Bad Brokers

According to FINRA, SNC Capital Management Corp., doing business as RCM Securities, was censured and fined $20,000 for willfully violating Exchange Act requirements by failing to timely file and deliver a Form CRS (Client Relationship Summary). Despite being notified by FINRA of its noncompliance, t...

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According to FINRA, SNC Capital Management Corp., doing business as RCM Securities, was censured and fined $20,000 for willfully violating Exchange Act requirements by failing to timely file and deliver a Form CRS (Client Relationship Summary). Despite being notified by FINRA of its noncompliance, the firm did not file a timely Form CRS or deliver it to retail customers as required.

The firm also provided inaccurate information on its Form CRS regarding the legal and disciplinary history of its registered representatives. Before filing the form, the firm had disclosed three state disciplinary actions on its Form BD related to conducting securities business in states where it wasn't registered. Additionally, three representatives had disclosed legal or disciplinary history on their Form U4 filings. Despite these disclosures, the firm incorrectly answered the Form CRS question about representative disciplinary history until filing a third revised form well after the initial disclosures.

Form CRS is designed to provide retail investors with clear, concise information about the services a firm offers, the fees it charges, conflicts of interest, and its disciplinary history. When firms fail to file accurate and timely Forms CRS, investors lack critical information needed to make informed decisions about whether to work with the firm.

The willful nature of these violations is particularly concerning, as it suggests deliberate disregard for investor protection requirements. Investors should always request and review a firm's Form CRS before opening an account. This document provides essential transparency about what to expect from the relationship and whether the firm has a history of regulatory problems.

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According to FINRA, Purshe Kaplan Sterling Investments, Inc. was censured, fined $40,000, and ordered to pay $16,000 plus interest in partial restitution for negligently failing to disclose material information to investors about an alternative asset management firm. The firm sold limited partnershi...

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According to FINRA, Purshe Kaplan Sterling Investments, Inc. was censured, fined $40,000, and ordered to pay $16,000 plus interest in partial restitution for negligently failing to disclose material information to investors about an alternative asset management firm. The firm sold limited partnership interests totaling $400,000 without informing customers that the issuers had failed to timely file audited financial statements with the SEC or the reasons for the delay.

The firm had received letters from the alternative asset management firm notifying it of the delays and the firm's intention to complete a forensic audit, but continued selling interests to customers without disclosing this critical information. Subsequently, the SEC filed a complaint alleging securities fraud, and the DOJ brought criminal charges against the firm's executives, including charges of securities fraud, mail fraud, and wire fraud. One executive has pled guilty to wire fraud.

Material information about delayed financial statements and forensic audits are significant red flags that investors deserve to know before making investment decisions. Such delays often indicate serious financial or accounting problems. When firms withhold this information, investors cannot make informed decisions and may invest in securities they would have avoided had they known the full picture.

The firm received $32,000 in commissions from these sales, creating a financial incentive to continue selling despite the warning signs. This case illustrates why disclosure obligations exist—to ensure that firms prioritize investor interests over their own profits. Investors should always ask probing questions about any investment, particularly regarding the timeliness and accuracy of financial reporting and whether any unusual circumstances exist.

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According to FINRA, Interactive Brokers LLC was censured and fined $3.5 million for failing to meet best execution obligations under FINRA Rule 5310. The firm's reviews of customer execution quality were ad hoc, inadequately documented, and did not consistently include all relevant execution quality...

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According to FINRA, Interactive Brokers LLC was censured and fined $3.5 million for failing to meet best execution obligations under FINRA Rule 5310. The firm's reviews of customer execution quality were ad hoc, inadequately documented, and did not consistently include all relevant execution quality factors or regularly assess competing venues.

The firm failed to reasonably evaluate price improvement opportunities. When its own Alternative Trading System or two other market centers disseminated indications of interest at least $0.01 better than the National Best Bid or Offer, the firm routed orders to those venues without reasonably evaluating whether non-IOI venues might provide even better price improvement. The firm also adjusted its routing of non-marketable orders at month-end to receive volume-based rebate payments without assessing the impact on customer execution quality.

Additionally, Interactive Brokers routed approximately 10.4 million customer transactions through two broker-dealers engaged in net trading, interjecting intermediaries between the firm and the best market without adequately reviewing whether customers would have received better execution through direct routing. The firm's written procedures failed to describe how best execution reviews should be conducted or documented.

Best execution is a fundamental investor protection requiring firms to seek the most favorable terms reasonably available for customer orders. When firms prioritize their own rebate payments or fail to adequately assess execution quality, customers may receive worse prices than they should. This $3.5 million fine underscores the importance FINRA places on firms fulfilling their best execution obligations and maintaining rigorous, documented review processes.

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According to FINRA, WestPark Capital, Inc. was censured, fined $475,000, and ordered to pay $218,160.36 plus interest in restitution for multiple serious violations including AML program failures, supervisory deficiencies, and unethical conduct. The firm repeatedly opened accounts for customers refe...

