Bad Brokers

According to FINRA, Yann C. Faho was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for two months for causing his member firm to maintain incomplete books and records. Faho used his personal mobile phone to communicate via text message with...

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According to FINRA, Yann C. Faho was assessed a deferred fine of $5,000 and suspended from association with any FINRA member in all capacities for two months for causing his member firm to maintain incomplete books and records. Faho used his personal mobile phone to communicate via text message with firm customers regarding securities-related business, and the firm did not capture or maintain these text messages as required.

The text messages included Faho seeking and obtaining authorization to buy and sell stocks, discussing specific investment recommendations, providing market updates, and conversations about account performance. These are precisely the types of communications that must be retained because they document the representative's recommendations, the basis for trades, and what was disclosed to customers.

When communications occur on personal devices that aren't captured by firm systems, there is no record if disputes arise about what was said, what was recommended, or what risks were disclosed. This leaves customers without evidence to support claims of unsuitable recommendations or misrepresentations, and it prevents firms from supervising their representatives' communications.

The use of personal devices for business communications has been a persistent problem in the securities industry, with numerous enforcement actions addressing this issue. The two-month suspension and $5,000 deferred fine send a clear message that representatives must conduct business communications through firm-approved channels that can be captured and retained. Investors should be wary of representatives who want to communicate through personal phones or email addresses, as this may indicate an attempt to avoid firm supervision.

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According to FINRA, Carl Cirelli was fined $5,000 and suspended from association with any FINRA member in all capacities for one month for placing unauthorized trades in a deceased customer's account. Prior to learning about the customer's death, Cirelli caused trades to be made in the customer's no...

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According to FINRA, Carl Cirelli was fined $5,000 and suspended from association with any FINRA member in all capacities for one month for placing unauthorized trades in a deceased customer's account. Prior to learning about the customer's death, Cirelli caused trades to be made in the customer's non-discretionary accounts without authorization.

When a customer dies, their account must be frozen until estate representatives are properly authorized to act on behalf of the estate. Trading in a deceased customer's account without proper estate authorization is unauthorized and potentially harmful to the estate and beneficiaries. Even if the trades were consistent with the customer's previous investment strategy, the representative no longer has authority to act.

The fact that these were non-discretionary accounts means Cirelli did not have written authorization to trade without specific customer instruction even when the customer was alive. Placing trades without authorization violates fundamental investor protections designed to ensure customers control their accounts and approve all transactions.

The one-month suspension and $5,000 fine reflect that Cirelli placed the trades before learning of the death, suggesting no intent to defraud the estate. However, the violation underscores the importance of obtaining proper authorization for all trades in non-discretionary accounts. Families of investors should immediately notify firms when account holders pass away to ensure accounts are properly frozen and transferred to estate representatives.

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According to FINRA, Felipe Henao Vargas was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in all capacities for 45 days for exercising discretion without written authorization by initiating a substantial short position in a volatile exchange-traded note. Aft...

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According to FINRA, Felipe Henao Vargas was assessed a deferred fine of $7,500 and suspended from association with any FINRA member in all capacities for 45 days for exercising discretion without written authorization by initiating a substantial short position in a volatile exchange-traded note. After the trade went against his customer, Henao closed out the position without written authorization from the customer or permission from his firm to exercise discretion.

Short positions in volatile securities carry substantial risk, as losses can theoretically be unlimited if the security's price rises. Initiating such a position without specific customer authorization is particularly problematic because the customer may not understand or accept these risks. When the trade resulted in losses, Henao compounded his violation by closing the position, again without authorization.

Henao further aggravated his misconduct by using an unapproved communication channel to exchange messages concerning the trades with a family member of the customer after the fact. This suggests an attempt to explain or justify the unauthorized trades outside of firm-supervised communications, preventing the firm from monitoring these discussions.

The 45-day suspension and $7,500 deferred fine reflect both the unauthorized discretionary trading and the use of unapproved communications to discuss the trades. The combination of unauthorized high-risk trading and off-channel communications to discuss the results represents a serious breakdown in compliance. Investors should never tolerate representatives who make trades without authorization or who want to discuss account activity through personal communication channels.

