Articles Posted in Broker Misconduct

Scott Patrick Klor of Midlothian, Texas submitted a Letter of Acceptance, Waiver, and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined and suspended for allegedly engaging in unapproved private transactions in violation of NASD Rule 3040 and FINRA Rule 2010.

In March 2011, Scott Patrick Klor registered with LPL Financial LLC as a General Securities Representative and General Securities Principal. According to FINRA , Klor solicited investors, including some of his firm customers, to form an LLC to purchase a variable life insurance policy for $1.4 million on the life of an elderly individual with a terminal illness. The findings stated that the transaction was structured as a viatical settlement and Klor did not notify his firm of his involvement. FINRA stated that Klor used his Firm email account to communicate with investors and received a four-percent interest in the LLC. According to FINRA, when the insured passed away the death benefit on the policy was worth less than invested and the investors who owned 90 percent of the LLC lost over $200,000. Additionally, Klor allegedly made false statements on the Firm’s annual compliance questionnaires when asked whether he had ever participated in a viatical settlement. Continue Reading

Gary Arthur Forrest of Swartz Creek, Michigan submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he has been fined and suspended for allegedly engaging in unapproved private transactions in violation of FINRA Rules 3280 and 2010.

In February 2007, Gary Arthur Forrest joined American Portfolio as a General Securities Representative where he remained until his termination on November 16, 2016. According to the FINRA findings, Forrest engaged in private securities transactions involving the sale of Woodbridge promissory notes totaling $826,986 to 15 investors, 13 of whom were his firm’s customers. The findings stated that Forrest sold the promissory notes, despite being denied approval from his firm upon request. In addition, Woodbridge later filed a voluntary Chapter 11 bankruptcy petition and subsequent judgment required Woodbridge and it former owner to disgorge their ill-gotten gains. Continue Reading

Cory Lee Mireau of Eden Prairie, Minnesota submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined and suspended for allegedly engaging in unapproved private transactions in violation of NASD Rule 3040 and FINRA Rules 3240, 3270 and 2010.

In July 2006, Cory Lee Mireau joined Ameriprise as a General Securities Representative and Investment Company/Variable Contracts Products Representative. According to the FINRA findings, Mireau borrowed $150,500 from two customers and used $140,000 to personally invest in private transactions without notice or approval from his firm. The findings stated that Mireau allegedly failed to repay the principal within two years with a 10 percent interest and the agreed shared 10 percent of his initial profits with one of the customers. The FINRA findings also stated that Mireau also performed outside consulting work for one of the customers and received $1,250 in compensation without approval from his firm. In addition to those findings, Mireau also allegedly falsely attested on annual compliance questionnaires that he had not engaged in unapproved private transactions and disclosed all outside business activities to his firm. Continue Reading

James Bradley Schwartz of New York, New York submitted an Offer of Settlement to the Financial Industry Regulatory Authority (FINRA) in which he allegedly churned, excessively traded and engaged in unauthorized transactions in willful violation of Section 10(b) of the Securities Exchange Act, Rule 10b-5, and FINRA Rules 2111, 2020 and 2010.

From June 2013 through June 2016, James Bradley Schwartz was registered with Aegis Capital Corp. as a General Securities Representative. According to the FINRA findings, James Bradley churned and excessively traded customer accounts.  He executed approximately 535 trades in four customers’ accounts resulting in a combined loss of more than $660,000. The findings also stated that Schwartz’s received more than $194,000 of the generated gross sales and commissions of approximately $277,705. In addition to the FINRA findings, James exercised de facto control over the customers’ accounts and executed 261 trades with a value of approximately $10 million without his customers’ authorization, including unauthorized trades in a deceased customers account. FINRA stated that Schwartz did not have a reasonable basis to believe that his trading in the customers’ accounts were suitable. Continue Reading

Daniel Gordon Maughan submitted an Offer of Settlement to the  Financial Industry Regulatory Authority (FINRA) in which he allegedly churned, excessively traded and made unsuitable recommendations in a customer’s account in violation of Section 10(b) of the exchange Act of 1934, Rule 10b-5, and FINRA Rules 2020 and 2010.