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According to FINRA, WestPark Capital, Inc. was censured, fined $475,000, and ordered to pay $218,160.36 plus interest in restitution for multiple serious violations including AML program failures, supervisory deficiencies, and unethical conduct. The firm repeatedly opened accounts for customers referred by three high-risk investment banking clients despite red flags indicating the issuers were controlling account activity.

The firm's AML program suffered from multiple deficiencies in customer identification and due diligence requirements. It failed to reasonably supervise an inexperienced, unregistered analyst who served as the primary contact with the issuers and referred customers. The firm did not supervise or retain communications between this analyst and the issuers, which occurred primarily in Mandarin on an unapproved messaging system, and made him responsible for investigating AML inquiries without adequate oversight.

The firm also engaged in unethical conduct related to a 2021 AWC requiring rescission offers to promissory note holders. Before executing that AWC, the firm induced all but three noteholders to sign agreements not to accept any rescission offer, without FINRA's knowledge. The firm later tried to enforce these agreements and falsely told FINRA that no noteholders had requested rescission when one explicitly had.

Additional violations included failing to supervise a representative who engaged in unsuitable trading and charged excessive markups causing $190,516.99 in customer losses, and failing to obtain best execution on corporate bond trades, costing customers $27,643.37. The firm is required to retain an independent consultant to review its AML and compliance systems. This case demonstrates a pattern of putting profits ahead of regulatory compliance and investor protection.

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According to FINRA, LPL Financial LLC was censured, fined $5.5 million, and ordered to pay $651,374.51 plus interest in restitution for failing to reasonably supervise transactions that representatives placed directly with product sponsors. Approximately 830,000 transactions did not appear on the tr...

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According to FINRA, LPL Financial LLC was censured, fined $5.5 million, and ordered to pay $651,374.51 plus interest in restitution for failing to reasonably supervise transactions that representatives placed directly with product sponsors. Approximately 830,000 transactions did not appear on the trade blotter used to identify potential sales practice violations, meaning the firm did not supervise these transactions for suitability.

For approximately two million additional transactions, the firm failed to collect required customer investment profile information relevant for suitability determinations, also failing to make and preserve required books and records. A retrospective review identified potentially unsuitable purchases of class C mutual fund shares and class B shares inconsistent with customers' investment horizons and liquidity needs, causing customers to pay approximately $546,000 in potentially excessive sales charges.

The firm provided customers with inaccurate information about switch transactions, materially misstating the fees incurred. Database errors meant switch letters either didn't include sales charges or included data from the wrong transactions rather than the specific purchases associated with the switch. The firm failed to detect that representatives recommended customers sell Unit Investment Trusts substantially before maturity to purchase new UITs, causing customers to pay approximately $31,000 in unnecessary sales charges.

Additionally, the firm failed to reasonably supervise Listed BDC transactions to comply with FINRA Rule 2111 and Regulation Best Interest's Care Obligation. The firm's electronic alert tool did not reasonably identify potentially overconcentrated Listed BDC investments for customers with low and moderate risk tolerance, resulting in $73,930 in realized customer losses. This comprehensive case illustrates the critical importance of robust supervisory systems and accurate recordkeeping to protect investors.

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According to FINRA, John Aloysius Dougherty was barred from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA. The request was made in connection with FINRA's examination into whether he engaged in undisclosed outside business act...

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According to FINRA, John Aloysius Dougherty was barred from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA. The request was made in connection with FINRA's examination into whether he engaged in undisclosed outside business activities and private securities transactions.

When FINRA initiates an investigation, registered representatives have an obligation to cooperate fully by providing all requested information and documents. This cooperation is essential to FINRA's ability to protect investors and maintain market integrity. Failure to respond to FINRA requests is considered a serious violation that typically results in a bar from the industry.

Dougherty's refusal to provide information prevented FINRA from determining whether he engaged in activities that could have harmed investors. Outside business activities and private securities transactions conducted away from a firm's supervision can create significant investor risks, including conflicts of interest, lack of oversight, and potential fraud. FINRA requires disclosure and approval of such activities specifically to protect investors.

The bar means Dougherty is permanently prohibited from working in any capacity with any FINRA member firm. Investors should always verify that their financial professionals are properly registered and have clean disciplinary histories. When representatives refuse to cooperate with regulators, it raises serious questions about what they may be hiding. This case underscores the importance of regulatory cooperation in maintaining investor confidence.

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According to FINRA, Joe David Gainer Jr. was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA. The investigation concerned whether he failed to disclose a position of trust in relation to, and receiving a $3 million...

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According to FINRA, Joe David Gainer Jr. was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA. The investigation concerned whether he failed to disclose a position of trust in relation to, and receiving a $3 million gift from, one of his firm clients.

A $3 million gift from a client to a financial professional raises significant red flags about potential elder abuse, undue influence, or conflicts of interest. FINRA's investigation was designed to determine whether Gainer properly disclosed this relationship and whether the gift was appropriate. His refusal to testify prevented FINRA from examining these serious concerns.