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According to FINRA, Frederick R. Watson was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for four months for engaging in an outside business activity by serving as executor of a customer's estate without providing prior written notice to ...

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According to FINRA, Frederick R. Watson was assessed a deferred fine of $10,000 and suspended from association with any FINRA member in all capacities for four months for engaging in an outside business activity by serving as executor of a customer's estate without providing prior written notice to his member firm. Watson had a reasonable expectation of compensation and requested compensation for his services, though he ultimately did not receive it.

Serving as executor of a customer's estate creates significant conflicts of interest and fiduciary duties that can conflict with a representative's obligations to the firm and other customers. Executors have access to sensitive estate information and make important financial decisions that could create conflicts with the representative's role as a securities professional.

Watson compounded his violation by inaccurately reporting in firm annual compliance questionnaires that he had not been named as executor in any customer's estate or will and had not engaged in any outside employment or business interest without the firm's approval. These false statements prevented the firm from evaluating the conflict and determining whether Watson should be subject to enhanced supervision or required to resign as executor.

The four-month suspension and $10,000 deferred fine reflect both the undisclosed outside business activity and the false statements on compliance questionnaires. Positions of trust with customers, such as executor, trustee, or power of attorney, must always be disclosed to firms so they can evaluate potential conflicts and protect both the customer and other clients. Investors should think carefully before naming their financial advisor as executor, as this creates conflicts that may not be in their estate's best interest.

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According to FINRA, Mitchell Steven Morrison was fined $5,000 and suspended from association with any FINRA member in all capacities for four months for participating in private securities transactions that raised $462,500 without providing prior written notice to his member firms. Morrison and anot...

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According to FINRA, Mitchell Steven Morrison was fined $5,000 and suspended from association with any FINRA member in all capacities for four months for participating in private securities transactions that raised $462,500 without providing prior written notice to his member firms. Morrison and another individual created a financial technology company with Morrison serving as President and CEO.

While Morrison disclosed his involvement with the company as an outside business activity, he did not provide written notice that he intended to raise funds for the company or obtain written approval to sell membership interests. The private offering of membership interests are securities sold pursuant to Regulation D of the Securities Act, making these selling away violations.

Morrison completed quarterly and annual compliance questionnaires for one firm in which he falsely denied participating in any private securities transactions. These false statements prevented the firm from supervising the transactions and evaluating whether they were appropriate or created conflicts with his responsibilities to firm customers.

Selling away—conducting securities transactions outside firm supervision—is one of the most dangerous activities for investors because it eliminates all oversight and investor protections. Firms cannot ensure suitability, cannot supervise sales practices, and may not be able to compensate investors if problems arise. The four-month suspension and $5,000 fine emphasize that representatives must obtain firm approval before participating in any securities transactions, particularly when they involve companies where the representative has a significant interest.

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According to FINRA, D. Allen Blankenship was named in a complaint alleging he engaged in unsuitable short-term trading of mutual funds by effecting trades in customer accounts that lacked a reasonable basis. The complaint alleges holding periods for these trades ranged from 119 to 364 days, resultin...

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According to FINRA, D. Allen Blankenship was named in a complaint alleging he engaged in unsuitable short-term trading of mutual funds by effecting trades in customer accounts that lacked a reasonable basis. The complaint alleges holding periods for these trades ranged from 119 to 364 days, resulting in sales charges of $21,158.45 paid by customers and generating commissions of $16,014.16 for Blankenship.

The complaint further alleges that Blankenship recommended mutual fund purchases where he failed to ensure customers received $21,873.91 in available mutual fund breakpoints. Breakpoints are volume discounts on sales charges that investors are entitled to receive when their purchases reach certain thresholds. Failing to ensure customers receive these discounts means they paid higher fees than necessary.

Additionally, the complaint alleges Blankenship circumvented his firm's supervisory procedures by intentionally dividing customers' mutual fund investments into multiple purchases under $20,000 to avoid completing required forms and evade supervisory review for suitability. This practice, sometimes called breaking up orders

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and no findings have been made. However

According to FINRA, Keith Craig Baron was named in a complaint alleging he made material misrepresentations to a married senior couple in connection with his recommendation of a company's stock. The complaint alleges Baron failed to disclose that he was a consultant for the company and had a financi...

