Category Archives: FINRA News

In February 2014, FINRA announced that Jefferies LLC submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $50,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it employed a statutorily disqualified individual in a non-registered capacity and permitted the individual to remain associated with the firm for eight years.

The findings stated that the individual was statutorily disqualified at the time of his hire and remained so throughout his employment with the firm. The individual failed to disclose his statutory disqualification to the firm, and the firm’s initial review of the individual’s background was incomplete and did not reveal that the individual had been barred and therefore was statutorily disqualified from associating with the firm in any capacity. The individual remained associated with the firm in a non-registered capacity until the firm terminated his employment after becoming aware that he was statutorily disqualified in connection with its review of operations professionals for the then newly established FINRA Series 99.

In February 2014, FINRA announced that BB&T Securities, LLC f/k/a Clearview Correspondent Services, LLC had submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $300,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that its affiliate and former member firm, Scott & Stringfellow LLC (S&S), with which it has since merged, effected sales of unregistered securities in contravention of Section 5 of the Securities Act of 1933.

The findings stated that the firm participated in the sale of approximately 242 million shares of unregistered stock of low-priced securities on behalf of issuers, which generated proceeds of approximately $537,000. The securities were not subject to a registration statement. The findings also stated that despite certain questionable circumstances surrounding the sales, such as the substantial deposits of the same low priced securities in related accounts at the firm followed shortly by liquidation of the shares, S&S failed to conduct a searching inquiry to ensure that the sales did not violate Section 5 of the Securities Act.

The findings also included that S&S failed to adequately enforce its Written Supervisory Procedures regarding the sales of unregistered securities. S&S did not have any documentation to show that it performed any reviews or asked the questions that the firm’s WSPs mandated concerning the subject securities before they were sold. In fact, the firm did not conduct, as its WSPs required, sufficient inquiries on any of the physical stock certificates that it received in the customer accounts, even though there were several “red flags,” some of which were identified in the WSPs. These red flags included customers opening new accounts and delivering physical certificates representing a large block of thinly traded or low-priced securities, and the customers having a pattern of depositing physical certificates, immediately selling the shares and then wiring the proceeds of the resale. The firm’s brokers who serviced the accounts in question did not conduct any searching inquiries and instead assumed that the firm’s clearing firm was supposed to ensure that all securities deposited were available to sell.

FINRA found that S&S failed to implement an adequate anti-money laundering (AML) program designed to detect and cause the reporting of suspicious activity. The firm’s AML program failed to adequately address potentially suspicious activity related to the deposits and liquidations of unregistered low-priced securities before or at the time the liquidations commenced. FINRA also found that S&S failed to adequately respond to red flags that were apparent at the time sales began, did not conduct appropriate due diligence on the underlying clients and the issuers before proceeding with further transactions, and failed to review whether the trades represented potentially manipulative activity on the market. The firm’s AML program eventually detected and stopped the questionable trading activity. Nevertheless, the activity was allowed to continue for approximately four months before the firm stopped it. In addition, FINRA determined that BB&T and S&S failed to consistently send letters to customers notifying them of a change in address made to their account records, due to a problem with the automated systems the firm utilized.

Moreover, FINRA found that S&S failed to maintain sufficient records of its research analysts’ public appearances made to ensure that they made disclosures NASD Rule 2711(h) required. As a result, the firm’s records did not show what disclosures were made with these public appearances and, most importantly, whether any disclosures complied with NASD Rule 2711(h).

In February 2014, FINRA announced that Deutsche Bank Securities Inc. submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $40,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it permitted two statutorily disqualified persons to associate with the firm.

The findings stated that although the firm had written pre-employment screening policies and procedures, it did not implement and enforce them with respect to non-registered employees transferring from another firm-related entity. The firm did not fingerprint the individual and other non-registered transferees upon their hire, nor did it conduct the requisite background checks to ensure that it was not employing a person subject to a statutory disqualification.

The findings also stated that the individual had become employed with a firm affiliate, which conducted a background check and submitted his fingerprints to the appropriate authorities. The individual completed an employment application on which he indicated he had been employed with a FINRA/New York Stock Exchange (NYSE)-regulated firm but did not disclose he had been terminated from this broker-dealer for misappropriation of customer funds and that there was an open NYSE investigation into this matter. The individual did not subsequently disclose to the affiliate that shortly after his hire, he was barred by the NYSE and was thus subject to a statutory disqualification. A firm staff member alerted the individual’s supervisor that the individual had been barred and the individual’s employment was terminated.

The findings also included that a subsequent review of firm non-registered employees disclosed a second person was subject to statutory disqualification because of a criminal conviction. As with the first individual, the firm did not conduct a background check or submit her fingerprints to the Federal Bureau of Investigation (FBI).