Positions of trust—such as serving as power of attorney, executor, or trustee for clients—create heightened risks of abuse and must be disclosed to firms so they can supervise these relationships appropriately. Large gifts from clients to their financial advisors are highly unusual and may indicate that the advisor exploited the relationship for personal gain.

Gainer's refusal to cooperate with the investigation demonstrates a lack of respect for regulatory oversight and investor protection. When registered representatives refuse to testify, they forfeit their right to work in the securities industry. Investors should be extremely cautious about granting positions of trust to their financial advisors and should be skeptical of any situation where an advisor receives substantial gifts or benefits from a client relationship.

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According to FINRA, Estevao Dias Semedo was barred from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA. The investigation concerned whether he engaged in undisclosed outside business activities and failed to timely disclose a f...

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According to FINRA, Estevao Dias Semedo was barred from association with any FINRA member in all capacities for failing to provide information and documents requested by FINRA. The investigation concerned whether he engaged in undisclosed outside business activities and failed to timely disclose a felony charge on his Form U4.

Form U4 disclosures are critical for investor protection, as they inform firms and the public about criminal charges, regulatory actions, customer complaints, and other matters that may affect a representative's fitness to serve clients. Failure to timely disclose a felony charge is a serious violation that prevents firms from making informed decisions about whether to continue employing the representative and whether enhanced supervision is needed.

Outside business activities can create conflicts of interest and divert a representative's attention from serving clients properly. When these activities are undisclosed, firms cannot supervise them or evaluate potential conflicts. FINRA requires representatives to disclose all outside business activities so firms can determine whether they should be restricted, prohibited, or require special oversight.

Semedo's failure to provide information prevented FINRA from investigating both the undisclosed felony charge and potential outside business activities. This lack of cooperation resulted in an automatic bar from the industry. Investors should always check BrokerCheck to review a representative's disclosure record and should be wary of working with anyone who has a history of disclosure failures or non-cooperation with regulators.

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According to FINRA, William Wade Godfrey was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA. The investigation originated after his firm filed a Form U5 reporting that Godfrey was terminated for submitting variabl...

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According to FINRA, William Wade Godfrey was barred from association with any FINRA member in all capacities for refusing to appear for on-the-record testimony requested by FINRA. The investigation originated after his firm filed a Form U5 reporting that Godfrey was terminated for submitting variable annuity applications with materially inaccurate information on exchange disclosure forms.

Variable annuity exchanges can significantly impact customers, often triggering surrender charges, new surrender periods, and loss of valuable contract features. Accurate disclosure forms are essential to ensure customers understand what they're giving up and what they're receiving in the exchange. Submitting applications with inaccurate information deprives customers of the ability to make informed decisions and may conceal unsuitable recommendations.

The fact that Godfrey's firm terminated him for this conduct indicates the seriousness of the alleged misconduct. Firms rarely terminate representatives unless the violations are significant. FINRA's investigation sought to understand the full scope of Godfrey's conduct and whether customers were harmed by the inaccurate information.

By refusing to testify, Godfrey prevented FINRA from examining his conduct and determining appropriate sanctions and remedies. This refusal to cooperate is itself a serious violation that warrants a bar from the industry. Investors who worked with Godfrey and exchanged variable annuities should carefully review their transactions to ensure they were appropriate and based on accurate information. This case highlights the importance of reviewing all disclosure documents carefully before authorizing any annuity exchange.

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According to FINRA, David Michael Korsnack was barred from association with any FINRA member in all capacities for accessing unauthorized materials while taking the Series 7 General Securities Representative examination and providing false statements to FINRA. Prior to the exam, Korsnack attested he...

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According to FINRA, David Michael Korsnack was barred from association with any FINRA member in all capacities for accessing unauthorized materials while taking the Series 7 General Securities Representative examination and providing false statements to FINRA. Prior to the exam, Korsnack attested he would abide by the Qualification Examinations Rules of Conduct, which prohibit accessing unauthorized materials.

During an unscheduled break, Korsnack left the testing center, retrieved his cell phone from his car, and accessed material on his phone relevant to the examination he was taking. When FINRA investigated, Korsnack falsely claimed he only checked for a text message from his wife and did not access any materials. He also falsely stated he retrieved the phone from his locker rather than his car.

The integrity of FINRA qualification examinations is fundamental to investor protection. These exams exist to ensure that only qualified individuals provide investment advice and handle customer accounts. When someone cheats on these exams, they may lack the knowledge necessary to properly serve clients, putting investors at risk.

Korsnack's lies to FINRA about his misconduct compound the seriousness of his violations. Honesty and integrity are essential qualities for anyone working in the securities industry. The bar ensures that Korsnack cannot work with investors, protecting the public from someone who demonstrated both a willingness to cheat and a willingness to lie about it. Investors should verify that their representatives passed qualification exams legitimately and have demonstrated ethical conduct throughout their careers.

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