Library - Law Offices of Robert Wayne Pearce

Caldwell International Securities Broker Suspended for Unsuitable and Excessive Trading

John Kakonikos, former registered representative with Caldwell International Securities Corp., submitted a Letter of Acceptance, Waiver, and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was suspended for 18 months, assessed a deferred fine of $10,000, and ordered to pay restitution of $72,524.53, plus interest, to his customer. John Billy Kakonikos, of Flushing, New York, was found by FINRA to have engaged in excessive and unsuitable trading in his customer’s account, causing realized trading losses of $72,524.53, while generating $41,617.56 in fees and commissions. According to FINRA, Mr. Kakonikos was the registered representative for a customer with a high-school education, annual income of approximately $25,000 per year, and no experience actively trading securities. Further, FINRA alleged that Mr. Kakonikos had de facto control over this customer’s account. FINRA found that Mr. Kakonikos recommended and executed 117 securities transactions in this account, nearly half of which were placed without the customer’s authorization. In light of the customer’s financial situation, lack of investment experience and financial needs, FINRA found Mr. Kakonikos’ trading to be unsuitable and excessive. Mr. Kakonikos was assessed a deferred fine of $10,000 and suspended by FINRA for 18 months. The suspension is in effect from November 21, 2016 through May 20, 2018.

Feb 13, 2017

FINRA Suspends Former Dougherty & Co. Broker for Unsuitable Recommendations to the Elderly

Jeffrey A. Hill, a stockbroker formerly registered with Dougherty & Co. LLC, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined $5,000, suspended for 15 months, and ordered to pay $45,000 in disgorgement of the commissions he received. Without admitting or denying FINRA’s findings, Jeffrey Alan Hill, of Bemidji, Minnesota, consented to the entry of findings that he recommended unsuitable bond investments and exercised discretion in the accounts of two elderly customers. Between January 2010 and June 2014, Mr. Hill allegedly initiated hundreds of trades for two elderly customers without their explicit permission. FINRA found that Mr. Hill contacted the customers only half of the time, and recommended dozens of transactions that were unsuitable, such as short-term trading of corporate and municipal bonds. According to FINRA, Mr. Hill recommended his elderly customers sell bonds shortly after buying them, or initiated the transactions for them. Those transactions were unsuitable for any customer, particularly in light of the commissions the customers ended up paying. Further, the trades were inconsistent with the customers’ financial situations, needs, and objectives. Mr. Hill was suspended by FINRA for 15 months and assessed a fine of $5,000, and required to pay $45,000 in disgorgement of commissions received. The suspension is in effect from December 19, 2016 through March 18, 2018.

Feb 10, 2017

BancWest Broker Barred by FINRA for Unapproved REIT Transactions

John Hudnall, a former broker with BancWest Investment Services, Inc. (BancWest), submitted an Offer of Settlement to the Financial Industry Regulatory Authority (FINRA) in which he was barred from the securities industry amid findings that he recommended and sold a REIT investment to an 80 year old customer, which he split into two transactions in order to circumvent his firm’s supervisory review. FINRA found that John Stuart Hudnall, of Pacifica, California, sold a $400,000 Wells Core Office Income REIT investment to an 80 year old customer. He then split it into two transactions, one of 40,000 and the other of $360,000, to avoid supervisory review of such a large transaction. Mr. Hudnall only submitted the $40,000 portion to his firm, and submitted the $360,000 portion directly to the REIT sponsor. Mr. Hudnall allegedly received a gross commission of $25,200 in connection with the $360,000 part of the REIT investment.

Feb 8, 2017

WFG Investments Broker Barred For Recommending Investment in ATM Ponzi Scheme

Stuart Graham Dickinson, of Highland Park, Texas, was barred by the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) in a default decision made by FINRA’s Office of Hearing Officers for allegedly selling more than $1 million of limited partnership interests in a company supposedly acquiring and operating ATM machines which caused his investor customers to lose their entire investments. FINRA alleged that while associated with WFG Investments, Inc., Stuart Dickinson recommended and sold limited partnership interests in ATM Alliance, LP to seven customers without conducting proper and reasonable due diligence on the company. FINRA alleges further that Mr. Dickinson failed to detect numerous red flag warnings that ATM Alliance was a fraudulent Ponzi scheme. The seven investors Mr. Dickinson sold the ATM Alliance limited partnership interests to suffered a total loss of their investments. Mr. Dickinson was barred from association with any FINRA member in any capacity and required to pay $924,000 plus interest in restitution to customers.

Feb 6, 2017

UBS and Ameriprise Broker Suspended for Unauthorized Trading and Unsuitable Recommendations

John Burns, a stockbroker formerly registered with UBS Financial Services, Inc. (UBS) and Ameriprise Financial Services, Inc. (Ameriprise), submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was assessed a deferred fine of $17,500 and suspended for 14 months. Without admitting or denying FINRA’s findings, John E. Burns, of St. Charles, Missouri, consented to the entry of findings that he engaged in a pattern of unauthorized trading in customer accounts and made unsuitable, risky investments in the account of an elderly couple. Between December 2013 and August 2015, while registered with UBS and Ameriprise, John Burns allegedly executed 100 unauthorized trades in nine customer accounts. Mr. Burns did not have written discretionary authority to place the trades in any of these customer accounts. FINRA found further that Mr. Burns made over 50 unsuitable and unauthorized investments in the account of a senior retired couple. According to FINRA, these transactions involved repeated high-risk investments in stocks which were unsuitable for the customers given their moderate risk tolerance and investment profile. As a result of Mr. Burns’ unsuitable investment strategy, the elderly couple sustained losses exceeding $50,000. Consequently, John Burns was suspended by FINRA for 14 months and assessed a deferred fine of $17,500. The suspension is in effect from December 5, 2016 through February 4, 2018.