In January 2014, FINRA announced that Hugh Robert Hunsinger Jr., previously employed by Lincoln Financial Advisors Corporation, was barred from association with any FINRA member in any capacity and ordered to pay $1,452,503.57, plus interest, in restitution to customers. The sanctions were based on findings that Hunsinger converted funds from the brokerage accounts of customers, his parents.

The findings stated that in total, Hunsinger transferred $1,452,503.57 from his parents’ accounts to bank accounts in his name. Neither of his parents had an account at the banks he transferred the money to, and neither authorized the transfer of funds from their brokerage accounts to Hunsinger or to accounts at the banks.

The findings also stated that Hunsinger engaged in securities fraud, willfully violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, FINRA Rule 2020 and NASD Rule 2120, by convincing his parents to agree to sell securities to purchase an annuity, even though he used the sales proceeds for other purposes. Hunsinger provided his parents with documents that purported to be designed for one of them and that contained information, based on an historical llustration, about withdrawals, contract values, cash surrender, average annual returns and standard death benefits. Hunsinger’s parents agreed to the recommendation and believed based on what their son told them, that their securities would be sold over time to purchase the annuity in a series of payments.

The findings also included that Hunsinger made repeated false statements to his parents, both orally and in writing, that the investments had been made, when they had not been made, and he was stealing their funds. Hunsinger falsely confirmed to his parents that he had purchased the annuity and represented that securities in their accounts would continue to be sold and money from the sales would continue to be transferred into the annuity over time. Although Hunsinger did not purchase an annuity for his parents, he continued to make disbursement requests, securities continued to be sold to satisfy those requests, and the proceeds continued to be distributed to Hunsinger’s or his parents’ bank accounts according to his direction.

FINRA found that Hunsinger misstated material facts and made misstatements in connection with the sales of securities. Each time one of his parents inquired about the annuity, Hunsinger falsely affirmed that he had purchased it, that the payments his parents were receiving were attributable to the annuity, and that the proceeds from securities sales were being transferred into it. At a certain point, the balances in his parents’ securities accounts were at or near zero; and a few months later, the annuity payments had stopped. When Hunsinger’s siblings confronted him, he admitted that he had not purchased an annuity for his parents. FINRA also found that Hunsinger failed to respond to FINRA requests that he provide information and documents related to its investigation.

It was unclear from FINRA’s announcement whether customers had initiated FINRA arbitrations or any other type of securities arbitrations. If you believe that you have suffered losses as a result of Hugh Robert Hunsinger’s misconduct, you may contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL 33324. By phone: 954.693.7577 or 800.718.1422.

In January 2014, FINRA announced that Paul D. Ferrante, employed by MML Investors Services, LLC, submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for five business days.

Without admitting or denying the findings, Ferrante consented to the described sanctions and to the entry of findings that while registered with his member firm and in anticipation of his move to a new firm, he moved documents related to firm customers he serviced from his firm office to his home. The findings stated that the documents contained non-public personal information, as that term is defined under Regulation S-P of the Securities Exchange Act of 1934, and Ferrante moved them without authorization and in contravention of his firm’s policies. Among other things, the non-public personal information included customers’ asset and income information, health information, addresses, birthdates and employment information. By removing the customers’ files from his firm’s control and possession, Ferrante placed the customers’ non-public personal information at risk.

In January 2014, FINRA announced that Daniel Kim, previously employed by Goldman, Sachs & Co., submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for one month.

Without admitting or denying the findings, Kim consented to the described sanctions and to the entry of findings that he engaged in an outside business activity without providing prior written notice of such activity to his firm. The findings stated that Kim was a member of the Board of Managers of a private company in which he had made an investment. Kim entered into an Advisor Agreement, which stated that he was to provide various services to the company and received compensation in the form of company stock. When Kim completed his firm’s annual compliance certification, he did not disclose his involvement with the company in response to a question that asked Kim to confirm and update disclosures regarding private investments and outside interests. Kim did not inform his firm of his relationship with the company.

In January 2014, FINRA announced that Jonathan Samuel Perry, employed by MML Investors Services, LLC, submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for five business days.

Without admitting or denying the findings, Perry consented to the described sanctions and to the entry of findings that while registered with his member firm and in anticipation of his move to a new firm, he moved documents related to firm customers he serviced from his firm office to his home. The findings stated that the documents contained non-public personal information, as that term is defined under Regulation S-P of the Securities Exchange Act of 1934, and Perry moved them without authorization and in contravention of his firm’s policies. Among other things, the non-public personal information included customers’ asset and income information, health information, addresses, birthdates and employment information. By removing the customers’ files from his firm’s control and possession, Perry placed the customers’ non-public personal information at risk.

