a pattern of unsuitable and excessive trading in accounts of three customers, one of whom was a 92 year old retiree, causing the clients to collectively suffer losses of $1,566,298.14.

According to FINRA, Mr. Cannata had de facto control over the customers’ accounts and employed a trading strategy which generated extraordinary levels of activity and disregard of his customers’ interests and financial objectives, thereby maximizing his own compensation.   For example, FINRA alleged with respect to the account of the 92 year old retiree, Mr. Cannata engaged in 128 trades in a span of 5 months, generating over $95,000 in commissions and fees.  In another customer’s account, Mr. Cannata allegedly engaged in 1,680 trades in a nine month time span, generating over $690,000 in commissions and fees. Continue reading →

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John Joseph Arnold, a broker formerly employed by Newport Beach, California-based Merrill Lynch, Pierce, Fenner & Smith, Inc., submitted an Offer of Settlement 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 falsely represented that he had verbally confirmed wire requests which turned out to be fraudulent requests from a customer’s hacked email account.

John Arnold, of San Clemente, California, falsely represented to a sales assistant and his member firm that two wire requests were verbally confirmed with the customer, when in fact, he had not spoken with the customer.  Further, and in contravention of his firm’s rules, Mr. Arnold split the wire into two separate transfers over two consecutive days to avoid obtaining a Letter of Authorization from the customer, which was required for wire requests exceeding $50,000.  Continue reading →

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Securities America, Inc. has agreed to pay more than $1.5 million in restitution to customers who were overcharged in certain mutual fund purchases.  According to the Financial Industry Regulatory Authority (FINRA), between July 1, 1009 and July 1, 2015, Securities America disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares of certain mutual funds without a front-end sales charge.  The customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses.

According to the Letter of Acceptance, Waiver and Consent (AWC) submitted to FINRA, Securities America failed to reasonably supervise the application of the sales charge waivers to the eligible mutual fund sales, relying on its financial advisors to determine the applicability of sales charge waivers.  Further, Securities America allegedly failed to adequately notify and train its financial advisors regarding the availability of mutual fund sales charge waivers for eligible customers.  Without admitting or denying the findings, Securities America consented to the sanctions, was censured, and agreed to pay restitution to eligible customers who were overcharged of an estimated $1,541,419.  This amount includes the approximately $1.3 million in mutual fund overcharges plus interest. Continue reading →

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Summit Brokerage Services, Inc. (Summit) of Boca Raton, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement for the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales-charge discounts to certain customers’ eligible purchases of unit investment trusts (UITs) and for failing to establish, maintain, and enforce a proper supervisory system. Summit faced a similar FINRA disciplinary action in 2015 with regard to its supervision of non-traditional exchange-traded funds (ETFs).

FINRA investigators alleged that Summit failed to apply sales charge discounts to certain customers’ eligible purchases of UITs. FINRA found that Summit failed to apply sales-charge discounts to 362 eligible UIT purchases resulting in customers paying excessive sales charges of approximately $62,236.26.  FINRA also alleged that Summit failed to establish, maintain, and enforce a supervisory system and written supervisory procedures (WSPs) reasonably designed to ensure that customers received sales-charge discounts to which they were entitled on UIT purchases. Summit’s WSPs did not even contain provisions specific to UIT discounts. Continue reading →

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H.D. Vest Investment Securities, Inc. dba H.D. Vest Investment Services (H.D. Vest) of Irving, Texas submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to timely and/or accurately report customer complaints, and failing to adequately supervise variable annuity transactions to be sure the products were suitable for customers.

FINRA alleges that during the period September 2012 through July 2015, H.D. Vest failed to accurately and/or timely report seven customer complaints in FINRA’s 4530 Complaint Reporting System.  According to FINRA, H.D. Vest failed to accurately report three customer complaints by failing to select the most egregious problem code; identifying the wrong registered representative in its reporting of another customer complaint; and failing to timely report an initial customer complaint. Continue reading →

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Robert W. Baird & Co. of Milwaukee, Wisconsin and Rolf Parker Griffith III of Nashville, Tennessee submitted a Letter of Acceptance, Waiver and Consent to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to reasonably supervise a former registered representative’s misuse of customer funds.

