Bad Brokers

According to FINRA, TIAA-CREF Individual & Institutional Services, LLC was fined $125,000 for failing to promptly report written customer complaints involving allegations of theft or misappropriation of funds or securities, and for failing to report settled matters where settlement amounts exceeded ...

Read More

According to FINRA, TIAA-CREF Individual & Institutional Services, LLC was fined $125,000 for failing to promptly report written customer complaints involving allegations of theft or misappropriation of funds or securities, and for failing to report settled matters where settlement amounts exceeded $25,000.

Although the firm was aware of customer complaints involving allegations of theft or misappropriation, it did not promptly report them to FINRA as required. Instead, the firm only disclosed these complaints in quarterly summary reports filed with FINRA, which does not satisfy the prompt reporting requirement. The firm also failed to report settlements exceeding $25,000 where it was the subject of customer claims relating to provision of financial services or financial transactions.

The firm only reported these settlements and complaints after being informed by FINRA of the deficiencies in its reporting. Additionally, the firm failed to establish and maintain a supervisory system and written procedures reasonably designed to achieve compliance with FINRA reporting rules. The firm failed to enforce its written procedures for reporting customer complaints, and its written procedures did not address settlements at all. The firm did not track settlements for purposes of disclosure to FINRA.

Timely and accurate reporting of customer complaints and settlements is critical for regulatory oversight and investor protection. FINRA uses this information to identify problematic brokers and firms, spot emerging trends, and take action to protect investors. When firms fail to properly report complaints and settlements, regulators lack visibility into potential misconduct, allowing bad actors to continue harming investors. Investors can check a broker's complaint and settlement history through FINRA BrokerCheck, but this tool is only effective if firms properly report all required information.

Show Less

According to FINRA, Virginia S. Davicino was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA as part of its investigation into circumstances giving rise to a Form 4530 filing made by her member firm.

FINRA Rule 8...

Read More

According to FINRA, Virginia S. Davicino was barred from association with any FINRA member in all capacities for refusing to provide documents and information requested by FINRA as part of its investigation into circumstances giving rise to a Form 4530 filing made by her member firm.

FINRA Rule 8210 requires associated persons to provide information and testimony in connection with FINRA investigations. This rule is fundamental to FINRA's ability to investigate potential misconduct and protect investors. When registered persons refuse to cooperate with investigations, they obstruct FINRA's regulatory oversight and undermine investor protection.

A bar means Davicino is permanently prohibited from working in any capacity with any FINRA member firm. This severe sanction reflects the seriousness of refusing to cooperate with regulatory investigations. The requirement to cooperate with investigations is a basic obligation of anyone in the securities industry.

Investors should understand that registered persons who refuse to provide information to regulators are subject to automatic bars. This rule ensures that FINRA can effectively investigate potential misconduct and take action to protect investors. When considering working with a financial professional, investors can check FINRA BrokerCheck to see if the person has any disciplinary history, including bars or suspensions for failure to cooperate with investigations.

Show Less

According to FINRA, John Michael Fagan was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with an investigation into the sale of certain fixed income securities by him.

FINRA's authority to compel...

Read More

According to FINRA, John Michael Fagan was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with an investigation into the sale of certain fixed income securities by him.

FINRA's authority to compel testimony from registered persons is essential to its investigative and enforcement functions. When individuals refuse to testify in FINRA investigations, they prevent regulators from gathering facts necessary to determine whether violations occurred and whether investors were harmed. This obstruction undermines the entire regulatory framework designed to protect investors.

The bar imposed on Fagan is a permanent prohibition from working with any FINRA member firm in any capacity. This severe sanction is typically imposed for refusal to cooperate with investigations because such refusal strikes at the heart of FINRA's ability to regulate the industry and protect investors.

For investors, this case serves as a reminder that cooperation with regulatory investigations is a fundamental obligation of securities professionals. When a broker refuses to testify or provide information, it raises serious questions about what they may be hiding. Investors can use FINRA BrokerCheck to review a financial professional's disciplinary history, including any bars or sanctions for failure to cooperate with investigations, before deciding whether to do business with them.

Show Less

According to FINRA, Robert Emmett Marquez was barred from association with any FINRA member in all capacities for refusing to provide on-the-record testimony requested by FINRA in connection with an investigation into sales of "pre-IPO" private placement offerings.

Pre-IPO private placements are ...

Read More

According to FINRA, Robert Emmett Marquez was barred from association with any FINRA member in all capacities for refusing to provide on-the-record testimony requested by FINRA in connection with an investigation into sales of "pre-IPO" private placement offerings.

Pre-IPO private placements are investments in companies before they go public, often marketed with promises of substantial returns once the company completes its initial public offering. These investments are frequently the subject of fraud and misrepresentation, making regulatory oversight particularly important. When registered persons refuse to testify about their involvement in selling such offerings, it prevents FINRA from determining whether investors were provided with accurate information and suitable recommendations.

The refusal to cooperate with a FINRA investigation is one of the most serious violations a registered person can commit because it directly interferes with FINRA's ability to protect investors. The permanent bar imposed on Marquez means he can never again work with any FINRA member firm in any capacity.