In January 2014, FINRA announced that Anil K. Chaturvedi, previously employed by Merrill Lynch, Pierce, Fenner & Smith Inc., submitted a Letter of Acceptance, Waiver and Consent in which he was fined $60,000 and suspended from association with any FINRA member in any capacity for 18 months.

Without admitting or denying the findings, Chaturvedi consented to the described sanctions and to the entry of findings that he established a trust fund for a customer with her nephew as the account’s beneficiary. The findings stated that several years after the customer’s death, Chaturvedi learned that the nephew had actually funded the account to shield his money from U.S. tax liability. Chaturvedi did not report this information to anyone until a later date because he was concerned the information would trigger an Internal Revenue Service (IRS) investigation of the nephew and himself. After the nephew filed a complaint with Chaturvedi’s firm, Chaturvedi reported the matter to the IRS but never reported the information to his firm.

The findings also stated that there were numerous suspicious transfers of money totaling approximately $8 million between unrelated accounts belonging to Chaturvedi’s clients and from the clients’ accounts to third parties. Chaturvedi was aware of the transfers and although the transfers raised “red flags” of potentially suspicious activity, he failed to inquire further or report the suspicious activities to his firm. Most of the transactions involved $100,000 or less, and some involved $50,000 or less.

The findings also included that Chaturvedi failed to implement his firm’s Anti-Money Laundering (AML) policies by failing to investigate red flags of potentially suspicious activity. Chaturvedi failed to conduct additional due diligence or raise concerns to his supervisor as mandated under the firm’s AML procedures. There were also suspicious, cryptic emails between Chaturvedi and his clients relating to some of the transfers. The wire transfers raised red flags that should have caused Chaturvedi to conduct an additional inquiry and report potentially suspicious activity to his firm. Many of the transfers were from a firm account belonging to one particular customer and were executed pursuant to Letters of Authorization (LOAs) the customer gave Chaturvedi signed in blank, and Chaturvedi filled in the terms of the transfers at the time of the transfer. FINRA found that this matter came to light following a complaint filed with his firm.

Chaturvedi’s firm also found signed but otherwise blank LOAs for another customer, and standing LOAs for transfers of funds where the signature had been cut out of another document and pasted in. The firm also discovered monthly account statements for a trust account and other customers’ accounts that had the liabilities sections covered over by a blank piece of paper. As a result, Chaturvedi created and submitted falsified documents to the firm, causing the firm to create and maintain inaccurate books and records in violation of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-3.

It was unclear from FINRA’s announcement whether customers had initiated FINRA arbitrations or any other type of securities arbitrations. If you believe that you have suffered losses as a result of Anil Chaturvedi’s misconduct, you may contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL 33324. By phone: 954.693.7577 or 800.718.1422.

In January 2014, FINRA announced that UBS Financial Services Inc. submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $260,000. The firm has paid a total of $131,534.81 in restitution to address the violations of MSRB Rules G-17 and G-30(a), NASD Rules 2110 and 2320, and FINRA Rule 2010.

Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it purchased municipal securities for its own account from customers and/or sold municipal securities for its own account to customers at an aggregate price (including any markdown or markup) that was not fair and reasonable, taking into consideration all relevant factors, including the best judgment of the broker, dealer or municipal securities dealer as to the fair market value of the securities at the time of the transactions and of any securities exchanged or traded in connection with the transactions; the expense involved in effecting the transactions; the fact that the broker, dealer or municipal securities dealer is entitled to a profit; and the total dollar amount of the transactions.

The findings also stated that in transactions for or with customers, the firm failed to use reasonable diligence to ascertain the best inter-dealer market, and failed to buy or sell in such market so that the resultant price to its customers was as favorable as possible under prevailing market conditions.

It was unclear from FINRA’s announcement whether customers had initiated FINRA arbitrations or any other type of securities arbitrations. Any customer who believes they have been a victim of excessive municipal markups or markdowns can contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL 33324. By phone: 954.693.7577 or 800.718.1422.

In January 2014, FINRA announced that Donald Richard Dahn, previously employed by LPL Financial LLC, submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity.

Without admitting or denying the findings, Dahn consented to the described sanction and to the entry of findings that he borrowed a total of $27,100 from public customers without the ability to repay the loans that had been represented to be used for operating expenses for a company Dahn ran with his brother. The findings stated that Dahn failed to disclose the loans to his member firm. The firm’s Written Supervisory Procedures prohibited borrowing money from customers. Dahn has failed to repay either of the loans, one of which required payment within 90 days.

It was unclear from FINRA’s announcement whether customers had initiated FINRA arbitrations or any other type of securities arbitrations. If you believe that you have suffered losses as a result of Donald Richard Dahn’s misconduct, you may contact David A. Weintraub, P.A., 7805 SW 6th Court, Plantation, FL 33324. By phone: 954.693.7577 or 800.718.1422.