Feb 3, 2017

MML Investors to Pay More Than $1.8 Million in Restitution for Mutual Fund Overcharges

MML Investors Services, LLC (MML Investors) has agreed to pay more than $1.8 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 September 20, 2016, MML Investors 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. MML Investors has more than 1,100 branch offices and more than 5,300 registered representatives. According to the Letter of Acceptance, Waiver and Consent (AWC) submitted to FINRA, MML Investors 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, MML Investors 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, MML Investors consented to the sanctions, was censured, and agreed to pay restitution to eligible customers who were overcharged an estimated $1,864,167.77. This amount includes the approximately $1.5 million in mutual fund overcharges plus interest.

Feb 1, 2017

1st Discount Brokerage Fined by FINRA for ETF Supervisory Failures

1st Discount Brokerage, Inc., of Lake Worth, Florida, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for failing to supervise the sales of non-traditional exchange-traded funds (ETFs). 1st Discount Brokerage was subject to similar FINRA disciplinary actions in 2012 and 2015 for the firm’s failure to supervise a registered representative who operated a Ponzi scheme and for failure to supervise its compliance with Section 5 of the Securities Act of 1933, respectively. Registered with FINRA since 1995, 1st Discount Brokerage currently has approximately 27 registered representatives and 20 branch offices. FINRA found that 1st Discount Brokerage failed to establish, maintain, and enforce a supervisory system regarding non-traditional ETFs. Further, FINRA found that 1st Discount Brokerage failed to provide its registered representatives with adequate training and guidance on suitability considerations for these complex, speculative investment products.

Jan 30, 2017

Former Dawson James Broker Suspended for Unsuitable Investment Recommendations

Kevin Barbalace, a former registered representative with Dawson James Securities, Inc. (Dawson James) submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was suspended and assessed a deferred fine of $5,000 by the Financial Industry Regulatory Authority (FINRA) for making unsuitable investment recommendations which resulted in more than $7,000 in net losses to his customer. According to FINRA, Kevin Lawrence Barbalace, of Baltimore, Maryland, recommended and made 46 trades in his customer’s IRA account and 8 trades in the same customer’s regular account which resulted in an excessive concentration of low-priced stocks which were highly volatile and unsuitable for his customer in light of the customer’s financial needs and risk tolerance. FINRA stated that one of the securities transactions made by Mr. Barbalace lost more than half its value in one month, and another lost nearly 80% of its value in less than two months. When Mr. Barbalace’s customer transferred the accounts from Dawson James, a loss of more than $7,000 was incurred as a result of the unsuitable recommendations and trades made by Mr. Barbalace.

Jan 27, 2017

Investors Capital Corp. Fined for Failing to Apply Sales-Charge Discounts to UIT Customers

Investors Capital Corporation (Investors Capital) of Lynnfield, Massachusetts, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly failing to apply sales-charge discounts to certain customers’ eligible purchases of unit investment trusts and for failing to establish, maintain, and enforce a proper supervisory system with respect to certain registered representatives’ unsuitable recommendations of unit investment trusts (UITs). FINRA found that Investors Capital, through some of its registered representatives, recommended unsuitable short-term trading of UITs without reasonable grounds for believing the recommendations were suitable for customers, resulting in customer losses of approximately $242,892. FINRA also found that Investors Capital failed to apply sales charge discounts to approximately 1,995 customers’ purchases of UITs, resulting in excessive sales charges of $472,876. The firm’s supervisory system allegedly failed to ensure the customers received appropriate sales charge discounts, relying solely on its representatives to ensure customers received the discounts. Without admitting or denying FINRA’s findings, Investors Capital was censured, fined $250,000 and required to pay restitution of $841,532.97 to the affected customers.

Jan 23, 2017

LPL Financial Broker Barred by FINRA for Participating in Private Securities Transactions

Michael Babyak Jr. II, a former registered representative with LPL Financial LLC of Mine Hill, New Jersey, submitted a Letter of Acceptance, Waiver, and Consent in which he was permanently barred by the Financial Industry Regulatory Authority (FINRA) for allegedly engaging in private securities transactions without notifying his member firm. Without admitting or denying FINRA’s findings, Michael Babyak Jr, of Randolph, New Jersey, was found to have solicited four LPL customers in a $4.25 million investment into a limited liability company (LLC) that he set up. FINRA found that Mr. Babyak established the LLC into which the investors’ funds were pooled, was listed as the LLC’s registered agent, obtained a tax identification number, arranged for legal representation, and assisted in wiring funds from LPL accounts to the borrower and the LLC’s bank account.

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