From May 18, 2010 until August 17, 2017, Daniel Maughan was registered with Financial West as a General Securities Representative. According to FINRA, Mr. Maughan exercised de facto control over a customer’s trust account, executing approximately 1,648 trades, totaling $70 million. FINRA stated that Daniel Maughan’s churning and excessive trading generated commissions of $841,000 while causing the account to incur losses of $812,000. FINRA’s findings also stated the trading was inconsistent with the customer’s objectives and financial needs, and Mr. Maughan did not have a reasonable basis to believe the transactions were suitable. In addition, FINRA stated that by churning and seeking to maximize his own financial benefit Daniel Maughan acted either with intent to defraud the account or with reckless disregard for the customer’s interests. Daniel Maughan has been barred from association with any FINRA member in all capacities. Continue Reading

Kalos Capital Inc. and Darren Michael Kubiak submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which Kalos Capital was fined for allegedly failing to supervise Darren Michaels unsuitable recommendations all in violation of NASD Rules 3010(a) and 3010(b) and FINRA Rules 3110(a), 3110(b), 2111 and 2010.

Darren M. Kubiak joined Kalos Capital as an investment company and variable contracts products representative in January 2007. According to FINRA Kubiak recommended the purchase of Leveraged and Inverse Exchange Traded Funds (LIETFs) to 17 customers without having a sufficient understanding of the risks and features. The FINRA findings stated that the customers only held the LIEFTs for 722 days during which they incurred losses of $98,000. FINRA also stated that the Kalos Capital Inc. failed to ensure Kobiak had reasonable basis to recommend the LIEFT’S and failed to enforce its supervisory system designed to ensure compliance of laws, regulation, NASD and FINRA Rules in relation to the sales. In addition, FINRA stated that Kalos Capital failed to provide training to all representatives before permitting them to sell the product. Continue Reading

Timothy Robert Millis of Lake Orion, Michigan submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he has been suspended for allegedly making unsuitable recommendations in violation of FINRA Rules 2111 and 2010.

In 2002, Millis joined NYLIFE Securities as General Securities Representative and Insurance Agent. According to FINRA, Millis recommended 66 unsuitable short-term Class A mutual fund share transactions in ten customers’ accounts. FINRA stated that the ten customers were charged approximately $174,725 in upfront sales charges and five customers accrued losses totaling approximately $33,391. FINRA also found that Millis recommended to another customer an unsuitable switch from a variable annuity to Class A mutual fund shares which resulted in a surrender charge of $14,866 and upfront sales charges of $15,340.  In addition, FINRA stated that Millis did not have a reasonable basis to believe these recommendations were suitable therefore violated the customer-specific suitability obligation. Continue Reading

Jun Zhou of Chicago, Illinois submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly engaging in private transactions in violation of FINRA Rules 3280 and 2010.

In November 2015, Jun Zhou joined Leaders Group as an Investment Company and Variable Contracts Products Representative. According to FINRA, between April 2017 and August 2018, Zhou’s real estate company received $179,000 in compensation from 27 private securities transactions, with sales of $16,050,000 without notice or approval from her Firm. The findings stated that Zhou also formed a private real estate fund that was managed by her real estate company and filed a notice of exempt offering of securities with the Securities and Exchange Commission related to 12 transactions through which they sold $2,000,000 in membership interests. In addition to the findings, Leaders Group filed a form U5 on August 2, 2018, reporting that Zhou had been discharged for unauthorized outside business activity that involves a private securities transaction. Continue Reading

Fredrick Martin Randhahn of South Ogden, Utah submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he has been fined and suspended for allegedly engaging in private securities transactions in violation of FINRA Rules 3280 and 2010.

In January 2012, Randhahn joined Sigma Financial as a General Securities Representative. According to FINRA, Randhahn sold $625,000 in promissory notes related to a real estate investment fund to five investors, two of whom were also customers of Sigma Financial. The FINRA findings stated that Randhahn invested $125,000 in the promissory notes and received $33,167.67 in commissions in connection with these transactions. In addition, FINRA found that Randhahn denied participating in any private securities transactions or selling any non-securities investment products in response to firm questionnaires. Continue Reading

Elizabeth Ann Guarino of East Meadow, New York submitted a Letter of Acceptance, Waiver, and Consent (AWC) in which Guarino was fined and suspended by the Financial Industry Regulatory Authority (FINRA) for alleged unsuitable recommendations and unauthorized transactions in violation of FINRA Rules 2111 and 2010.

From May 2008 until November 2017, Elizabeth Ann Guarino was registered with Wells Fargo as a General Securities Representative. According to FINRA, Guarino recommended that an elderly customer invest $85,000 in oil and natural gas limited partnerships that were speculative securities transactions. The FINRA findings stated that the partnerships’ earnings were inadequate to cover fixed charges and proceeds raised from the preferred securities would be applied to reduce outstanding debt. As a result of declining oil and gas prices, the company filed for bankruptcy and the customer sustained loses of over $150,000. The firm compensated the customer for her losses and filed a Uniform Termination Notice for Securities Industry Registration (“Form U5”) terminating Guarino. Continue Reading