Articles Posted in Brokerage Firms In The News

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Capitol Securities Management, Inc. (CSM) of Glen Allen, Virginia submitted a Letter of Acceptance, Waiver and Consent to the Financial Industry Regulatory Authority (FINRA) for several alleged supervisory failures and unsuitable purchases of Reverse Convertible Notes (RCN’s). CSM has been a FINRA member since 1985 and has over 60 branch offices including its main headquarters in Glen Allen, Virginia.

FINRA found, between January 2008 and August 2011, a registered representative for CSM recommended and executed 24 unsuitable purchases of customizable RCN’s totally approximately $4 million. FINRA alleged that the eight clients affected were not suitable candidates for these RCN purchases due to their risk tolerance, age, and financial experience. By executing these transactions, CSM, through a registered representative, failed to maintain and enforce proper supervisory procedures.

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Randy Burke of Ferguson, North Carolina submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority for allegedly engaging in private securities transactions without his employer member firm’s knowledge.

Mr. Burke first became registered with FINRA in 1996. In 2002 Mr. Burke became register through Synergy Investment Group (Synergy). After his termination in 2011, Mr. Burke registered with Capital Investment Group, Inc. (CIG) and remained there until 2013. Mr. Burke is currently registered with Calton & Associates, Inc. (Calton).

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Joseph Butler of Brandywine, Maryland was barred by the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly converting a customer’s funds for his own personal use. Mr. Butler entered the insurance industry in 1967 and in 1994 became registered with Woodbury Financial Services, Inc. (Woodbury) as an investment company and variable contracts products limited representative. In 2012, Mr. Butler was terminated after he failed to disclose he was listed as a beneficiary for multiple client banking accounts.

In August 2013 FINRA filed a complaint against Mr. Butler alleging that he converted a client’s funds for his own personal use. FINRA alleged that Mr. Butler violated Woodbury policies and took advantage of an elderly client using their funds to pay his taxes. This client was an elderly widow with diminishing mental health. Mr. Butler frequently visited this client and noticed her mental and physical health was declining and that she was not paying her bills. In 2009 Mr. Butler was added as a joint account holder to her bank accounts. On that same day, FINRA found that Mr. Butler transferred $25,000 from his clients account to his own personal account. In 2009 alone, Mr. Butler wrote a cashed three checks from his clients account.

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Carmine Capone of Fort Lauderdale, Florida and The GMS Group (GMS) of Livingston, New Jersey submitted an Acceptance, Waiver and Consent to the Financial Industry Regulatory Authority for allegedly failing to supervise one of their registered representatives. A FINRA member since 1979, GMS has 7 branch offices and over 100 registered representatives. Mr. Capone has been associated with GMS since August 1985 and is a General Securities Sales Supervisor for the firm.

FINRA found, that between 2011 through 2013 a registered representative, who was supposed to be under Mr. Capone’s supervision, recommended and engaged in several unsuitable trades in ETF’s in four customer accounts. During the relevant period, FINRA found that the registered representative for GMS did not understand the unique features and specific risks of the ETF transactions. All four clients realized thousands of dollars in losses while the GMS representative generated commissions of $210,754. FINRA alleged that the ETF’s were nontraditional and exposed the clients to more risk than they could tolerate.

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Lincoln Financial Advisors Corporation (LFA) of Fort Wayne, Indiana 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 implement and enforce reasonable supervisory procedures related to the recommendation of private placement variable annuities (PPVA).  LFA has been a FINRA member since 1969 and has nearly 2,500 registered representatives and over 500 branch offices.

FINRA found that between October 2008 and April 2009, representatives from two of LFA’s branch offices recommended customers to invest in a hedge fund that engaged in a complex option trading strategy. FINRA alleged that the complexity of the hedge fund exposed the LFA clients to a high degree of financial risk. LFA however approved the recommendations and 25 firm customers invested approximately $11.7 million in the hedge fund. In 2010, the hedge fund was shut down.

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The Financial Industry Regulatory Authority (FINRA) has ordered Wells Fargo Advisors, LLC (Wells Fargo) to pay a $500,000 fine and $241,974.34 plus pre-judgment interest in restitution to customers for allegedly making unsuitable recommendations to customers to purchase structured repackaged asset-backed trust securities (STRATS).

From approximately 2005 to 2012, Wells Fargo made unsuitable STRATS recommendations to its retail customers, selling nearly $12 million worth of the complex structured products. According to FINRA, Wells Fargo failed to properly educate its registered representatives about the risks associated with STRATS and that the customers had the potential to suffer significant losses. FINRA also found that Wells Fargo’s internal-use STRATS brochures were not fair and balanced and neglected to provide an appropriate basis for evaluating the risks and therefore the suitability of the STRATS. Wells Fargo did not admit to or deny FINRA’s findings. Continue reading →

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The Financial Industry Regulatory Authority (FINRA) fined a dozen independent broker-dealers (IBDs) for failing to give their clients the proper discounts available to them, known as breakpoint discounts, on sales of unit investment trusts (UITs). They were also cited for related supervisory failures. Some of the biggest fines were levied against First Allied Securities Inc. (First Allied), Fifth Third Securities Inc. (Fifth Third), Securities America Inc. (Securities America), Cetera Advisors LLC (Cetera Advisors), and Park Avenue Securities LLC (Park Avenue).

FINRA ordered the 12 firms to pay both fines and restitution totaling $6.7 million. The other firms sanctioned were: Commonwealth Financial Network (Commonwealth Financial), MetLife Securities Inc. (MetLife), Comerica Securities (Comerica), Cetera Advisor Networks LLC, Ameritas Investment Corp. (Ameritas), Infinex Investments Inc. (Infinex), and The Huntington Investment Company (Huntington Investment). Continue reading →

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The Financial Industry Regulatory Authority (FINRA) fined six independent broker dealers for failing to give their clients the proper discounts available to them, known as breakpoint discounts, on large sales of certain nontraded REITs. The six firms are Voya Financial Advisors Inc. (Voya), Transamerica Financial Advisors Inc. (Transamerica), Investacorp Inc. (Investacorp), J.P. Turner & Co. (J.P. Turner), National Planning Corp. (National Planning), and Cetera Investment Services (Cetera).

The fines were levied in July and August and total more than $500,000. Voya and Transamerica were fined the largest amounts: $325,000 for Voya and $85,000 for Transamerica. The other fines levied against Investacorp, J.P. Turner, National Planning, and Cetera were: $50,000, $45,000, $30,000, and $30,000, respectively. All six firms were also ordered to pay restitution. Continue reading →

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Atlas One Financial Group, LLC (Atlas One) 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 report transactions to the Trade Reporting and Compliance Engine (TRACE) within the time required by FINRA rules.

Atlas One has been a member of FINRA since April 24, 2003. On three occasions between 2011 and 2014, Atlas Once has faced FINRA disciplinary actions due to late reporting in TRACE-eligible securities. Continue reading →

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In an arbitration proceeding against UBS Financial Services, Inc. of Puerto Rico (UBS-PR), the Law Offices of Robert Wayne Pearce, P. A. won a $600,000 plus interest award for one of the firm’s clients this week.

The case arose out of the alleged misrepresentations and unsuitable recommendations by a UBS PR financial advisor to our client that he purchase and then hold an excessive concentration of UBS-PR closed-end bond funds in his investment account. UBS-PR, through its representatives, made false representations and misleading statements to our client about both the nature and risk of the closed-end bond fund and investment strategy. Continue reading →