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According to FINRA, Keith Craig Baron was named in a complaint alleging he made material misrepresentations to a married senior couple in connection with his recommendation of a company's stock. The complaint alleges Baron failed to disclose that he was a consultant for the company and had a financial stake in their investment as a result of his agreement with it. Baron allegedly received $284,890 in compensation from the company during one year.

The complaint further alleges that Baron made additional material false statements to one investor in connection with a purported buyback of the couple's shares. Baron allegedly failed to disclose his outside business activity to his firm and participated in private securities transactions by recommending and facilitating the couple's purchase of $359,806.16 in company stock without obtaining written authorization from his firm.

Additionally, the complaint alleges Baron made false statements orally and in writing to his firm on annual certifications claiming not to have any undisclosed outside business activities. When the couple submitted a complaint to FINRA, Baron allegedly misrepresented to the firm the nature and extent of his involvement with their investment and submitted false information to FINRA regarding his involvement with the company.

These are allegations in an unadjudicated complaint, and no findings have been made. However, the allegations describe a pattern of concealment and misrepresentation involving undisclosed conflicts of interest, private securities transactions, and false statements to both the firm and FINRA. The alleged conduct involves a senior couple investing over $359,000 based on recommendations from someone with undisclosed financial interests in the company.

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According to FINRA, Daniel Keith Beech was named in a complaint alleging he improperly paid approximately $900,000 in commissions, directly and indirectly, to an unregistered person who was required to be registered at the time of payments. The complaint alleges that while registered with a member f...

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According to FINRA, Daniel Keith Beech was named in a complaint alleging he improperly paid approximately $900,000 in commissions, directly and indirectly, to an unregistered person who was required to be registered at the time of payments. The complaint alleges that while registered with a member firm, Beech entered into an agreement with the unregistered person's registered investment advisory firm to purchase the person's book of business.

No FINRA member firm reviewed, approved, or was a party to this purchase agreement. The agreement allegedly required Beech to pay $10,000 up front and thereafter 75 percent of commissions he earned from certain customer accounts for ten years, plus 25 percent of commissions for an additional five years. During the relevant period, the complaint alleges the unregistered person continued to solicit new brokerage customers for Beech, attend meetings with Beech's customers, independently meet with customers to discuss securities investments, make securities recommendations, maintain customer records, and receive commissions from securities transactions.

These allegations describe a situation where an unregistered person continued to function as a registered representative—soliciting customers, making recommendations, and receiving transaction-based compensation—without being properly registered. This violates fundamental investor protection requirements that anyone engaging in securities activities be properly registered, qualified, and supervised.

These are allegations in an unadjudicated complaint, and no findings have been made. However, the alleged arrangement would deprive investors of critical protections including verification of the person's qualifications, supervision of their activities, and the ability to bring complaints against someone who is registered. The alleged $900,000 in payments demonstrates the substantial scale of the alleged violations.

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According to FINRA, four firms—M1 Finance LLC, Open to the Public Investing, Inc., SoFi Securities LLC, and SogoTrade, Inc.—were sanctioned a combined $2.6 million, including over $1 million in restitution to retail customers enrolled in fully paid securities lending programs and $1.6 million in fin...

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According to FINRA, four firms—M1 Finance LLC, Open to the Public Investing, Inc., SoFi Securities LLC, and SogoTrade, Inc.—were sanctioned a combined $2.6 million, including over $1 million in restitution to retail customers enrolled in fully paid securities lending programs and $1.6 million in fines for supervisory and advertising violations.

The firms failed to establish adequate supervisory systems for their fully paid securities lending offerings. Although each firm agreed in contracts with their clearing firms to determine which customers were appropriate for participation, the firms did not establish any criteria for customer participation or make appropriateness determinations. Instead, they automatically enrolled all new customers in fully paid securities lending at account opening.

When shares are borrowed over a dividend date, customers receive payments in lieu of dividends rather than actual dividends. These substitute payments typically are subject to higher tax rates than qualified dividends, potentially causing adverse tax consequences. The firms also provided customers with disclosure documents containing misrepresentations that customers would receive compensation, including a loan fee

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