Library - Law Offices of Robert Wayne Pearce

Allstate Financial Services Broker Suspended by FINRA for Forging Customers’ Signatures

William Kerschbaumer, a broker formerly employed by the Carrollton, Ohio branch of Allstate Financial Services, LLC, submitted a letter of Acceptance, Waiver, and Consent (AWC) in which he consented to, but did not admit to or deny, the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that he forged two customers’ signatures without the customers’ knowledge or consent. William Fredrick Kerschbaumer Jr., of New Philadelphia, Ohio, was found by FINRA to have forged the signatures of two customers on four documents which were related to their annuity investments. FINRA’s findings state that Mr. Kerschbaumer forged a customer’s signature on two variable annuity distribution forms and, approximately three months later, again forged the same customer’s signature on a letter requesting restoration of a rider to an annuity investment without the customer’s knowledge or consent. Further, FINRA found that Mr. Kerschbaumer forged the signature of a second customer on a letter to the firm requesting a distribution from the IRA account of the customer’s ex-husband, once again without the customer’s knowledge or consent.

Oct 14, 2016

FINRA Files Complaint Against Newport Coast Securities Broker For Allegedly Converting Customer Funds

David Braeger, of Bayside, Wisconsin, was named a respondent in a Financial Industry Regulatory Authority (FINRA) complaint alleging that he converted $33,000 of his customers’ funds and misrepresenting to the customers, through falsely stated quarterly reports and tax documents, that their investment funds were invested as they had instructed. Formerly registered with Newport Coast Securities, Inc., an Irvine, California based broker dealer, the now unregistered David Oscar Braeger is alleged to have obtained a total of $30,000 from his customers, who instructed him to invest the funds in a private offering for Rubicon Capital Appreciation Fund (Rubicon), an entity that Mr. Braeger founded and managed. However, Mr. Braeger allegedly never invested the customers’ funds as instructed and allegedly never returned the funds to his customers.

Oct 12, 2016

Signator Investors Broker Suspended by FINRA for Allegedly Forging Customer Signature

Thomas Vigil, a General Securities Representative formerly employed with the Warwick, Rhode Island branch of Signator Investors, Inc. (Signator) and the Westboro, Massachusetts branch of MetLife Securities, Inc. (MetLife), submitted a Letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he impersonated a customer to obtain an annuity surrender form, falsified account documents, and forged a customer’s signature all without the customers’ knowledge or consent. Mr. Vigil consented to the sanctions described below. FINRA’s findings state that while employed by Signator, Thomas A. Vigil, of Saunderstown, Rhode Island, falsified a 403(b) rollover form for one of his customers by whiting out the date from an earlier, validly signed form and writing in the current date. Mr. Vigil allegedly did this without the customer’s knowledge or consent. Furthermore, Mr. Vigil allegedly forged the signature of another customer on a change of broker-dealer form without the customer’s knowledge or consent. In both instances, FINRA found that Mr. Vigil, when asked about the falsified documents, initially denied the actions, but later acknowledged the misconduct. FINRA also found that while employed by MetLife Securities, Mr. Vigil impersonated a customer on a call to an insurance company to obtain an annuity surrender form.

Oct 11, 2016

Raymond James Broker Fined and Suspended for Unauthorized Account Withdrawals

Paul Hack, a broker employed by Raymond James & Associates, Inc. (Raymond James), submitted a Letter of Acceptance, Waiver and Consent in which he consented to, but did not admit to or deny, the entry of the Financial Industry Regulatory Authority’s (FINRA) findings that he accepted instructions from a customer’s husband to withdraw account funds of at least $200,000 without that customer’s written authorization and sanctions described below. Paul Hack, of Bloomfield Hills, Michigan, was the registered representative for the accounts held by the customer involved in this matter. FINRA found that between January 2008 and December 2011, the customer’s spouse, who allegedly had no authority over the accounts, requested that Mr. Hack or his assistants withdraw funds from the customer’s accounts. The customer’s spouse allegedly requested these funds withdrawals on at least 20 occasions. Notwithstanding the policies of Raymond James, which required a written Letter of Authorization (LOA) from the customer and prior approval from the Branch Office Manager, Mr. Hack’s sales assistants delivered checks to the customer’s spouse which were drawn on the accounts of the customer. Consequently, Mr. Hack was fined $10,000 and suspended from association with any FINRA member in any capacity for 10 business days. The suspension was in effect from August 15, 2016 through August 26, 2016.

Oct 3, 2016

First Financial Equity and CCO Named in FINRA Complaint for Failure to Supervise Violations

Scottsdale, Arizona-based First Financial Equity Corporation (First Financial) and the firm’s Chief Compliance Officer (CCO), Melissa Ann Strouse, were named in a Financial Industry Regulatory Authority (FINRA) complaint alleging that the firm failed to establish and maintain a proper supervisory system with respect to the appropriateness of fee-based accounts and the monitoring of accounts for potential churning and excessive trading. Melissa Strouse was named in FINRA’s complaint amidst allegations that as the firm’s CCO, she was responsible for ensuring the firm’s compliance with supervisory procedures. According to the FINRA complaint, First Financial Equity had inadequate written supervisory procedures (WSPs) with respect to the appropriateness of fee-based accounts for the firm’s customers and had no system in place to address situations where excessive fees may have been charged. Further, the Complaint alleges that First Financial failed to maintain and enforce a supervisory system related to its options business and that the firm allegedly had no WSPs for the supervision, approval and sale of exchange-traded funds (ETFs). For her part, the Complaint alleges that Melissa Strouse failed to ensure that the WSPs covered all required areas and were amended as needed.

Sep 30, 2016

National Securities Broker Fined and Suspended for Fraudulent Wire Transfers

Stephanie Lynn Fagenson, of New York, NY, allegedly caused two fraudulent wire disbursements to be transferred from her customer’s account to a third-party bank. According to FINRA, Ms. Fagenson received an email from an imposter posing as her customer requesting $100,000 to be wired to a third-party bank account. Ms. Fagenson allegedly processed the wire request without orally confirming the request with the customer, as was required by her member firm. Two weeks later, Ms. Fagenson purportedly received another email from the imposter requesting another wire transfer. This time, the request was for $200,000 and, again, Ms. Fagenson allegedly processed the wire without orally confirming with her customer. Ten days following the second wire transfer, Ms. Fagenson supposedly found out in a conversation with her customer that the customer’s email account had been hacked and that none of the wire requests had come from the customer. FINRA assessed a fine of $5,000 and suspended Ms. Fagenson from association with any FINRA member in any capacity for 45 days. The suspension is in effect from August 15, 2016 through September 28, 2016.

Sep 28, 2016

Craig Scott Capital Broker Permanently Barred for Excessive & Unsuitable Trading

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.

Sep 26, 2016

Merrill Lynch Broker Fined and Suspended for Fraudulent Wire Transfers

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.

Sep 23, 2016

Securities America to Pay More Than $1.5 Million in Restitution for Mutual Fund Overcharges

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.

Sep 21, 2016

Summit Brokerage Fined for Failing to Apply Sales-Charge Discounts to UIT Customers

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.

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