FINRA alleges that during the period July 1, 2013 through June 30, 2014, Robert W. Baird & Co. failed to establish, maintain and enforce a supervisory system and written supervisory procedures for correcting trade errors that was reasonably designed to ensure compliance with applicable laws, regulations and rules. FINRA claimed the brokerage firm did not provide its supervisors with any training or guidance on how to review, approve or process trade corrections in violation of NASD Conduct Rule 3010 and FINRA Rule 2010. Without admitting or denying the FINRA findings, Robert W. Baird & Co. was censured and was ordered to pay a $200,000 fine and ordered to adopt and certify to FINRA that it put in place reasonable supervisory procedures for trade corrections to prevent abuse of customers.  Continue reading →

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Newbridge Securities Corporation (Newbridge) of Boca Raton, Florida submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (UITs) in violation of FINRA Rule 2010.

A UIT is a type of Investment Company that issues securities and holds a fixed portfolio. UITS typically offer “break points” which reduce client fees based on the amount invested. FINRA requires that all UIT transactions take place “on the most advantageous terms available to the customer.” FINRA investigators found that Newbridge failed to apply sales discounts to customers resulting in clients paying excessive charges.

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WFG Investments, Inc. of Dallas, Texas submitted a Letter of Acceptance, Waiver and Consent to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales charge discounts to curtain customers’ eligible purchases of Unit investment Trusts (UITs). WFG was subject to a similar FINRA complaint in December 2014 which alleged the firm failed to supervise a representative in connection with false statements received by clients.

A UIT is a type of Investment Company that issues securities, typically called “units,” representing undivided interests in a fixed portfolio of securities. UIT units are redeemable securities that are issued for a specific term, and entitle an investor to receive his or her proportionate share of the UIT’s net assets on redemption or at termination. One way to reduce the sales fee charged on a UIT purchase is through “breakpoints” which reduce client fees based on the amount they invested.

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FOG Equities LLC (FOG) of Chicago, Illinois, Scott Epstein of Crystal Lake, Illinois, and David Spack of San Fransisco, California submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to establish, implement and maintain an adequate supervisory system and written supervisory procedures for the FOG’s low-priced securities business that were reasonably designed to achieve compliance with Section 5 of the Securities Act of 1933.

FINRA investigators found that FOG, Epstein, and Spack failed to establish, maintain and implement anti-money laundering (AML) procedures reasonably designed to detect and report suspicious transactions related to low-priced securities transactions. Between May 2014 and February 2015, the Respondents failed to detect and investigate ”red flags” indicative of potentially suspicious account activity in violation of FINRA Rules 3310(a) and 2010.

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Paul T. Rampoldi and William S. Blythe III, were named Respondents in a Securities and Exchange Commission (SEC) complaint that alleges the two participated in an insider trading scheme to profit in advance of two major pharmaceutical company announcements. The insider trading case involved the securities Ardea Biosciences, Inc. (Ardea), a California-based biotechnology company.

The SEC alleged, in advance of several announcements between April 2009 and April 2012, Michael J. Fefferman, who was Ardea’s Senior Director of Information Technology, tipped his brother-in-law nonpublic information concerning an agreement between Ardea and another company to license a cancer drug and an acquisition of Ardea by AstraZeneca PLC (AstraZeneca). This information eventually came to Mr. Rampoldi, for which the SEC alleges, he used along with his friend Mr. Blythe to illicit profits by trading ahead of the pharmaceutical announcements. Hopefully, Mr. Rampoldi and Mr. Blythe have obtained skilled representation because they have a battle on their hands.

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