Investors should be extremely cautious about pre-IPO private placement offerings, which are often high-risk, illiquid investments that may be unsuitable for many investors. The fact that a registered representative refused to testify about such sales raises serious red flags about the nature of those transactions. Investors can protect themselves by thoroughly researching any investment opportunity, understanding the risks, and checking the disciplinary history of financial professionals through FINRA BrokerCheck.

Show Less

According to FINRA, Megurditch Mike Patatian was barred from association with any FINRA member in all capacities and ordered to disgorge commissions in the amount of $458,418.07, plus prejudgment interest, for recommending unsuitable purchases of non-traded REITs, unsuitable variable annuity surrend...

Read More

According to FINRA, Megurditch Mike Patatian was barred from association with any FINRA member in all capacities and ordered to disgorge commissions in the amount of $458,418.07, plus prejudgment interest, for recommending unsuitable purchases of non-traded REITs, unsuitable variable annuity surrenders, and unsuitable variable annuity exchanges.

Patatian recommended non-traded real estate investment trusts to customers without meeting his reasonable-basis suitability obligations and violated customer-specific suitability obligations when he recommended the non-traded REITs to customers who required liquidity and desired less risky investments. Customers testified consistently that Patatian did not discuss the risks associated with REITs and promised they would get their money back in periods ranging from one to five years, when the prospectuses warned that REITs could remain illiquid for seven years or more.

Patatian also recommended unsuitable variable annuity surrenders to customers without considering or selecting the option to withhold applicable taxes. As a result, customers incurred substantial tax bills, including underpayment penalties, that they did not know about when following his recommendations. Patatian admitted he believed that surrendering a variable annuity and purchasing a REIT qualified as a tax-free 1035 exchange and told customers this provision applied, which was incorrect.

Additionally, Patatian made unsuitable recommendations to customers to exchange their variable annuities for new variable annuities based on faulty cost comparisons and failure to secure intended optional death benefits. FINRA also found that Patatian impersonated a customer in a telephone call with an insurance company, providing the customer's date of birth and Social Security number, and caused his firm to maintain inaccurate books and records by inflating customers' investment experience and net worth to make REIT investments appear suitable.

This case illustrates the serious harm that unsuitable investment recommendations can cause to investors, particularly seniors who require liquidity and cannot afford to lose principal. Non-traded REITs are illiquid investments that may be suitable for some investors but are completely inappropriate for others who need access to their funds. The fact that Patatian falsified customer information to make unsuitable investments appear appropriate demonstrates deliberate misconduct designed to generate commissions at customers' expense.

Show Less

According to FINRA, Richard DiArenzo was barred from association with any FINRA member in all capacities for refusing to provide documents and information and on-the-record testimony requested by FINRA during an investigation originated from his member firm's filing of his Form U5.

The investigat...

Read More

According to FINRA, Richard DiArenzo was barred from association with any FINRA member in all capacities for refusing to provide documents and information and on-the-record testimony requested by FINRA during an investigation originated from his member firm's filing of his Form U5.

The investigation arose after DiArenzo's firm filed a Form U5 noting that he had been terminated for failure to timely disclose a reportable event. Form U5 is the Uniform Termination Notice for Securities Industry Registration that firms must file when a registered person's employment ends. When a firm terminates a representative for cause, FINRA typically investigates to determine the full facts and circumstances.

By refusing to provide documents, information, and testimony, DiArenzo prevented FINRA from fully investigating the circumstances of his termination and determining whether additional misconduct occurred or whether investors were harmed. This refusal to cooperate is itself a serious violation that warrants a permanent bar from the industry.

The permanent bar means DiArenzo can never work with any FINRA member firm in any capacity. This severe sanction reflects that cooperation with regulatory investigations is a fundamental obligation of anyone in the securities industry, and refusal to cooperate undermines the entire regulatory system designed to protect investors.

Investors should understand that they can check a financial professional's employment history and disciplinary record through FINRA BrokerCheck. When a broker has been barred for refusing to cooperate with an investigation, it raises serious concerns about what that person may have been trying to hide. Investors should always verify their financial professional's credentials and history before doing business with them.

Show Less

According to FINRA, Edward Steven Mercer was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation into a customer's investment in a crypto asset offering away from his member firm.
...

Read More

According to FINRA, Edward Steven Mercer was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation into a customer's investment in a crypto asset offering away from his member firm.

This case involves a customer investing in cryptocurrency or crypto assets away from Mercer's member firm, which raises several regulatory concerns. Registered representatives are generally required to disclose outside business activities and outside securities transactions to their firms. When representatives facilitate customer investments away from their firm without proper disclosure, it prevents the firm from supervising the activity and protecting the customer.

Crypto asset offerings have been an area of significant regulatory focus due to the high risk of fraud, manipulation, and losses. Many crypto offerings have turned out to be fraudulent schemes that caused substantial investor losses. FINRA's investigation into the customer's crypto investment was likely aimed at determining whether Mercer properly disclosed his involvement, whether the investment was suitable, and whether any misconduct occurred.

By refusing to testify about the circumstances of this investment, Mercer prevented FINRA from gathering critical information about his role and whether investors were harmed. The permanent bar imposed reflects the seriousness of obstructing a regulatory investigation, particularly one involving potentially problematic crypto investments.

Investors should be extremely cautious about crypto investments recommended by financial professionals, particularly if the investments are conducted away from the broker's firm where there is no supervisory oversight. This case serves as a reminder to always verify that investments are properly supervised and to thoroughly research any crypto opportunity before investing.

Show Less

According to FINRA, Keith M. Curtis was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony in connection with FINRA's investigation into his potential conversion of funds.

Conversion of funds refers to the unauthorized taking or misa...

Read More

According to FINRA, Keith M. Curtis was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony in connection with FINRA's investigation into his potential conversion of funds.

Conversion of funds refers to the unauthorized taking or misappropriation of customer money or securities. This is one of the most serious forms of misconduct in the securities industry and causes direct financial harm to investors. When FINRA investigates potential conversion, it is examining whether a registered person stole from customers or otherwise improperly took their funds.

Curtis's refusal to testify about potential conversion is particularly concerning because it prevented FINRA from determining whether customers were victims of theft and from gathering evidence that could be used in criminal prosecution or civil recovery efforts. By refusing to cooperate, Curtis not only violated his regulatory obligations but also potentially obstructed efforts to help any victims recover their losses.

The permanent bar imposed on Curtis means he can never work with any FINRA member firm in any capacity. This severe sanction is appropriate for someone who refuses to answer questions about potential theft of customer funds.

For investors, this case underscores the importance of monitoring account statements carefully and immediately reporting any unauthorized transactions or missing funds. Investors should also check FINRA BrokerCheck before working with a financial professional to review their disciplinary history. A bar for refusing to testify about potential conversion of funds is a major red flag that should cause investors to avoid doing business with that person under any circumstances.

Show Less

According to FINRA, Christopher Booth Kennedy was barred from association with any FINRA member in all capacities for churning customer accounts, creating fake account statements to hide trading results, and lying to FINRA during its investigation.

Kennedy used his control over customer accounts ...

Read More

According to FINRA, Christopher Booth Kennedy was barred from association with any FINRA member in all capacities for churning customer accounts, creating fake account statements to hide trading results, and lying to FINRA during its investigation.

Kennedy used his control over customer accounts to direct an excessive series of transactions that generated commissions for his own benefit at customers' expense. He made an average of 102 trades per account per month, representing net trading of more than $6.9 million per account or approximately 13 times the average account value. As a result of Kennedy's excessive trading, his customers collectively lost over $2.3 million in value from their accounts and paid more than $715,000 in total trading costs and margin interest, including over $595,000 in commissions.

To hide the results of his trading from two customers who were the co-trustees of a family trust account, Kennedy prepared and sent six fake account statements from his personal email over a six-month period. In one instance, Kennedy sent a fake account statement purporting to show an ending balance of $5.2 million and a gain of over $3 million, when in fact the account had lost nearly all of its value and only approximately $160,000 remained.

During FINRA's investigation, Kennedy repeatedly lied in response to requests for information and on-the-record testimony. Kennedy falsely denied preparing fake account statements and falsely claimed that his personal email had been hacked and that an imposter had sent all but one of the fake statements. By churning customer accounts, Kennedy willfully violated Section 10(b) of the Securities Exchange Act, Rule 10b-5, FINRA Rule 2020, and Regulation Best Interest.

This case represents some of the most egregious misconduct a broker can commit: churning accounts to generate commissions, creating fake statements to hide massive losses, and lying to regulators. Investors should monitor their accounts closely for excessive trading activity and always verify account values through official statements from the firm rather than documents provided by individual brokers.

Show Less

According to FINRA, Hector Jesus Hernandez was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation into his potential failure to disclose an outside business activity while he was a...

Read More

According to FINRA, Hector Jesus Hernandez was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA in connection with its investigation into his potential failure to disclose an outside business activity while he was associated with his member firm.

Registered representatives are required to disclose all outside business activities to their member firms so the firms can evaluate potential conflicts of interest and determine whether the activities should be restricted or prohibited. Outside business activities can create conflicts when they compete with the firm's business, involve securities transactions, or otherwise interfere with the representative's duties to clients.

When representatives fail to disclose outside business activities, firms cannot properly supervise them or protect customers from potential conflicts. FINRA's investigation sought to determine whether Hernandez had engaged in undisclosed outside activities and whether those activities created conflicts or harmed investors.

By refusing to testify about his potential failure to disclose outside business activities, Hernandez prevented FINRA from gathering facts about what activities he was engaged in, whether they were properly disclosed, and whether they created problems for customers. This refusal to cooperate is itself a serious violation warranting a permanent bar from the industry.

Investors should understand that their financial professionals may have outside business interests, but those interests must be disclosed to and approved by their firm. Undisclosed outside activities can create serious conflicts of interest where the broker prioritizes their outside business over client interests. Investors can ask their financial professional about any outside business activities and can check FINRA BrokerCheck for disclosure information and disciplinary history.

Show Less